The big-tech domination playbook … the company poised to transform the industry … the opportunity by the numbers
Big-tech domination follows a pattern.
In Luke Lango’s recent Daily 10X Stock Report, he summed it up nicely:
Step 1: Innovatively deploy technology to drive down the costs and drive up the convenience of a must-have product or service.
Step 2: Pass those cost-savings onto the consumer, resulting in a best-in-breed product or service with industry-low prices.
Step 3: Take all the money made from mass adoption of this first “hero product” and invest it into creating multiple new products and services on top of that same technology infrastructure.
To illustrate, Luke points toward Amazon.
It used technology to make shopping hyper-fast and hyper-cheap… it then passed those savings onto the consumer via a marketplace with market-low prices… then, it leveraged all those Amazon.com profits to launch Amazon Web Services, Prime Video, Amazon Fresh, and more.
Back to Luke:
This winning strategy has already been executed in most industries, resulting in the creation of new tech giants in centuries-old markets.
Amazon is now the 400-pound gorilla in the retail market. Facebook is the same in the communications sector, and Netflix the same in the entertainment world.
But this strategy hasn’t been executed in all industries yet – and in the industries where it has yet to be executed, is where you will find the next Amazon…
The multi-trillion-dollar financial industry is one such industry.
In today’s Digest, we’re going to sneak a peek into Luke’s Daily 10X issue. We’ll learn about the coming technological disruption of the world’s banking system and discover the identity of the innovative fintech company at the center of it all – a company Luke calls the “Amazon of Finance.”
Let’s jump in.
***How digital banks will replace the legacy banking system
For newer Digest readers, The Daily 10X Stock Report is like no other service we know about – it was created back in the spring for one purpose:
Deliver to your inbox—every day the market is open—a top-notch small cap stock pick that could rise by 1,000% or more in the long run.
Oftentimes, a stock that rises 10X comes courtesy of a company that’s disrupting the status quo. That’s exactly where we find Luke’s pick today.
The traditional banking process is all about the status quo – and it’s filled with problems.
Luke points toward account fees, clearinghouses, high interest rates, and long wait-times for customer service and in-person appointments, among other issues. It’s a cumbersome, expensive process – generally because banking is filled with middlemen who are siphoning money out of the process.
Back to Luke:
But what if technology automated out those middlemen profit-takers?
What if someone created an entirely digital bank, with all technology-driven processes, that delivered fast, cheap, and convenient financial solutions to customers all across America?
Someone is doing that – and that someone is SoFi, a $15 billion digital finance company that is going public through a merger with one of Chamath Palihapitiya’s SPACs, Social Capital Hedosophia Holdings Corp. V (IPOE).
SoFi is following the Amazon playbook. Only, in this case, it’s disrupting of the legacy financial industry that commands trillions of dollars.
***How SoFi will one day emerge as America’s digital bank
SoFi’s roots date back to 2011, when Stanford business school students realized that the student loan financing industry was being bogged down by two things…
One, banking was a physical-first industry. This meant excessive property-related expenses that were inevitably passed onto the consumer.
Two, student loans were typically structured as complex transactions with tons of middlemen. This meant fees that jacked-up expenses for the college student.
SoFi was a reaction to these inefficiencies.
Back to Luke:
SoFi was created on the idea that the platform could leverage automated technologies and a digitally-native experience to create hyper-convenient access to cheap student loan refinancing.
Luke explains how, in the past decade, students across America have turned to SoFi and its lower rates to refinance their loans. These lower rates have come thanks to the use of technologies to reduce the operating costs of the business.
If we look back to our tech-domination pattern above, these less-expensive loans were SoFi’s “hero product.”
So, what has SoFi been doing with the profits from this hero product?
From the Daily 10X issue:
Over the past two years, SoFi has launched a series of digitally-native fintech solutions with significant cost and convenience advantages, through its SoFi mobile and desktop applications. These solutions include:
- SoFi Money: a cash management account that acts like a mobile checking or savings account, with no account fees, 0.25% APY, and an attached debit card.
- SoFi Invest: an attached mobile investing account, where consumers can use their funds from SoFi money to invest in stocks, ETFs, and cryptocurrencies. You can also invest in pre-IPO shares, which are usually reserved for institutional clients.
- SoFi Credit Card: an attached credit card, where consumers can link their Money accounts to this credit card and earn 2% cash-back on all purchases. Those rewards can be used to pay down debt through a SoFi loan, or invest in stocks/cryptos with SoFi Invest. No annual fee.
- SoFi Relay: an attached budgeting software tool, where you can track and monitor spending via SoFi accounts and external linked bank accounts. You can also check your credit score.
- SoFi Education: complementary educational articles and videos that help consumers learn everything about finance – from how to invest in cryptos, to what an APR is, to why credit scores matter.
With the SoFi app, you get all of that… in one application. It’s an all-in-one mobile money app that is leveraging technology to make banking fast, cheap, and easy.
It’s the future.
***The massive opportunity in front of SoFi
Let’s look at a few numbers…
Today, SoFi boasts roughly 1.8 million customers. That’s up more than 160% from the start of 2019.
But Luke explains that this number still represents just 0.4% of the roughly 500 million bank accounts in the U.S. In other words, despite its tremendous growth, SoFi still has pretty-much the entire market to capture.
Another helpful illustration of SoFi’s huge opportunity comes through comparing market-caps.
Wells Fargo has a $170 billion market cap. Bank of America is at $345 billion. JPMorgan, $475 billion. Meanwhile, SoFi’s market cap is just $15 billion.
This means its market cap would have to soar more-than 10X to catch up to Wells Fargo (the smallest of the three just mentioned).
Back to Luke:
Long-term, we think deeply embedded consumer distaste for big banks plus SoFi’s breakthrough technology platform which makes banking cheaper, faster, and easier, will ultimately lead to the SoFi platform turning into America’s “digital bank” one day.
It will replace Wells Fargo. It will replace Bank of America. It will replace JPMorgan Chase.
Just like Amazon replaced Walmart, Target, and Nordstrom.
Because, at the end of the day, the consumer likes cheap and fast – and technology-first platforms are cheaper and faster than legacy platforms.
One final note…
As mentioned above, SoFi is going public through a merger with a SPAC that comes from Chamath Palihapitiya.
For readers less aware, Palihapitiya is a billionaire venture capitalist who has quite a pedigree. He was AOL’s youngest vice president ever… he joined Facebook as a high-level executive when it was just 1-year old… he launched his own fund, Social Capital… he’s been an early investor in big names including Slack, Box, and Premise… and last year, he helped take Virgin Galactic public through a SPAC.
The point is there’s lots of experience behind his name – specifically a great deal of tech experience.
I’ll give Luke the final word to take us out today:
SoFi has a long runway ahead of it to technologically transform the antiquated financial services industry.
And that’s why you should consider taking a long-term position in SoFi stock today.
Have a good evening,