SoFi Technologies, Inc. (SOFI) Earnings Call Transcript & Summary

All right. Cool. Let's get started. I'm Ashwin Shirvaikar. I'm Citi's Global Head of Fintech Research. I'm super happy to be here. And fantastic with the 2 companies we end the day with, SoFi and PayPal. And from SoFi, you've got Anthony Noto, who is the CEO. Anthony, thank you for being here.

Appreciate it.

Yes, absolutely. I'd like to start with a set of question, generally, sort of to level set investors in the room should be familiar with the company, but if you could spend maybe a couple of minutes just kind of a broad overview of SoFi that'd be great.

Sure. SoFi, at the highest level, is a consumer financial technology company. Our mission is to help our members achieve financial independence, which means they reach the point they have enough money to do what they want, whatever that may be. We're targeting high achievers that have done well academically, they've done well professionally, and they're struggling to build to own the home that they want, live where they want, have the size of family they want, have the career and retire when they want, they just haven't been well served by banks. We think we can uniquely serve them better than anyone has through a digital platform to help them borrow better, save better, spend better, invest better and protect better. We think it's critically important to provide all those services so that we can be there for all of the major decisions they make in their financial lives, big decisions and all the days of between. And we think if we can build that lifetime relationship, we can build trust and reliability with the first product, which we want all of our products will be best of breed. So when they want to use a second product, we have a better chance of winning that relationship and continue to drive value for them, which results in superior unit economics and lifetime value. As we've built the company and have built out all these products over the last 5 years, we've run across many companies that said they want to be one-stop shop. They want to be a complete solution set, and it's quite hard to build. I'm not aware of anyone that's actually done it other than us. One of the things that has allowed us to do it is that we're vertically integrated. We're vertically integrated in loans. We're going to be vertically integrated in money as well as credit card on the back of the acquisitions of Galileo and Technisys, and we eventually will be vertically integrated in Invest. That allows us to do more personalization, provide better real-time decisioning. It allows us to make our products work better when they're used together. But it also allows us to really drive the road map of technology innovation for the industry. When we've partnered with technology companies in the past, regardless of the product, we've often found they're not willing to invest in innovations that we want to drive that we think are key to differentiation of building best-of-breed products. And similarly, the cost that we would incur to get them to build those technologies or absorbing it, and it's really hard to be a low-cost operator if you're operating in that type of way, not to mention you can't really own your innovation. So the acquisitions of Galileo and Technisys and building other technologies position us to not just build to control the pace of innovation and technology, but to be a low-cost operator, ensure we have best-of-breed products. And because we're building stuff that the rest of the industry needs, but building it for the company that's going to be the biggest and largest, we're building technologies that we know they'll use, and we're happy to allow them to use it to lift the tide for everyone is that we try to drive from physical to digital financial services.

Okay. Okay. I want to start with one of the first things you said, your customer is -- and as we sort of think of that, they may be not well served, but they are higher end. And being as it is that macro is such a big part of what investors worry about today, do you feel like maybe that higher end consumer maybe protect you as it makes you a little bit more defensive compared to others' any changes in behavior?

Yes. I think there's a couple of natural benefits we get out of having this high-end consumer, $100,000 of income or higher, well educated, need for broad-based financial services, need for more than what they get from traditional banks, but don't have enough assets to get the high-end private wealth management services. Well, those people are hard to find. And they do have a higher standard of product experience that they want. They do want a relationship with certified financial planners. So the equation that we build from the value creation we build for them is hard to replicate. And so that is one moat that we're building around our business. In addition to that, in periods of financial stress, they're going to perform better. That doesn't mean we're immune to the economic environment. We definitely have the same risk as other people, but we're underwriting higher credit, [ 68 ] and higher. The quality of our unsecured personal loan borrowers at 740 FICO score. Our student loan refinancing product is over FICO 750. So super high credit, really attractive income, high needs for financial services. And we try to hold ourselves to standards that will allow our loans to be durable through the cycle. We made a really tough decision in 2018 when it was still a very bullish market to reduce our lending from mid-teens billions of dollars a year down to single digits. And we did that because we wanted to focus on quality over quantity. And in that process, we developed unit economics that would be very attractive, 40% to 50% variable profit per loan through the cycle. And in order to get there, we had to really improve our pricing testing, our credit testing, our marketing channel testing, our operations, and really get to great unit economics. By the end of 2018, we are delivering 40% to 50% variable profit margin per loan. And we knew that when a deep recession hit and life-of-loan losses increased, those loans would still provide an adequate return, whether we kept them ourselves or we sold them. And that's helping us in today's environment. We try to manage our unsecured personal loans to an 8% life-of-loan loss or lower, and we've been able to do that since 2018. And in some periods where things got rough, we pulled back to make sure we can maintain that standard, and we've been able to do that. We're below that still today. We expect it to normalize, and we'll make the appropriate changes as it happens.

