How Does SoFi Make Money?

SoFi is an online lending platform that provides affordable education loans to students, and it expanded into financial services, including loans, credit cards, investment services, and insurance. It makes money primarily via payment processing fees and loan securitization. 

Origin story

SoFi (Social Finance) is an American online personal finance company founded in 2011 by Mike Cagney, Ian Brady, Dan Macklin, and James Finnigan.

Each of the four founding members met while studying at the Stanford Graduate School of Business.

The company was established to provide more affordable options to students taking on high levels of debt to fund their education.

In the ensuing years, SoFi expanded its product range to include a suite of financial services.

These services include credit cards, mortgages, personal loans, banking, and investing which can be accessed through an app or desktop interface.

SoFi revenue generation

Although SoFi is generally regarded as a no or low-fee lender, it does make money from a diverse range of sources.

To get a better idea of the SoFi business model, it is helpful to consider the following categories.

Lending products 

This includes student, personal, and home loans that can either be issued or refinanced. On occasion, SoFi collaborates with third-party loan issuers such as mortgage lender Zillow.

These loans are monetized through a process called whole loan sales, where loans under management are bundled and then sold by SoFi to an institutional buyer.

Investment platform 

SoFi also offers a zero-brokerage trading platform allowing users to buy and sell ETFs, securities, and cryptocurrency.

Company executives accept that SoFi will lose money on the zero-brokerage aspect.

But like similar platforms such as Robinhood, Sofi hopes to make money on interest accrued from customer accounts.

It also makes money from securities lent to other institutions and FDIC-insured sweep programs.

Credit and debit cards

Consumers can sign-up for a SoFi-branded debit or credit card, with the former offering a cashback facility for selected partners and providing incentivization for healthy spending habits.

As is the case for many financial institutions, SoFi earns a small amount of interest on the money held in customer accounts.

It also collects a payment processing fee of around 1% from the merchant with each transaction.

The company also receives a commission when customers use their SoFi cards to pay for goods or services from partner organizations.

Examples include Netflix and food delivery service DoorDash.


Under the banner SoFi Protect, members can purchase home and contents, life, or automobile insurance policies in partnership with other providers.

As a result, SoFi earns a referral fee whenever it sells one of these insurance policies. The fee depends on the policy premium and expected customer lifetime value (duration).

Key takeaways:

  • SoFi is an online lending institution founded in 2011 by four Stanford graduates. The company was created because of a shared vision to provide affordable education loans to students.
  • SoFi now offers a diverse range of financial services, including loans, credit cards, investment services, and insurance. For consumers, the company is generally regarded as a low or no-fee lender. As a result, SoFi generates the bulk of its revenue through interest and referral charges.
  • SoFi also derives revenue via payment processing fees, referral fees, and loan securitization. Furthermore, the company offers FDIC-insured sweep programs for investors, allowing cash balances to be transferred to (and insured by) eligible banking institutions.

Read More: How Does TD Ameritrade Make MoneyHow Does Dave Make MoneyHow Does Webull Make MoneyHow Does Betterment Make MoneyHow Does Wealthfront Make MoneyHow Does M1 Finance Make MoneyHow Does Mint Make MoneyHow Does NerdWallet Make MoneyHow Does Acorns Make MoneyHow Does SoFi Make MoneyHow Does Stash Make MoneyHow Does Robinhood Make MoneyHow Does E-Trade Make MoneyHow Does Coinbase Make MoneyHow Does Affirm Make MoneyFintech Companies And Their Business Models.

Related FinTech Business Models

Acorns Business Model

Acorns is a fintech platform providing services related to Robo-investing and micro-investing. The company makes money primarily through three subscription tiers: Lite – ($1/month), which gives users access to Acorns Invest, Personal ($3/month) that includes Invest plus the Later (retirement) and Spend (personal checking account) suite of products, Family ($5/month) with features from both the Lite and Personal plans with the addition of Early.

Affirm Business Model

Starting as a pay-later solution integrated into merchants’ checkouts, Affirm makes money from merchants’ fees as consumers pick up the pay-later solution. Affirm also makes money through interest earned from the consumer loans when those are repurchased from the originating bank. In 2020 Affirm made 50% of its revenues from merchants’ fees, about 37% from interests, and the remaining from virtual cards and servicing fees.

