SoFi Technologies, Inc. (NASDAQ:SOFI) Morgan Stanley US Financials, Payments and CRE Conference Call June 15, 2022 1:00 PM ET
Company Participants
Anthony Noto – Chief Executive Officer
Conference Call Participants
Jeffrey Adelson – Morgan Stanley
Question-and-Answer Session
Q – Jeffrey Adelson
Jeff Adelson here with Equity Research at Morgan Stanley. Before we get started, I’ll just go ahead and give a quick disclosure. For important disclosures, please see Morgan Stanley’s research disclosure website at www.morganstanley.com/researchdisclosures. If you have any questions, please reach out to your Morgan Stanley sales representative.
With that, Anthony, very happy to have you join us today. Anthony Noto, CEO of SoFi, thanks for joining us in-person this year. Why don’t we just get into it right away? You’ve been at SoFi for over five years now, CEO for about four years. I think many investors here are familiar with SoFi, but for those of them who are not, can you just lead maybe with a quick overview of the company, what you are doing, what you are looking to do over time?
Anthony Noto
Sure. And thank you, Jeff and Morgan Stanley for having us at the conference. I think it’s the first live conference I’ve done in quite a while, so good to be back in-person. I always like to start with our mission. Our mission is to help people achieve financial independence to realize their ambition. And the best way to describe that in normal terms is we want to help people get to the point, they have enough money to do what they want that could be having a family of a certain size, a certain size house in a certain location retiring at a certain point in time.
It was our observation, when I was joining the company and when I pitched to the Board that there is this cohort of people in the United States that have done incredibly well academically. They’ve done well economically and professionally. But they’re not getting to the point that they can have the things and live the American dream, the way it used to be able to a couple decades ago and that they really needed more financial services and a relationship over their span of their life to make all the right decisions, make the right decision when they go off to college to pay for that college education, make the right decision buying a house, making sure they invest in their 20s or losing 10 years of compounding investment returns, obviously not over levering themselves and living in a state where they can continue to retire when they want and pay for their kids’ education, et cetera.
And the reason why was many of the big large banks had run out of account growth, they’d run out of household growth because the industry became mature and then they had to drive returns ROE by optimizing their businesses. So they got out of the housing market, they got out of the mortgage market, or they got out of the investment market and they were just optimizing their portfolio to have the best ROE they could as opposed to starting with the consumer.
And so we felt like there’s this cohort of people that are making $100,000 or more, and they weren’t well served. And we want to be there for every one of the major financial decisions they make in all the days in between to have that lifetime relationship so they can get their money, right. That was a big change for the company. It required us to immediately build a mobile application to launch all the products across borrowing, savings, spending, investing and protecting.
We were just in two of those products, when I arrived and now we’re in all of those products and we’re a bank and we owned end-to-end technology in our loan business. We own the end-to-end technology in our checking account business. We will soon own that in the credit card business and eventually all of our businesses, which allows us to innovate faster than anyone else, allows us to be a low cost operator to have superior and economics and lifetime value, and really forms the basis of our competitive advantage.
Ultimately, when we build trust and reliability in one product, we get the second or third product and it really drives great productivity on the LTV side of the equation. And then the technology we’re using to driving it is also a great business with high returns. And we’re really happy to have achieved the $1 billion revenue last year with really high growth and our first full-year of positive EBITDA $30 million and we’re forecasting this year and our guidance $1.5 billion plus, and a $100 million plus in EBITDA.
Jeffrey Adelson
Great. Thanks for that. And speaking of some of the changes, there’s a lot of uncertainty in the economy out there. Just wanted to kind of hone in on the environment you’ve seen over the last three to six months. What kind of steps have SoFi taken a reaction to the uncertainty out there? Are there any sort of strategic areas you’ve added, reprioritized maybe where you’re being a little bit more tactical right now?