Okay, okay. The other part of it is us planning for next year. And just from a prudence perspective, are you modifying your planning process as you think of next year sort of a just in case?

Yes. I think we've lived in a world that no one else has lived in since 2020. Yes, everyone's had to navigate working from home in the pandemic and protecting their employees, et cetera. But I think we uniquely got hit with a big external threat in March of 2020 when the President announced appropriately a moratorium on paying federal student loans. And that really hurt our largest and first business in student loan refinancing. We went from generating $2.4 billion of origination volume in the fourth quarter of 2019 when Fed funds was 1.65%, to its most recent quarter, generating less than $400 million of originations. So it's less than 25%. And the reality of that for the last 2.5, 3 years is that we've had to reallocate resources to other growth areas. I think we've proven that we have a pretty diverse business. We built this business to accomplish our mission, which puts the member at the center of what we're building, which is a one-stop shop. The business benefit of that is that we have a lot of businesses that are pretty diverse, and we can play the game of where can we win the most in a certain environment. When rates are low, we can win in things like home loans, and we can win in things like investing because there's no yield on checking and savings. When rates are high, we can win in things like checking and savings, we can win in things like personal loans. And so that diversity has allowed us to overcome the challenge over the last 3 years of student loans being where they're at. It's also forced us to scenario plan. When is the student loan moratorium going to end? I think it's been extended. I lost count 5 or 6x. But we've always had a plan B, C or D to drive the growth. And I think one of the things I'm most proud of as a company is not just that we built something no one else has built, but it's proven to be durable. It's proven to be diversified. The fact that we've hit 6 record revenue quarters in a row and 8 quarters of positive EBITDA despite that punch in the face, so to speak, from our largest most successful business, most differentiated business, largest market share business being hit is a testament to what we've actually built. So as we go into 2023, we couldn't be more optimistic about our position in the marketplace and the growth opportunity ahead of us. And where the student loan moratorium gets extended or not, we're going to deliver really strong growth. If we're in an economy that's what we expect it to be, which is a little bit more dour than today but not overly dour.

Okay. Okay. Understood. I have a question sort of a broad question about your TAM. And the way I'm kind of looking at it is when you consider your target market, people who are 100,000 or over, it's about 1/3 of the U.S. population. When you consider the number of members you have, you have what seems like a pretty impressive 10% share of your target market already. I don't know if it's the right way to look at it. There's obviously a cross-buy and all that kind of stuff. But how are you thinking of the long-term components of growth, sort of your growth algorithm as you go over the next several years?

Yes, so if we only play in the prime credit market, it's probably a 40 million home market out of 125 million homes, which I think is what you're referring to. But you got to remember, a home is not a person. It's multiple people. So we should have multiples of a home. So whether that's 2, 3 or 4 or people in a home. But anyway, 40 million to 50 million people or more as adjustable market for prime. Now we have many products that appeal to people, whether or not prime. Like our Checking and Savings account product is a product that anyone could use. Our Invest product is a product that anyone can use, assuming they're in good standing with the government and know your customer and all the other security things we have to do. Same thing with Relay product, anyone could use from an economic standpoint. So we'll have a really big top of the funnel. But at the end of the day, if we get to 40 million people or equivalent of 40 million homes, so 80 million people, half of that, that would be an incredible outcome. So we've barely scratched the surface. And that's a number of members. And on top of that, our goal is to be there for every one of the major decisions they make and all of the days in between. And so our aspiration is to have many products per person. So I think about the growth opportunities we have versus the other companies I covered as a research analyst covering Internet and media from '99 through '07 and then as a banker and all the companies I've seen over the last 20 years and the financial services sector is, by far, the most appealing sector. And there's really a couple of reasons for it. First, it's one of the largest parts of our economy. Second, every product we do is digital. We don't have to manufacture and ship anything. We don't have to go to a supplier. And there's infinite permutations when it becomes digital. There's infinite permutations of rate and term and so many different ways to differentiate. And it's an algebra equation. You tell me one variable, and I'll solve for the other variable to make money against that variable. So it's a pretty dynamic situation. We say to our company, the only thing that's gaining our growth, and we're growing 50% 6 record quarters in a row, is how much money we spend to build awareness, to build trust and become a household brand name. When we make people aware of the product, they're best-of-breed products, they adopt it, they trust us, they adopt the second product. And that's what we're going to keep doing over and over and over for the next many decades. And so we barely scratched the surface of what the opportunity is in front of us from a consumer standpoint. We also have this technology platform business, and we want to build the AWS of fintech. Galileo and Technisys are just the first 2 pieces. There's a whole pipeline of products and services we'll continue to add to drive the ecosystem to be modern in the cloud be able to use dynamic decisioning and personalization and data.

