In this city’s crowded financial district you’ll find a Wells Fargo Bank branch with an antique stagecoach inside. But I was interested in talking with a former Wells Fargo employee, so I headed elsewhere, to SoFi, a “fintech”—financial technology—company doing its best to turn the banking system upside down. I wound my way out to the Presidio, a former military base now commercialized, with beautiful views of the Golden Gate Bridge, Alcatraz and, if you peer through the fog, the future.
Once inside SoFi’s modern, open-floor-plan headquarters, I meet the CEO, chairman and co-founder, Mike Cagney, sitting at a table in a gray company T-shirt and jeans. The 45-year-old native Californian speaks in a deep, deliberate voice, with an undercurrent of confidence and excitement. What’s he so confident and excited about? Doing to banks, with a smartphone-based model, what Amazon has done to book stores and Uber has done to taxi fleets. “There is going to be a seismic redistribution of market cap in the banking world,” he says. “They won’t see it coming until it’s done.”
Much of America wasn’t sure what it was seeing when SoFi aired a dreamy “Great loans for great people” Super Bowl ad this year. But the high-profile TV spot, in the telecast’s tradition, stuck a flag in the ground for a young company with big dreams. The question is whether SoFi will turn out to be more Apple Inc. or more Pets.com.
What started out as an ingenious little enterprise making gold-plated student loans at the Stanford Graduate School of Business a few years ago has since expanded to student loans more generally and added mortgages, personal loans and wealth management. Mr. Cagney says SoFi has done 150,000 loans totaling $10 billion and is currently at a $1 billion monthly loan-origination rate.
How did he get here? The aspiring big-bank slayer grew up as a surfer in Southern California. He says he qualified for schools with better reputations, but his priority was better waves so he enrolled at the University of California, Santa Cruz (home of the Fighting Banana Slugs), and got a degree in applied economics. He also taught himself to code. In 1994 he took a traditional route, a job at a bank—at Wells Fargo, managing credit exposure to risk. “We would sell a credit swap to a XYZ and then lay it off to J.P. Morgan,” he says.
The young banker suggested that the bank could make a lot more if it kept the risk in-house. But the technology was ancient—Fortran and Cobol and IBM 3270 terminals—so he was tasked with a one-year project to set up a modern system. “I went in with my wife over a weekend and rewrote the whole thing and deployed it.” The bank made tons of money trading derivatives, he recalls, but as everyone on Wall Street knows, you get paid at investment banks, not commercial banks, so the really good people leave.
Mr. Cagney left in 2000 to start a wealth-management software company—not the greatest timing, as the dot-com bubble burst. He named it Finaplex—not the greatest name, as it turned out also to be the name of a popular growth hormone. Finaplex was sold in 2007 and Mr. Cagney decided to raise money to start trading again. Everyone told him he had been away from the market too long, but he thought “it’s the same market,” and dived in.
“One of the most important characteristics of an entrepreneur is you should be obtuse enough not to listen to everyone telling you that you can’t do something,” Mr. Cagney says, “but not so obtuse that you try to make flying cars.”