Anthony Noto
Yes. So the actions that SoFi started to take didn’t start a year-ago or six months ago, that actually started two and a half years ago. When the pandemic hit in early March of 2020, we saw the commercial paper market and the repo market freeze overnight. And that was a wake up call. We had an early warning framework that we use for underwriting. This is before we were a bank and before we operate in this environment over the last two and a half years.
We significantly reduced our lending during that time period. We made some strategic decisions. We bought Galileo. We solidified our funding resources and made them committed lines versus uncommitted lines, and really started to managing the business for a high degree of uncertainty.
On the back of all that the President Biden gave an executive order that said, you didn’t have to pay your federal student loans for the foreseeable future. Well, student loans at that point in time were our largest and most profitable business. And over the course of the last two and a half years, we’ve operated an environment without that business with a great uncertainty around us across the board. So we’ve tightened our belt for the last two and a half years, reallocated resources to the highest growth businesses and good return businesses, and just managed the portfolio to deliver in my mind, unprecedented results.
To hit that objective last year of a $1 billion of revenue, we set it in early January of 2021 and to achieve the EBITDA of $30 million also set in early January of 2021 was a great accomplishment despite the fact that the student loan moratorium got extended twice after we’d given that guidance. So we’ve been very prudent with how much we spend and how much we drop to the bottom line. So we’ve changed our hiring practices. We’ve changed what business we are investing in. So there’s not one answer, it’s just – we’ve done it for the last two and a half years and we like the trend in our business. We gave increased guidance after we had outperformance in Q1 and we built the durable business that gives us that diversity.
Jeffrey Adelson
And you mentioned the changes or the changes you were doing when COVID hit, so what are your recession plans at this point? What would you do if you saw things that caused you to say, gee, maybe the consumer is starting to go the other way? How would you react? What are you looking for at this point?
Anthony Noto
Yes. So we have a number of leading indicators that we track and if they turn from green to yellow to red, we’ll make changes on what we’re doing from an underwriting standpoint. Our objective for their underwriting model is to achieve about a 7% to 8% life-of-loan loss on our unsecured personal loans. Student loans life-of-loan losses are less than 1%. That business has been so dramatically impacted by the student loan moratorium that it’s not really a factor in how we think about the environment getting really challenging.
And so the unsecured personal loans would be the – that would be the most impacted. And if we go from green to yellow to red, we would change that what we’re underwriting to make sure we could still be at that 7% to 8% life-of-loan losses. The yield that we get on our loans need to be attractive to us or any of our buyers through the cycle.
And so for the last, call it, four years, we’ve built a business where we could react to that environment to underwrite less and still deliver what we like to focus on internally as a 40% to 50% variable profit margin per loan, which is dependent on that life-of-loan loss of 7% to 8%. So if that went up, we would either have to raise prices to offset it, lower cost to offset it, but we have to get back to that 40% to 50% available profit margin because through this cycle, that will be a durable good return yield.
Jeffrey Adelson
And what have you been doing on pricing lately? You talk about the WACC and EPRs are charging the borrowers today. How have you adjusted to the higher rate environment and what are you seeing from the buyers of your paper? Are they still there pulling back? What are you seeing?
Anthony Noto
Yes. So in 2018, when we set the objective of hitting a 40% to 50% variable profit margin per loan, we had to develop a lot of testing capability. One thing that we developed was the ability to test pricing and credit, and we have about six different grids with 36 cells in each grid that we’re constantly testing each week to see how far we can push WACC versus credit and where we would be on a loss basis.
And we’ve been able to pass on a lot of the increase in benchmark rates. I would say the last two weeks, we’re adjusting to now prior to the last two weeks, we were passing on about 70% of the increase in benchmark rates in a higher WACC in our unsecured products, which is a testament to our testing capability, but also the differentiation in our product in terms of our ability to find the right customer with the right credit profile at the right price and we’ve maintained – as you imagine, we are looking at elasticities as we raise price and we’ve maintained what we thought we would want to see in the quarter.