Okay. Okay. We'll get into some of those pieces through the course of this conversation. But I'm kind of doing this frequency in terms of what questions I get from investors. So one of the more frequent ones is with regards to bank charter. And what are reasonable expectations one should have for 2023?

Yes. What I'd say, first and foremost, is that we've made a lot of big strategic choices and bets, and the bank license was a highly debated topic and one that was really challenging to get our Board comfortable with and then even more challenging to get through the process with the Federal Reserve and OCC. In fact, I wouldn't be surprised if we don't see another bank license given out for another decade, especially on the back of some of the financial trouble that we're seeing in the marketplace today. So it's an incredibly valuable asset. I couldn't be happy that we made the decision. It gives us a huge competitive advantage. It gives us lower cost of funding. It gives us the ability to use our deposits to fund our loans and not be dependent on others for their resources. In addition to that, we can really differentiate our Checking and Savings account. We've come out with an interest rate that's really unmatched in checking of 2.5%. We have 3% on savings. Not only is it a great interest rate, but it comes with no fees. 2-day early paycheck, the ability to pay any way you want, you can pay with your phone, you can pay with your debit card, you can pay person-to-person payments. We can do electronic pay. We can even send a check for you. In addition to that, it's all on your phone and easily integrated with our other products. In one click, you could be buying stocks or ETFs off of that platform. You can now set up auto investing off of your direct deposit account. And so it's the center of what we're doing for our members. It's the primary account, and it's also driving significant growth in high-quality members. So you only get the benefits that I mentioned if you do direct deposit with us. So our deposits totaled $5 billion. Prior to the bank, we had $1 billion. So we've driven $4 billion of incremental deposits just since opening the bank earlier this year. 80% of those deposits come from direct deposit customers. So they're sticky customers, they're primary customers. We get to see the data on them to help them get their money right. We can see if they have a mortgage that can be refinanced. If they have student loans or credit cards that could be consolidated into a personal loan. We can see if they're overrunning their budget, need to talk to a certified financial planner, or if they're sitting on a bunch of cash that should be invested to be compounding. So it's really critical to the overall strategy. In addition to what I just mentioned, it's also a good revenue product because when they do direct deposit, they spend with their debit card, and our annualized spending now is in the billions of dollars, many billions of dollars, and growing quite fast. So the bank charter really solidified our strategy in building that trusted relationship to then generate cross buying from there and driving more products per person as well. And so there's absolutely a funding benefit that's just priceless in this marketplace, where funding liquidity are going to be at a premium in addition to allow us to execute the rest of our strategy.

Okay. Let's look at some of the segments. So starting with lending, and personal loans obviously done fantastic this year. You've done this a few years, you know that investors often get nervous about growth on growth and it becomes -- this is not a tough comp kind of a question. So as we sort of think of personal loan growth in the future, what drives that? Is it more would be cross buy? Is it more new members? So.

