SoFi cross-selling accelerates as members drive 51% of new products

SoFi cross selling gained momentum in the second quarter, with existing members accounting for 51% of new products as the financial technology company added a record 1.1 million members and 2.2 million products. The shares fell 9% at the start of trading Wednesday after SoFi raised its revenue outlook but held adjusted EBITDA guidance at about $1.6 billion.

The company’s earnings call and investor materials showed products per member reached 1.54, reflecting SoFi’s effort to build a broader financial relationship with customers after they enter through banking, credit, investing or lending products. A year earlier, existing members generated 35% of new products, according to the company.

How is SoFi cross selling growing?

Cross-selling means offering additional financial products to customers who already use at least one service. In SoFi’s model, management said members who begin with products such as SoFi Money or Relay can later be offered investing, credit card, small-business and lending products at lower acquisition cost because the customer relationship already exists.

Chief Executive Anthony Noto told analysts that adding more Money and Relay members creates downstream benefits across SoFi Invest, SoFi Credit Card, SoFi’s small-business business and its loan products. He said acquisition costs for those additional products are effectively negligible.

SoFi Plus was one example highlighted by management. The subscription product had about 206,000 subscribers at quarter-end, 85% of whom were already SoFi members. The company said 25% of those subscribers later opened another product, while Noto said the group was also adding deposits, assets under management and spending.

Artificial intelligence is being added to that customer model. SoFi Coach uses information from SoFi accounts and externally connected accounts, and the company expects it to move beyond guidance into actions on behalf of customers. Automated subscription management and cancellation are planned for later this year, according to the company.

Lending and payments drove the quarter

SoFi’s lending business remained a large contributor. Personal loan originations reached a record $10.7 billion, while student loan originations were $2.7 billion and home loans were $1.4 billion. The company kept $7.6 billion of personal loan originations on its balance sheet and transferred $3.1 billion through its Loan Platform Business.

Credit metrics improved from the prior quarter, according to the company. Excluding sales of delinquent loans, the annualized personal-loan net charge-off rate fell to 3.7%, down 70 basis points sequentially. The 90-day delinquency rate declined seven basis points to 40 basis points.

Chief Financial Officer Chris Lapointe also pointed to higher transaction activity. Annualized spending across SoFi Money and Credit Card exceeded $28 billion, helping interchange revenue rise 67% from a year earlier and 25% from the first quarter.

Business banking and SoFiUSD

SoFi is extending the same product-expansion approach into business accounts. Noto said the company plans to follow its small-business lending product with checking, savings and other services. Its Big Business Banking operation targets commercial customers that need API-based fiat and digital-asset banking, according to management.

Noto said SoFi’s cryptocurrency business is settling transactions in SoFiUSD, and that commercial banking customers can use it for payments. He also said SoFi expected to start settling Mastercard debit and credit card transactions in SoFiUSD within weeks. Company materials showed about $300 million of SoFiUSD in circulation at quarter-end.

Revenue forecast rose, profit guidance did not

Adjusted net revenue increased 40% year over year to $1.2 billion. Financial Services revenue rose 29% to $466 million, while Lending adjusted net revenue increased 59% to $712 million.

SoFi lifted its full-year adjusted net revenue forecast to a range of $4.75 billion to $4.85 billion, implying growth of roughly 32% to 35%. Lapointe said the company plans to use some of the additional revenue to fund growth areas rather than convert it immediately into higher profit, while keeping adjusted EBITDA guidance at approximately $1.6 billion.

This story draws on original reporting from PYMNTS.