Jeffrey Adelson
So 70%, I think you might have been at 11% yields before. I know you don’t disclose your WACC, but that – so that should be going up 70% with the benchmark rates out there, the two to three years.
Anthony Noto
Yes. I’m carving out the last two weeks because rates have moved so much in the last two weeks and we’re in the process of making changes will lags a little bit. But we’re constantly testing it. Yes, we’ve been able to pass on a good percentage of the benchmark rates.
Jeffrey Adelson
So the buyers are still there liking that demanding your paper at this point.
Anthony Noto
Yes. One of the things we also focused on in 2018 was expanding the buyer base for our loans. We wanted the loans to be attractive through the economic cycle. That’s where we focused on that 40% to 50% and communicated our commitment to 7% to 8% life-of-loan losses and we’ve been delivering on that and therefore the demand has been where we expected it to be. And I would say, if anything, people are going up in credit. And so, while we have a good start worth of buyers for our loans, there’s increasingly more demand from people that may not have bought as much from us in the past as they’re looking to go up and credit as well.
Jeffrey Adelson
And where are those people coming from?
Anthony Noto
I would say our home loan market is really a combination of regional banks, large banks and large asset managers. Those are the buyers of the hold loans. And we haven’t tapped the ABS market in a while because the home loan market has been so strong. And the way we think about sort of where we sell, which is a common question, we have sort of three choices: one, we can hold the loans; two, we can sell in the hold loan market and three, we can sell in the ABS market and we’re trying to optimize for the best return and best ROE we can drive in those choices.
Jeffrey Adelson
And are you finding that you’re getting more demand for your paper because you underwrite to a 740 FICO high or an average with a strong income level. Are you finding that? People are getting mindful of the deterioration elsewhere and maybe coming to you guys?
Anthony Noto
I think people are looking at the environment and the great uncertainty. And so it’s a flight to quality and flight to get back to home, so to speak. And while there may not be deterioration out in the marketplace, there’s an expectation there could be. So that means people want to go up and credit and be a little bit safer. They are willing to accept less yield for less risk.
Jeffrey Adelson
And maybe just switching gears a little bit, you talk about the 40% to 50% target there. What about the path to profitability of SoFi as a whole? I think there’s been a lot of focus out there in the tech space and the fintech space on bottom line profitability. We’ve seen a lot of announcements out there on cuts. What are you doing classically? How are you managing your expense base? How are you looking to get to increase your profitability over time?
Anthony Noto
Sure. When we set the objective of having a 30% incremental EBITDA margin, we did that so that we could answer this question when times get tough. The same way we answer it when the market is very jubilant. We didn’t like reinvest everything when the market was jubilant because we have to show a path towards long-term margins, which on an EBITDA basis, we think are over 30%. So when we establish 30% incremental EBITDA, margin reinvesting 70%, it was the reinforce where our long-term margins were going to be as well as our long-term ROE and ROA. And this year is a little bit of an aberration with the student loan refinancing moratorium be extended, but that’s sort of our path long-term. Let me talk about each of the pieces.
So our lending business is very profitable. We disclose the contribution profit there. I wouldn’t expect that margin to go out very meaningfully. There is a couple of sources of upward margin expansion there, but we’d likely reinvested over time. So student loan is operating at less than 50%. We’ve talked about that in the past. So that margin gets negatively impacted by that environment. Personal loans, very high margin – really high volumes. I wouldn’t expect a margin to go higher there because we want to maximize dollars in that range of 40%, 50%. Home loans are definitely under earning relative to where they could be long-term as we’re retooling the backend operation there for purchases versus refinance loans.
So I would say the contribution profit margin for lending is probably at steady state already with some pluses and minuses, depending on the environment. The technology services business is about a 30% EBITDA contribution margin. That was 40% to 45% when we first bought Galileo, but we’ve invested massively moving to the cloud and a bunch of new products that we want to sell to existing customers. And so the revenue streams against that investment will come down the line. So that margin over time would go from 30 to 40 plus percent, but the near-term we’ve said, keep it at 30 because we want to invest in future growth of those new products, but more upside there.