Alipay Business Model

Alipay is a Chinese mobile and online payment platform created in 2004 by entrepreneur Jack Ma as the payment arm of Taobao, a major Chinese eCommerce site. Alipay, therefore, is the B2C component of Alibaba Group. Alipay makes money via escrow transaction fees, various value-added ancillary services, and its Credit Pay Instalment fees.

Betterment Business Model

Betterment is an American financial advisory company founded in 2008 by MBA graduate Jon Stein and lawyer Eli Broverman. Betterment makes money via investment plans, financial advice packages, betterment for advisors, betterment for business, cash reserve, and checking accounts.

Chime Business Model

Chime is an American neobank (internet-only bank) company, providing fee-free financial services through its mobile banking app, thus providing personal finance services free of charge while making the majority of its money via interchange fees (paid by merchants when consumers use their debit cards) and ATM fees.

Coinbase Business Model

Coinbase is among the most popular platforms for trading and storing crypto-assets, whose mission is “to create an open financial system for the world” by enabling customers to trade cryptocurrencies. Its platform serves both as a search and discovery engine for crypto assets. The company makes money primarily through fees earned for the transactions processed through the platform, custodial services offered, interest, and subscriptions.

Compass Business Model

Compass is a licensed American real-estate broker incorporating online real estate technology as a marketing medium. The company makes money via sales commissions (collected whenever a sale is facilitated or tenants are found for a rental property) and bridge loans (a service allowing the seller to purchase a home before the revenue from the sale of their previous home is available).

Dosh Business Model

Dosh is a Fintech platform that enables automatic cash backs for consumers. Its business model connects major card providers with online and offline local businesses to develop automatic cash back programs. The company makes money by earning an affiliate commission on each eligible sale from consumers.

E-Trade Business Model

E-Trade is a trading platform allowing investors to trade common and preferred stocks, exchange-traded funds (ETFs), options, bonds, mutual funds, and futures contracts; acquired by Morgan Stanley in 2020 for $13 billion. E-Trade makes money through interest income, order flow, margin interests, options, future and bonds trading, and other fees and service charges.

Klarna Business Model

Klarna is a financial technology company allowing consumers to shop with a temporary Visa card. Thus it then performs a soft credit check and pays the merchant. Klarna makes money by charging merchants. Klarna also earns a percentage of interchange fees as a commission and for interests earned on customers’ accounts.

Lemonade Business Model

Lemonade is an insurance tech company using behavioral economics and artificial intelligence to process claims efficiently. The company leverages technology to streamline onboarding customers while also applying a financial model to reduce conflicts of interest with customers (perhaps by donating the variable premiums to charity). The company makes money by selling its core insurance products, and via its tech platform, it tries to enhance its sales.

NerdWallet Business Model

NerdWallet is an online platform providing tools and tips on all matters related to personal finance. The company gained traction as a simple web application comparing credit cards. NerdWallet makes money via affiliate commissions determined according to the affiliate agreements.

Robinhood Business Model

Robinhood is an app that helps to invest in stocks, ETFs, options, and cryptocurrencies, all commission-free. Robinhood earns money by offering: Robinhood Gold, a margin trading service, which starts at $6 a month, earns interests from customer cash and stocks, and rebates from market makers and trading venues.

SoFi Business Model

SoFi is an online lending platform that provides affordable education loans to students, and it expanded into financial services, including loans, credit cards, investment services, and insurance. It makes money primarily via payment processing fees and loan securitization.

Stash Business Model

Stash is a FinTech platform offering a suite of financial tools for young investors, personalized investment advice, and life insurance. The company primarily makes money via subscriptions, cashback, payment for order flows, and interest for cash sitting on members’ accounts.

Wealthfront Business Model

Wealthfront is an automated Fintech investment platform providing investment, retirement, and cash management products to retail investors, mostly making money on the annual 0.25% advisory fee the company charges for assets under management. It also makes money via a line of credits and interests on the cash accounts.

Zelle Business Model

Zelle is a peer-to-peer payment network that indirectly benefits the banks’ consortium that backs it. Zelle also enables users to pay businesses for goods and services free for users. Merchants pay a 1% fee to Visa or Mastercard, who share it with the bank that issued the card.

Read: Robo-AdvisorsBetterment Business ModelWealthfront Business ModelM1 Finance Business Model.

Read Next:

Main Free Guides:

About The Author

Scroll to Top