SoFi wants to become the AWS of banking services

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The news: American neobank SoFi has accepted to acquire Technisys, a cloud-based provider of basic banking services. The combination is valued at approximately $1.1 billion and is expected to close in the second quarter of 2022.

More on this: Adding the supplier gives SoFi its own core banking platform.

  • Leaving the multiple outside companies he currently relies on will help him save about $75-85 million cumulatively from 2023 to 2025.
  • The core overhaul is designed to help SoFi move faster and roll out more personalized offerings for its customers.

The bigger picture: SoFi said its agreement with Technisys would help it in its ambition to become “a one-stop financial services platform.”

  • The neobank also sees itself as similar to Amazon’s cloud services arm, Amazon Web Services (AWS)but operating in the fintech space.

Technisys is the third major deal for SoFi:

  • the Golden Pacific Bancorp OKwhich he completed earlier this month, helped SoFi become a full-fledged bank after its approval by the Office of the Comptroller of the Currency (OCC) and the Federal Reserve.
  • Banking Service Provider as a Service (BaaS) Galileo came after to agree to the merger in 2020. Galileo still operates independently; SoFI plans the same for Technisys.

The BaaS Growth Game: SoFi goes combining Galileo and Technisys technologies for its improved BaaS armthat it plans to offer to established banks and fintechs.

  • The banking products mentioned include savings, checks, credit cards, loans and deposits.
  • SoFi will also use coupling for integrated financeallowing non-financial companies offer banking services to their customers.
  • Both Technisys and Galileo operate in the United States and Latin America, and their addressable market will cover 16 countries.

The big takeaway: Technisys is giving SoFi the building blocks to form a BaaS division that could eventually rival its neobanking business in importance.

  • This scenario recalls the relationship between AWS and Amazon: AWS represented only 12% of the company’s net sales in the first quarter of 2021, corn constituted the majority of its operating profitaccording to our report, “The power of Amazon.”
  • Embedded finance could be particularly lucrative, as its new revenue volume is expected to soar 922%, from $22.5 billion in 20202 to nearly $230 billion by 2025. by Capital of the light year.

SoFi’s series of acquisitions could give its neo-banking arm a competitive advantage over incumbents:

  • Its newly assembled state-of-the-art technology stack is unencumbered by more difficult to manage legacy systems.
  • Having a basic banking platform eliminates its reliance on external vendors. On the other hand, many incumbent banks are unhappy with their current relationships in this space.
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