As it relates to the functional services business, that’s the area where we have the most margin expansion. If you go through our Qs and Ks, you can now calculate the revenue for that segment, less all the variable costs. If you subtract all the variable costs except marketing, you’ll see we’ve been profitable revenue versus variable costs for the last three quarters. If you then add marketing expenses, we’ll cover the marketing expense in addition to the other variable costs by the fourth quarter of this year. So the end of this year, our variable profit in financial services will be positive after marketing. And that includes acquisition costs within marketing.
And then by the end of 2023, it’ll cover our fixed costs. And then the last piece we have to cover is our SB stock-based compensation that currently is very high. If you sort of adjust it for the one-time grant of the PSUs, it was around 15% to 16% of revenue in Q1. We expect that to get down to the high-single digits by 2024. And that’s when we’ll bring all the pieces together for GAAP profitability.
Jeffrey Adelson
So it sounds like, you could get to the GAAP profitability by sometime in 2024 depending on what happens with the macro environment and some other things going on?
Anthony Noto
Yes. We could grow faster if student loan business comes back faster and is bigger, the home loan business gets to where we wanted to go, that path could change. There’s other revenue streams that we have that we’re not counting on in our five-year forecast that are tied to the bank as well as our technology platform business. So lots of opportunity for new products that we’re not factoring into the outlook for technology.
Jeffrey Adelson
Got it. I wanted to make sure we also addressed the other big theme for you guys. You recently launched the bank. You bought Golden Pacific, the bank charter. I know that Chris was out there last week with the deposit growth update, $2.2 billion. You’ve been growing a 100 plus million a week. Can you talk about the account growth you’ve been getting there, how that’s going so far, any learnings you’ve been able to take away running the bank in this short time period?
Anthony Noto
Yes. The bank was a big strategic debate we had with the Board and the company on whether or not we wanted to be a bank. And as we started to learn the business and understand the competitive factors and how we want to differentiate our product, like we want to build trust and reliability with the new member based on whatever product they want. But ultimately we want to be their primary provider of financial services. And in order to do that, you have to have a very attractive checking and savings account, which is what they use every day. And we believe that without becoming a bank, we could never compete in a very attractive checking or savings account on the scale and innovation that we wanted.
And I will tell you, now that we have the bank and going through that entire process, I couldn’t be happier. Everything we thought the bank could do for our business, it’s doing for our business. It gives us a lower cost of funding for our loans. It allows us to take that savings and give it to members in a high interest rate and unprecedented interest rate. I don’t know anyone that’s offering 1.25% on checking with direct deposit and an unlimited amount of money with no restrictions on spending. So it’s pretty unique. It’s resonating in the marketplace. And we like the trends that we’re seeing across the board.
As Chris updated on the deposit side of the equation, it took us three years to get to a $1 billion of deposits. And it took us three months to add another $1 billion and they’re high quality coming from direct deposit customers. So once we have that primary relationship, we have their central nervous system. We understand how much they’re spending. We understand if they’re sitting on a bunch of cash and they should be investing that and setting them up with a free certified financial planner, we can see if they’re overspending and they need to consolidate their debt. We could offer them that product. We can also help them diversify into other areas as they think about yield.
So the bank has definitely lowered our funding cost. It’s given us ability to hold loans, if we want to hold loans, which puts pressure into the wholesale market, puts pressure in the ABS market when people want our pristine credit, we can hold that if we want and that creates another competitive advantage on what prices we can yield, not to mention all the benefits we have in the checking and saving account business.
