Put This “Future of Finance” Company in Your Pocket – And Its $9 Stock in Your Portfolio
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It was like a “movie theater to go.”
But Blockbuster had a problem: One of its biggest strengths was also its greatest potential weakness.
I’m talking about fees. Customer fees.
Those fees – for returning movies late, for not rewinding tapes, and others – accounted for $800 million a year in 2000 alone, or about 16% of its revenue. Those ticky-tack fees were a lucrative cash stream – but were also ticking customers off.
So when Blockbuster hammered Reed Hastings with a $40 fee for the late return of “Apollo 13,” the entrepreneur knew there was a need for a better experience in renting movies.
And that marked the genesis of Netflix Inc. (NFLX) – a true disruptor that would dispense with the annoyances, let folks enjoy their videos for as long as they wanted, and to ultimately beam those flicks directly into their living rooms.
By the time Blockbuster understood the threat, it was already game, set and match – with Netflix as the winner.
Today, Netflix is a $194 billion market leader. Blockbuster is a Harvard Business Review case study in how to run a heavyweight into bankruptcy.
Just as Hastings spotted the “disruptive” opportunity in movie rentals, pioneering thinkers see the same potential for creating a better customer experience in saving, investing, managing, and borrowing money.
Not surprisingly, in finance – just like with movie rentals – one starting point is the unhappiness over fees.
Want an example? Look at overdraft fees – which netted banks $7.7 billion last year:
Some overdraft fees can wind up costing a person hundreds of dollars per day.
Add in the reality that it can take days for transactions to clear…
Limited hours to talk with a “live” customer-service rep…
And the need to have multiple accounts for paying bills and investing – even across multiple companies – and you’re talking about an industry that’s out of step and way behind the customer curve.
In the old days, you’d walk into your local bank branch – and bank tellers knew your name, where you worked, and the names and ages of all your kids.
But technology eclipsed that… and younger generations just don’t find that important.
What these younger customers do care about is finding out quickly about a fraudulent transaction, clicking a button that identifies they have not purchased thousands of dollars in shoes in Europe when they are sitting at an office in Florida, and having that transaction blocked in minutes.
What they do care about is being able to send gas money to a friend for a road trip and having the transaction clear in seconds.
And what they do care about is keeping this all super simple – having an “everything app” where you can receive your paycheck, receive a decent yield for savings, invest in stocks or cryptocurrencies, and manage bills.
But this all isn’t just a “wish list” for the future.
The future is happening today – through one company (and one stock) that our friends at Derby City Insights have uncovered.
And it’s a true “disruptor” to the stodgy finance industry.
Just as Netflix put a movie theater in your living room, this company puts a bank, brokerage firm and mortgage lender on your phone and in your pocket.
A Real Disruptor You Can Invest in Today
Mobile banking apps are becoming a “must-have” money management tool for Millennials and Gen Z, and with the ease of downloading an app, the “new bank” is in the palm of your hand.Consumer conversations around digital wallet usage and managing their finances online have spiked 13% year-over-year, according to data from Derby City Insights.
Larger companies have taken notice, with fintech (“financial tech”) firms like PayPal Holdings Inc. (PYPL) offering versions of “all-in-one” apps that serve as a bank account, a savings account, and a place to invest.
Even the “grandpa” of this New Order of Fintech — American Express Co. (AXP), founded in Buffalo way back in 1850 – is rolling out new features on its mobile app that allows cardholders to split purchases with PayPal users…meaning you only have to pay your true share at that dinner gathering (no more springing for the guy who had surf-n-turf – when you only had an iceberg-wedge salad).
But hidden in the shadows of such towering fintech titans as PayPal ($70 billion) and AmEx ($122 billion) is a “tiny” player with a market cap of less than $9 billion.
And this tiny innovator is winning – with consumers and with their money.
The company that I’m talking about is SoFi Technologies Inc. (SOFI), a San Francisco-based venture that was born a bit more than 10 years ago – and that now owns one of the industry’s most enthusiastic customer bases, with a Consumer Happiness level nearing 80%.
And with the ability to “do it all” – from investing, borrowing, credit cards, mortgages, and conventional banking (with no overdraft fees) – it’s easy to see why consumers across all age groups are talking about the “death” of traditional banking.
The SoFi Relay mobile dashboard gives members a convenient way to view everything going on with their finances in one spot. And competitive interest rates, strong customer service, and highly accessible CEO Anthony Noto are attracting a large, loyal following.
Even as demand for competing services like PayPal (-13%) and AmEx (-29%) has declined, thanks to the data, we know SoFi demand stayed consistently high throughout the summer.
Purchase Intent mentions – consumers talking about opening a SoFi banking, lending, credit card, insurance, or investment account – remain elevated by 4% on a quarter-over-quarter basis…
And that demand translated to real growth for SoFi during its most recent quarter:
- Quarterly revenue soared 37% year-over-year to $488.8 million…
- Membership grew 44% year-over-year, bringing its total tally to 6.2 million…
- Total deposits to its SoFi Bank subsidiary increased 26% sequentially to $12.7 billion…
- And adjusted EBITDA – which stands for earnings before interest, taxes, depreciation, and amortization, and is a great “big picture” indicator of a company’s financial health and future performance – saw a 278% boost from the year prior to $77 million.
Our friends at Derby City Insights flagged SOFI as a buy in May when it registered a Social Heat Score of 74… and shares were trading for just $4.79.
The stock has already doubled since then, giving their paid-up members an early lead.
But the team at Derby City Insights believes that SoFi could double in price again over the next two years.
Making SoFi a true “disruptor” that deserves a spot in your portfolio today and making Derby City Insights a publication to never miss.