Yes. Personal loans only about 25% to 30% of our personal loans are cross-bought. Now that's actually giving us great efficiency on marketing costs and driving the significant savings in customer acquisition cost, but that product is very differentiated. We have a very small share, but we've gained a lot. We're about a 6% market share in our demographic. So 680 and higher FICO score, unsecured personal loan market, we're about 6% share. It's up from about 4.5% share a year ago. We think it's a very differentiated product. You can apply and be approved relatively quickly. We have time to apply the fund down to 2 days, which is really hard to match. We also do sizable loans. The average is about $30,000. We provide a lot of flexibility in terms of term. And we give you additional benefits, if you're willing to do auto pay and direct deposit as well to make the product work better together. So in this environment, people are consolidating their debt. They're terming it out over a period of time instead of letting it revolve at a fixed rate, so it's a really attractive product. And our growth there is really just limited by how much we want to grow it. And right now, we're being pretty smart and prudent about how fast that we're growing it relative to the risk. One thing we're committed to is our credit box and making sure we keep our life-of-loan losses at 8% or lower. We've been well below that level. We do expect it to normalize up to that level. And if we get into a really tough recession next year, we're forecasting about a 1% to 3% decline in GDP, which in this environment, we think we can still operate in pretty well. We're going to get much more dour than that, and unemployment gets into the 5%-plus range, and we have GDP contraction in the mid-single to high single digits. We'll likely have to underwrite less in that business and reallocate to other businesses to make up for it. But we'll gate our growth there by how much risk we want to take overall from a portfolio standpoint, always limiting the life-of-loan losses to 8% up or lower.

Okay. Okay. The use of those personal loans, is it primarily debt consolidation? Does that change over time?

It's also home improvement. It's also solar installation. It's also bridge loans for events of people's lives, but the largest percentage is debt consolidation.

Okay. Okay. Have you provided a breakout of usage over time or...

We have. We ask the question when people apply and we could share the numbers with you, we've talked about before.

Okay. Okay. On student loans, and I -- last year, you saw ahead of the moratoriums supposedly ending. There was a lift. I don't know how many times that can happen with behavior. I mean, are you expecting that kind of a lift now or people sort of...

Yes, every day, the environment changes. If the moratorium ends on January 1, which remains a big if until we get there, we anticipate there will be a lift in December, which is what we saw last year. As I mentioned, we were doing about $2.4 billion in the fourth quarter of 2019. We still think there's a really big TAM with rates up as high as they are now. It's a hundred -- hundred of -- couple hundred billion dollars of TAM that people would save in still our financing in our credit box today. And so we think we can get back to the high 1s, low 2s on a normalized basis when payments resume. We also think, and we've seen this in personal loans, that there will be a fair amount of the population that have not refinanced in the past. They've been waiting to see if they get forgiveness. They now know if they're getting it or not based on what was announced. The courts are now debating that, whether it was a -- whether it was something that President had the authority to do or not. But let's assume for a second, he did. People know what they're getting and what will be forgiven. At most it's $10,000. Most of our members are over the limit of [ $180,000. ] So it won't apply to them. Even if they can't save on the interest rate, we think there will be a high propensity of people to term out that loan over a longer time period to lower their monthly expense. They could still pay the full principal amount they were paying before if they want, but it gives them the option to pay less on a per month basis. The thing that's interesting about the student loan refinancing product is if they're, let's say, they're rate right now and that is 5% and they can't get better than 5%, they can't even get 5.5%. It's maybe in their interest to refinance it at a higher rate, term it out over 10 or 15 years. So their monthly payment is low, so they can kind of afford the higher inflation environment that we're in. And a year from now, 1.5 years from now when rates have come back down, they can refinance without any additional costs. There's -- unlike a mortgage, there's no closing cost. There's no title insurance. It really cost them nothing to refinance the loan. We don't charge fees. And there's not like a big cumbersome closing process they have to go through. So it's almost a frictionless option for them to refinance and lower that cost over time. They could still pay back at the same rate they were before, but have the optionality. If they're short relative to the cost that we're seeing in the environment, they could have more discretionary spending. So regardless of what happens, I think there will be incremental demand. The question is, does it get all the way back to about $2 billion a quarter. And I think if it resumes in January, it does. If it doesn't, it's somewhere in between.

Okay. Okay. And then the last part of it, home loans, as you kind of look at that, the higher interest rates seem to have the intended effect here. The question is do you also have some other factors -- fulfillment issues and so on? Where do we stand there, if you could kind of walk through...

Yes. We're clearly in a purchase market. To be in a purchase market, you have to have time to fund now. We want to get to 30 days. That requires great operations in the back end. We have partners in the back end. They're not performing at the level that they need to, and we really need to own the back end. And so we're evaluating different options for small purchases of technology and processes to allow us to own end to end. So I'd say the home loan business is something we definitely want to be in. It's one of the most important decisions our members will make in their financial lives. It's a hugely emotional decision, and we want to be there for them. But we have to deliver the product on time when someone is buying a home and not be late. And so the team is working really hard on optimizing that. We've made great progress since August. And I feel like we're coming out of the bottom of that, but we have a long way to go for it to be a major contributor to the performance of the business. So 2023 will be a year of investment in rebuilding, but I'm optimistic about where we're going to be.