The added benefits of the bank are things we haven’t talked about before. So Galileo has partners. Most of them are consumer-facing partners, but increasingly they’re signing up more B2B partners that want payment capabilities. Well, they also need sponsor banks because they want to open up small, medium checking accounts or savings accounts. Well, now that SoFi is a bank, it could be the sponsor bank for those enterprises. And so that’s a new line of business that we wouldn’t have had before without the bank that actually is synergistic with Galileo and its ability to sign up new customers, which then bleeds over into Technisys, especially for a company that maybe starting in a small, medium business area. And they need a core technology that Technisys can provide. They need a payment process that Galileo can provide and they need a sponsor bank and now they can get it in one place. Other businesses will add to the bank over time, not just one example.
Jeffrey Adelson
Got it. I want to revisit that in a little bit, but just maybe finishing up on the bank. What’s your goal with the deposit growth? It’s been very successful so far? You’ve only needed to increase the rate one so far. Do you have a deposit funding target in mind? And you mentioned holding loans, do you have a retention of the loan strategy at some point coming into play? Just help investors understand that?
Anthony Noto
Yes. What we articulated during the going public process from January 2021 to when we went public in June, we’ve continued to say, even before we got the bank is, we want to use the bank to optimize for the best ROE that we can. And if we can get a great price for our loans in the whole loan market versus holding them, then we will do that. From a deposit standpoint, we’re on track to our year-end target for deposits, we’re growing at, as Chris mentioned over a $100 million a week. I would say, as long as we stay at that rate with the high quality new account openings the members that we’re getting, we will increase rates. If competition heats up and increases, we have a lot of cushion to able to increase rates to stay at that rate, but that’s kind of where we want to be.
We came out with a 1% rate on checking initially with direct deposit. The Fed has moved 75 basis points since then. We’ve only passed through 25 basis points of that. And it’s really doing well where it’s at. So something we need to change for us to want to go higher. We could definitely afford to do it. But we’re at the pace we want to be at the year-end targets and have the optionality of holding loans longer. We said that we would hold six months instead of three months and that’s what we’ve been doing.
Jeffrey Adelson
You mentioned the Galileo opportunity with some of these enterprise clients acting as the sponsor bank. Can you dig in a little bit on that? What would you actually do? Is that something where you’re originating for banks or what’s the profitability aim there?
Anthony Noto
Yes. So I think you mean on this – using the bank as a sponsor bank for Galileo.
Jeffrey Adelson
Yes. Well, you were talking about the enterprise clients to Galileo?
Anthony Noto
So if an enterprise customer, sorry, enterprise partner of Galileo has a number of customers and wants to provide banking services for them, they’re not a bank. They need a sponsor bank. So we would provide them with a bin for their debit cards that as the card issuer. For that we would also provide them a ledger, a core technology, and be able to do end-to-end banking services in the small, medium business sector. If we didn’t have the bank, we couldn’t offer that end-to-end solution. We could offer the technology solution, but they’d have to go with one of the sponsored banks that exist outside because we’re now a bank, we can do everything, soup to nuts.
Jeffrey Adelson
Got it. And with Technisys, can you just remind us why you decided to pursue that acquisition? What does it bring to the table that you don’t have today? And then, you also talked a lot about the opportunity in the U.S., which, I don’t think you were embedding in the numbers you put out initially with the cross-sell there. But what are your goals there and how achievable do you think it is? I think it’s a highly competitive market. One of the things that sometimes we hear from investors is that it’s really hard to be successful in that business globally. Just maybe give us a framework for understanding that?
Anthony Noto
So first is an important element of our strategy. We believe vertical integration is critical to having a competitive advantage in being a faster innovator, a low cost operator and therefore highest lifetime value. Our loan business, we own end-to-end, we can innovate faster than anyone else, we can test faster than anyone else, we can drive better engagement and more data to do personalization and real-time decisioning.
As we were building the SoFi money account, we built on one of the old providers and we were trying to innovate with two-day early paycheck. We were trying to innovate with free roundups. We were trying to innovate with a few other things and the partner just couldn’t do it, we were at the long – we were at the end of a long line. So we did a big RFP and said, what would it take for us to do this with someone else? We picked Galileo among all the other choices. As we were integrating with them, we realized that we had a much more ambitious roadmap than they had on their own or for any of their customers wanted. And we felt that we could provide the funding, the vision and the foresight of where we needed to go and the industry needed to go and that we would help enable the entire industry of digital frontier companies.
