The full-scale “destruction of banking” narrative is getting weary. Disruption is happening, but the hype of 2015 has cooled. This is not an invalidation of the importance of fintech companies, but merely a resetting of expectations to more sustainable business models.

Take SoFi, for example. SoFi has been one of the most aggressive fintech startups by any measure – fundraising, loan volume, marketing ubiquity, and “disruption smack talk.” Since launching in 2011, they have already made $10 billion in loans, and are valued around $4 billion.

However, there have been some hiccups – their Super Bowl ad created so much demand that they didn’t have enough capital to fund the loan requests. Q1 volume of $1.85 billion was also well below the projections of $2.4 billion.

The week, the Wall Street Journal published an article discussing the strategic questions that SoFi is facing – namely, what business model makes sense for a growing fintech lender. One startling admission from CEO Mike Cagney,

“Our thought process has matured to the stage of we understand and appreciate how important the banking infrastructure is for our business to execute and grow and succeed.”

While the statement itself is relatively benign, it is an about-face from the brash claims of SoFi and other fintech companies who claimed they would destroy the banking system in the next 5 years.

SoFi is also exploring applying for a bank charter, which would help them offer insured deposit accounts and credit cards. This may be a good time, as the House just blasted the FDIC for not approving enough new banks. Cagney also met with JP Morgan’s Jamie Dimon earlier this year, but no partnership announcement has surfaced (allegedly disagreements over who owns the customer).

Despite the uncertainty around SoFi’s future business model, banks cannot assume any slowdown in the pace of change. One of the greatest advantages startups like SoFi enjoy is the ability to pivot quickly. They have the intellectual and financial capital on hand to find a solution, and won’t be giving banks any breathing room.

But that may just be because SoFi will stand so close to their new fellow banks…

Wealth Management
Betterment has become the first independent robo-advisor to surpass $5 billion in assets. Betterment had only $900MM in November 2014, so AUM is up 450% in less than two years. They overtook Wealthfront in 2015, though Schwab’s robo-advice service already has nearly $7 billion.

Chase has launched on the clearXchange network, allowing real-time p2p payments to Bank of America and US Bank. This service will be provided to 60% of American bank accounts at Chase. In addition, they noted that $20 billion of transactions passed through Chase QuickPay in 2015. They estimate this is twice as much as the leading fintech company.

Corporate Venture
Deutsche Boerse is spinning off its fintech investments into separate venture capital fund. The new firm, DB1 Ventures, will be looking for new investments in blockchain, robo-advisors, trading platforms, etc., and will have a very flexible deal stage/structure mandate. For now, Deutsche Boerse will be the sole LP.

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