Okay. Okay. Just moving to the Technology segment. If you could kind of talk about the vision of that sort of You put Galileo with Technisys together. You now have -- you talked in the more recent call about the B2B opportunity. A year from now, 3 years from now, how does that product look?

Yes. I mean, Galileo has gone through a huge investment. It's modern in the cloud. 99% of the authorizations we have are being processed in the cloud. And that is a hurricane goal that the team achieved winning those small feat. We've maintained great SLAs for our partners during that whole transition of moving from on-prem into the cloud. We're deploying code faster. We have a great pipeline. I couldn't be happier with the technology, stability, robustness, redundancy and pace of innovation we have in the business right now. I think it's second to none from a technology standpoint, from an innovation standpoint. We're running over our competition, whether it's incumbent processors or new modern self-proclaimed modern in the cloud processors. We're really taking share across this consumer segment and the B2B segment. And I expect us, with TechniSys, to be very differentiated and continue to win big relationships. There are incumbents that have relationships with older technologies. And it's not a question of whether our technology is better or a lower-cost solution. It's a question of when they're willing to make the change from an older technology to that silo. So we're in discussions with large banks that we've never been in discussions with before because we have a complete end-to-end solution. I think we're in a pole position to win those big financial institutions, big bank deals, but it really is going to come down to when they decide to make the transition. We're also in discussion with large consumer companies that want to be in the financial services sector that may -- that have big installed bases, that have partnerships that are pretty fragmented that could be consolidated with Galileo and with Technisys, as well as a lot of the products that SoFi has built. So I think we're in a really strong position. LatAm Technisys has done a phenomenal job with traditional financial institutions, and now Galileo's in those discussions. And in the U.S., Galileo's partners are in discussions with Technisys.

Okay. Should investors worry about when many investors think of the Galileo base of clients. There are a number of neobanks in there, and that's not particularly attractive end market right now. There is a sense that there was a lot of overinvestment that went in. Many of your clients went back to the same end client base. How are you thinking of that? Is that sort of a risk? Or are there components where you can kind of say to particular clients, I can help you.

Yes. I would say the financial stability of our top, top customers is pretty strong. I mean, we do have partners that we worry about. I do think there will be entities that will have to pull back, but the sort of vast majority of our biggest customers are in really good shape. And those that aren't, we think we can replace with new customers or new products. The dimensions of growth for us at Galileo are the existing partners growth in accounts, which has been quite strong in driving that. In addition to that growth, it's us selling in new products against that installed base, which is quite promising. In addition to adding entirely new customers, not just in the consumer segment, but also in the business segment. And last quarter, we announced almost half of our new partners were B2B. Many of the B2B partners have installed bases. So the time to revenue is very short, just a matter of integration. And we see more and more businesses coming to us as their awareness of the platform that we provide increases. And we have a pretty big robust pipeline with Galileo and Technisys. In fact, the first product that we'll launch that was built on Galileo and Technisys is Pay in 4 . It's a partnership with Mastercard. It's going to launch on SoFi first. We'll preapprove you for a line, let's say it's $500, we'll give you a virtual card. You can use that virtual card as much as you want. And every time that you use it, that amount that you're financing with that card is paid off in 4 payments, 1 at the beginning and then 3 subsequent payments. And that's a product that we'll launch at SoFi. It's a great additional credit product for our members. We'll only offer to direct deposit customers again so we'll have great information about them. But we'll also offer that to all Galileo's partners. And it's a much better product for Galileo's partners than spot me or overdraft. It's a product where the consumer is actually not paying an interest rate. The merchant is paying a percentage point that the company is getting. They are clearly taking credit risk, and they decide how much to underwrite whether it's $100 or $500 or $1,000. It's knowable, especially for the direct deposit customers. So we think it's a really good offering that will drive incremental revenue for us based on who takes that product. But I think it's a much better product. And Galileo's partners are currently offering to their members from a lending standpoint.

Right, right. So just to clarify, this is automatic BNPL?