And so we bought Galileo so that we could innovate faster, drive lower costs and bring new products to market that no one else is willing to do. It turns out to that technology and those products we needed by all their customers. So it would also drive great profits for us to reinvest as well. As we thought about this concept of end-to-end integration, we came to the realization that our core technology needed to be on one platform.
We have a core technology for our lending business. We have a different core technology for checking and savings. And for those that don’t know core technology, it’s really the operating system of that product. We have a different one for credit card, different one for investing. So we started to look at building our own multi-product core that was extendable to products that didn’t even exist today. That was customizable and that was in the cloud.
And we ultimately saw a number of different companies that already had done that. Technisys was one of them. So for about a year and a half, we were in deep diligence to understand. Could they meet all of our needs to have one core technology across all of our existing products customizable in the way that we wanted? And it could be extensible the products we hadn’t contemplated yet today. And ultimately, we thought this was the right solution for that.
At the same time, Galileo’s partners, many of which are one product companies wanted to add secured credit card. They wanted to add revolving credit card. They wanted to add Buy Now Pay Later. They wanted to add crypto services. They wanted to add loans. They were going to need multi-product core as well because Galileo has one core. So Technisys serves two purposes. One, it will be our core technology across all the products, which enables lower cost, real time decisioning and personalization, but it’ll also serve the community well with Galileo’s partners and on its own, which it’s already doing, which is very strong across all LATAM.
In terms of international expansion, Technisys can go global. We have a lot of demand out of Europe and increasingly other parts of the world, not just LATAM in the U.S., it’s a standalone product by itself or we can couple it together with our bank, we can couple together with Galileo and pieces along the way.
Jeffrey Adelson
And how has the progress been going there so far? I know it’s still pretty early, but any learnings you can share with us on that process?
Anthony Noto
Yes. I’d say in the course of acquiring a company at the scale of Galileo or Technisys, one of the things you can never truly, truly understand is like they are operating tempo and their decision making process, you have to be part of the company. And after about my fourth weekly, like what we call latest call business update meeting. I’m like, I couldn’t be happier. Like I just need to check-in with Derek and Miguel, once in a while, like they’re professionals, they know what they’re doing. This is a well, well run company and can really – it’s really complimenting Galileo and bringing partners to the table from the traditional financial industry that wouldn’t have come to the table before. But because that’s something that’s so unique and valuable, it’s been a great compliment and it’s incredibly well run.
Jeffrey Adelson
Got it. One thing I wanted to touch on, make sure I got in front of you, there was the whole proposal you put out in the proxy recently with the reverse doc, but just wanted to see if, you could answer, what was the thought process there? Why are you putting them in there?
Anthony Noto
Yes. And there’s been a lot of chatter on all the social media platforms, which we read and we care about all of our shareholders deeply. And this is definitely one that’s created a lot of controversy. The headline I would say is, this is one of those break in case of an emergency. And I’ve lived through the financial crisis of 2000, 2001, 2002. The crisis in 2008, 2009 and 2010 and obviously we’re going through a huge dislocation now.
And so as we were going into the shareholder meeting, we thought about all the ranges of scenarios that could unfold and what do we need to be best prepared. And markets can be irrational. Like we’re incredibly proud of what we built. We think we have a durable business. It’s doing quite well. We’re one of the few companies that exceeded Q1 expectations and raised for the rest of the year.
So our confidence is in no way reflected in the ask for this vote. What is reflecting in the ask for this vote is prudent management. We want to give our Board the option that if we enter a market, that’s even more irrational than we are now. And it is justified to do a reverse stock split. They have the option to do it. Many shareholders don’t realize that to do reverse stocks, but requires a shareholder vote.
And if you don’t ask in your Annual Shareholder Meeting, and for some reason you need it down the road because the markets are irrational in our case, which would be the only scenario that I see us having to do it, unless there’s something I haven’t anticipated. The Board has the optionality to do that. Otherwise, we’d have to have a shareholder vote on one particular thing at a high point of stress when the markets are irrational and may not be able to help the company. So it’s really meant to be a free option for the Board if they believe they have to break in case of an emergency. But in no way, communicates our confidence and our strategy or our business or what we see in the future, our goal is to keep driving our results, which eventually we reflected on our stock price. But right now, in a period of great uncertainty and people don’t know answers to some questions, but I know our strategy is the right one. We have the right team and we’re executing.
Jeffrey Adelson
Got it. So it’s really there not to actually execute it on it with the Board. It’s really there just to have the option down the line?
Anthony Noto
That’s right. And the Board would have to prove it if it’s approved in the shareholder vote. And there have been other financial institutions that have had to do that. And we looked at the range of scenarios and it’s just prudent financial management and risk management.
Jeffrey Adelson
And is that something where, if you want to execute it after as approved, you can do it whenever you want, or is there like another step there? Like how does that work?
Anthony Noto
It requires Board approval and they only have the right to do it for one year.
Jeffrey Adelson
Okay. Before we continue, I just want to see if the audience had any questions. Open it up a little bit here. Nope. Happy to go ahead and continue, so financial services, you mentioned earlier, that’s something you are striving to get towards profitability right now. Is there anything in that line of business that you feel like you’re missing today, want to add more to for your customers? Talk about your growth ambitions there?
Anthony Noto
Sure. In the invest product, we’ve really sort of pioneered being a one-stop shop, just an invest. So we launched with single stocks, fractional shares, which we pioneered others have copied. We have our own robo advisory accounts, which people will talk about as automated investing. We offer 30 crypto coins. In addition to that, we launched IPOs last year. So we’re the only place digitally you can go on and buy all those asset classes in one place. We also provide a free certified financial planner and a lot of other member benefits as it relates to financial investing and planning. We will add more selection. We will continue to differentiate on selection.
There’s a huge opportunity whether asset classes to add. I think investing is one of the hardest to access drivers of wealth long-term, and the least understood the response that we’ve seen in our invest product, even despite these challenging markets is really positive and it shows the desire of our members to invest, to try to get to where they want to go. And we want to give them more products and services to get there that can drive outsize returns.
As it relates to checking and savings, we launched with just the one account, there’s a lot more innovation we could add within that, that portfolio of products, high yield savings as an example, we do have a 70 basis point product. If you don’t do direct deposit with us, there’s more that we could do within that place and with rates being higher now, we could think about things like CDs and other types of financial products.
In insurance, we’re just a partner. So we provide lead generation for home, auto and life. We generate for our partners about $250 million of insurance premiums a year. So it’s about a $1 billion run rate. That’d be an area, we’d love to be in as a principal at some point in time, if an asset were available at a low price and it was a technology and a team, and it could be an acqui-hiring and be in that business there’s areas we’d like to be there. Currently, we’re not intact, again, something that our members really want will be complimentary to our ability to save and reinvest that savings through the right types of tax planning. But again, not something we’re rushing to get into, but something down the line.
And there’s a lot of other areas within the vertical categories. In credit card, we have one credit card today. It’s a gray card. It’s the one card that helps you get out of debt. You can redeem your points at 2x into loans versus the 1% you’d get to if it was just cash, you can redeem 2x into invest as well as checking and savings. And you’ll see us launch something called SoFi plus, which brings everything together. SoFi plus will be like a subscription service where you get a whole host of member benefits, if you do direct deposit with us. So we won’t charge for it, but we’ll give you all these value added services. When you do SoFi plus with us, which is triggered off of doing direct deposit, and there’ll be benefits in loans, benefits in invest, benefits in rewards in a number of other areas. So that will bring it together as well.