It's automatic. So today, let's just say with SoFi, you have a credit card and you have a debit card. And we'll preapprove you with an offering. You're a member of home feed that says, Ashwin, you've been preapproved for $1,000 pay in 4 when you use -- let's say, use that card to buy something for $200, you'll pay 1/4 of that $200 upon that point and then the other 3 out of your debit account. And the other 3 payments will be debited against your debit account over a period a period of time, and it will just be automatic. You pay no interest. The way the provider of that card, SoFi, makes money is on the interchange that Mastercard has negotiated with all of the people that accept Mastercard. So there's no need for us to go sell into retail. There's no need for us to go sell it to manufacturers. We're instantly available everywhere.

Right, right. Is there a -- seems like a odd question. Is it a business banking opportunity as you kind of look at the...

Not today, but there's a clear opportunity for SoFi to do what it's doing in consumer for businesses. So someday, we'd like to offer small, medium businesses, a checking account, a savings account, treasurer account, the ability to borrow money from us, the ability to invest with us, all the things that small medium businesses need. All the technology that we're building is technology that could be used for small and medium businesses. We have such a huge opportunity in consumer. We're focused on that today, but we will plant seeds in 2023 that will grow in '24, '25 and '26 to add on to the growth rate that we have. And the small medium business is absolutely one area we'll go into, but we need to continue to show the regulators how well we can do in consumer before we ask for the permission to add other products like SMB Lending and SMB checking and savings. There's a lot of demand for it. We get requests every day.

Okay. Okay. The -- just going back to the Technisys question. You had sort of multiyear, multi-level synergies that were promised. Where do you stand with regards to -- I mean, are you on track? What needs to be done?

Yes. We still believe the synergies we've laid out are all achievable. We're to the point now we're a go-to market on both Technisys and Galileo and then together as being executed, and the feedback that we're getting from our partners is quite positive. A big piece of the synergies is also moving checking and savings on to Technisys' core, offer the current core, and I'm excited about that, in addition to the credit card processing and the core on to Technisys. So some of the cost savings is just us bringing it in-house, which will be phenomenal once it's done.

Okay, okay. And does that mean that you have to also convert a long list of clients? Or is that...

We do, but we just -- we're -- we've actually done it 3 times. We're pretty capable of doing it. And because we own our ledger, it's not that hard of a challenge. If you don't own your out ledger, it can be really challenging.

Okay. Okay. Got it. So moving to the Financial Services segment, obviously, many elements to that. And you had strong momentum in your deposit growth. You sort of partially answered this question earlier, but what keeps that deposit growth going? The strong APY helps. That essentially -- what I'm asking is what's the differentiator? Is that a good rate? Good experience? Is that...

Yes, we try to differentiate...

As simple as that?

Yes. We try to differentiate each one of our products on 5 things. First is fast. The fastest place to apply, the fastest place to move money. Whatever it is, we want to be the fastest, the sets -- fastest place to pay a bill, et cetera. Second thing is selection. What does that mean? That means what are the features and functionalities that is added on top of that? The interest rate is part of selection. The ability to have joint accounts, custodial accounts, the ability to do bill pay, ability to do person-to-person payments, ability to pay with your debit card or with your phone, wire transfers, remittance, et cetera. That's all part of selection. Content and convenience are the other 2 elements. The convenience element often is not appreciated because people think it's just about having it at your fingertips. But it's also how convenient is it to use that checking and savings account with your SoFi brokerage account or paying your loan or applying for a new product. And we're constantly working on those things. But it's also making it super convenient when you have a question, ask the question through chat or through e-mail, or when you call in, having that person answer all your questions, not just about SoFi Checking or Savings. And the rate is a big headline thing that gets people interested and they see all the rest of the benefits that are there. As an example, most people don't realize this, but with SoFi Checking and Savings, we give you reward points. We give you reward points for setting up direct deposit. We give you reward points for coming to the app. We give reward points for doing bill pay. We give you reward points for doing person-to-person payments. Those reward points are redeemable into any of our other products. So the product itself sits in an ecosystem that makes it more valuable as part of an ecosystem in addition to itself. And the last point I make is, I don't believe anyone can compete with us on rate. We're not even close to the highest rate we could offer and still be better off than our other choices. So right now, we're offering 3% on savings and 2.5% on checking. I don't know anyone that's offering more than 1% on checking. So that's a very attractive rate. How can we afford to do that? Well, we used to pay primarily banks to use the warehouse lines to fund our loans. Now we're paying consumers 2.5% to fund their loans. Well, the warehouse lines are up 5%. So we're actually paying the consumers half at 2.5% what we'd be paying for the warehouse lines. Now sometimes we still use the warehouse lines because our deposits are growing very fast, but it doesn't fund all of our loans. So we have a lot of ability to raise that rate in addition to all the other benefits that we have. So I feel like we have a huge competitive advantage that will be hard for others to match, including the big banks who do not offer interest rate on checking. That's significant. It's like 10 or more basis points.

Yes. No, no. It makes a difference. I know people on my team will switch. So how should we think about the noninterest income in this segment?

Yes. We do have interchange. As I mentioned, the debit spending is growing very fast because of direct deposit. And our run rate, our annualized run rate is quite meaningful there, and that's an incremental revenue stream, that's high margin.

Okay. I look at all the pieces that have been on an investment care for multiple years. As a tech analyst asking a tech company, is all the investment done? It sounds very weird, but I want to ask it anyway. Is that...

Yes, no, I mean, we've said since we've started talking to investors, we want to be disciplined investors. We want to build durable growth. We want to compound growth for years. That requires that we're disciplined. And of every incremental dollar year-over-year in revenue, we want to reinvest 70% of it back in the business and drop 30% to the bottom line. Our long-term EBITDA margins, we think, are 30-plus percent. By dropping 30% of incremental revenue to the bottom line, it reinforces the path to that 30%. And the 70% allows us not to shortchange the investments that we can make in the business with this wide open growth opportunity in front of us so we can continue to compound that 35-plus percent for a long period of time. And I think the things that are in front of us are ours for the taking. We just have to keep on the strategy that we're executing on. It's a matter of becoming a household brand name in building awareness and trial and keep innovating faster than an experts which we're doing. So we're super excited about it.

Okay. Okay. And the 30% incremental margin debt commitment that stays at year in, year out, it's going to be there?

That's our goal. Like if something like the pandemic happens again or something else, where there's a significant change in the economy that's dire and it's substantial, we may have to change that. But in a normalized environment, that's what we'd like to do through the cycle.

Okay, okay. We're almost out of time here. Any closing comments, something you want to say to the audience?

Yes. I would just say a couple of other things. Like at the heart of what we do is technology. We don't build buildings. We don't put pillars up. We don't have people standing behind us. And the technology piece of what we do is not trivial. It's a huge differentiator. It's what brings the product to life. And it's not just the individual features and functions of that technology. It's the experience we're trying to build on the app.. And we don't talk about this very often because we're in an environment where we could have a recession. We have unprecedented inflation. We have a potential continuous rate hikes. And so everyone focuses on the financial elements of it, which I would be doing as well. But what can't be missed in our journey is that we're building an app that is very personalized, that has a member home feed. And in the member home feed, we're trying to answer for you in a personalized way 3 questions every day. What must you do in that -- your financial life that day? What should you do? And what can you do? And we're using all the information we have on you and all the information we have on other people like you to program that feed to answer those 3 questions in a personalized way. And not only is the technology that we're using creating an app that could be a daily app, not one that you just use when you want to pay a bill or you want to check a balance, but that you go to every day, the way you go to Facebook every day to see what your friends are doing or LinkedIn to see what's happening in the business world or Twitter to see what's happening in the news world or to TikTok to be entertained. When we have you coming back every day, we have more chances to build trust and reliability with you, to educate you, to have you understand those 3 choices that you have. And as that happens, we'll build network effects, and those network effects will make us better and better and really hard to catch. So building out the class of products is step 1, building out the underlying technology of step 2. That manifests itself in an experience that's going to be unmatched in the financial services. And that's what will give a license to go even beyond traditional financial services products. We talk about borrowing as opposed to personal loans and student loans internally. We talk about savings. We talk about spending. We talk about investing. We talk about protecting. We're not using the industry parlance because we don't want to think about the industry's products. We're going to think about those activities. So when we say we want to help you spend better, it's not just by giving you a credit card or a debit card or pay in 4 or bill pay or person-to-person payments or fed now or remittance, it's also being able to buy things cheaper. So one of the things that we're really excited about is something called SoFi Travel. We'll have the ability to white label for you through our brands, SoFi Travel, the ability to get travel at discounted prices, and not just buy in our app better travel, but also to use a reward points on top of the discount that's already there and build more reward points if you use your SoFi products to buy. And 2023 will be a year where we start to plant these seeds that go beyond just the simple financial products into these verbs that we're talking about, spending and investing in a much bigger and differentiated way. So we're super excited about...

Looking forward to it. Thank you Thank you for your insights. Great.

Great. Thank you. Great. Thanks. Bye.