Jeffrey Adelson
And when can we expect that to come out?
Anthony Noto
That’s a back half of this year type of initiative and one that we think communicates a couple of things. First, it says, hey, this is a one-stop shop. They have a product across all these different areas. I only have to do one thing to get the benefits across all these areas. And it’ll be something we add more value to over time as we learn and grow. As an example today, we double your points. As you redeem it to other products, you could imagine a SoFi plus member getting triple points or quadruple points for specific activity and many other iterations around that, but we want to get the platform launched, learn and iterate as we go.
Jeffrey Adelson
Have you figured out what kind of pricing you’d like to do on that product?
Anthony Noto
SoFi plus will be free if you do direct deposit. At some point, we may provide the opportunity to pay for it instead of doing direct deposit. But we love direct deposit customers given all the benefits we get from the data and helping them get their money right.
Jeffrey Adelson
And you mentioned the potential for maybe bringing in-house some of the services you refer out right now, insurance tax, do you have a priority list or any kind of ranking or is it really just take it as you will pricing, et cetera?
Anthony Noto
Yes. I’d say we’re not in a rush to do anything. The Technisys acquisition was our second large acquisition, Galileo was a huge home run. Technisys looks like it will be that as well. We want to make sure we successfully execute on that strategy before we do anything else large. So might mention these other things, they would be relatively small and not distracting. And the reality is just not a lot of small attractively priced assets like that. So I wouldn’t expect anything in the near-term. It’s just longer term thinking about where we could go.
Jeffrey Adelson
Understood. And then just maybe to wrap it up a little bit here. The deposit customers you’re getting, what are you finding that those customers are like compared to the existing SoFi customer? Are they the same? Are they doing anything different? What kind of activity are they putting on the platform for you?
Anthony Noto
They’re exactly the people we like to acquire. They are high income. They’re very active in spending. Their deposits continue to grow even though they’re doing direct deposit in spending. So they’re the right characteristics for our business that we bring on the top of the funnel. Our cross-buy rates into loans have remained relatively the same. We disclosed during the IPO process, mid-20s, cross-buy rates into loans. That means 25% of the loans that we underwrite. Personal loans and student loans come from our existing members, 60% to 70% of home loans come from our existing members.
At the top of the funnel is money invested in credit card and that’s coming in the profile that is allowing us to still drive those type of cross-buy rates. So even though the top of the funnel has grown so dramatically, the cross-buy rates have held up quite meaningfully, and we haven’t changed our underwriting criteria.
Jeffrey Adelson
And maybe I could just fit one last quick one in for you. Mortgage has been a hot topic of late, the market has come off a lot. Can you just talk a little bit about what you’re doing there? I know the purchase area is something you’re really focused on right now. How are you addressing that right now?
Anthony Noto
Yes. We are definitely transitioning from a refinancing market and home loans to a purchase market. In a purchase market, you need to be able to close within 30 days, in a refinancing market it’s not that critical. Once the rate is locked in, people are less sensitive to how long it takes to close the loan. And we want to create a great consumer experience for our members. Given the fact that 60% to 70% of our loans in mortgage or from existing members, we need to be able to close in 30 days, we’re working hard with our back-end partner to make that transition. So we’ve taken our foot off the gas and driving the demand until that back-end is ready to go and then we’ll step back on the gas.
So we think it’s incredibly important product to have for our members. It’s one of the biggest financial decisions they’ll make. It’s definitely one of the most emotional decisions they make and we have to be there for them, but we have to be reliable and build trust. In every experience we have with them, trust is critical so that when they need the second, third or fourth product, they choose us because they had such a great first experience. So we have to nail the back end and we’re working hard to do that.
Jeffrey Adelson
All right. Well, I think we’re out of time. Really appreciate you being here, Anthony.
Anthony Noto
Thank you, Jeff.
Jeffrey Adelson
Thanks.
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