LENDING A HAND

A US online lender keeps its millennial customers by helping them find jobs (and friends and life partners)

Obsession
Future of Finance
Obsession
Future of Finance

When Joanna Mathews was laid off from her job as an advertising strategist in Dallas, Texas, she called her online lender to get forbearance on her credit consolidation loan. The lender agreed, but only one condition: It would have to let it help her find a new job.

Mathews, 31, and the counselor provided by SoFi, a US online finance company, spoke at least once a week as she looked for work. She also took advantage of SoFi webinars on how to write resumes and interview. Her conversations with her coach focused on job-search strategies and, eventually, salary negotiation. With her coach’s help, she landed 15 interviews. After three months of searching, she found a position at another firm in Seattle, a city where she once lived and where was eager to return.

In a world where loans are a commodity and banks virtually indistinguishable, SoFi was looking for novel ways to separate itself from other lenders. For SoFi, providing career counseling to its borrowers serves two ends. It helps unemployed workers get back into jobs, where they can resume paying their loans. And it helps forge a bond between the customer and lender that SoFi hopes will lead to a life-long relationship with the people it’s courting—mainly millennials making their first big financial transaction, like buying a house or starting a business.

Along with career advice, SoFi also hosts social events, like rock climbing sessions and cocktail mixers for singles. (After all, people tend to make big, expensive life choices as couples.)

“We’re really trying to combine this idea of money, careers and relationships, which we see as the main drivers for this demographic we’re targeting,” said CEO Mike Cagney. “If you lose a job, we don’t call you up and threaten to take your car. We help you find a new job.”

Another customer struggling to make payments, Ramona Liszt, was directed to SoFi’s career counseling website, which she thought was a waste of time. Still, the marketing manager from Austin, Texas kept SoFi in the back of her mind, and the morning before a job interview, she called a coach for tips on salary negotiation.

The result “was the greatest counseling of my life,” Liszt said; she was able to bargain for an additional $6,000 in annual salary.

Selling new products to existing bank customers is a known as cross-selling. Despite its recent negative reputation—promoting the practice led to the massive fake-account scandal at Cagney’s previous employer Wells Fargo—there’s nothing inherently sinister about the strategy. Banks love cross-selling to their customers because it’s much cheaper than acquiring new ones—the advertising and marketing required to attract new customers can cast 10 times as much as retaining current ones, according to one estimate.

The more products a customer has, the more entangled their finances become, and the less likely they are to leave. It’s a strategy worth trying, because millennials are particularly mistrustful of banks.

A different generation

In interviews with 10,000 millennials—an age group roughly defined as those born in 1982 and later—a consulting firm owned by Viacom discovered most young people don’t believe their bank offers them anything special and a third are open to switching. More than 70% would be more excited about a new financial product from Google, Amazon, or Paypal than from a traditional bank.

So SoFi has tried to orient itself along the priorities of millennials, Cagney said. The company emphasizes speed, which Cagney was astonished to find young people prize above all else. “Millennials have a completely irrational sense of the value of their time,” he says, adding they’ll avoid spending 20 minutes figuring how to consolidate their student loans, even it means saving thousands of dollars a year.

The approach seems to be working. San Francisco-based SoFi originated $8 billion in loans in 2016, up from $5.2 billion in 2015, and has received $1.5 billion in investor funding. SoFi now says it has 230,000 customers, many of whom used the company to refinance student loans. SoFi also provides student-loan repayment plans as a workplace benefit.

SoFi launched its career strategy program in 2013, and more than 2,000 of its borrowers have taken advantage of it. The vast majority are young professionals who are already employed, and want to upgrade their jobs or careers, although more than 100 were out of work when they used the service, the lender said. And it is adding more coaches as SoFi grows.

SoFi doesn’t act as a job board or match job seekers with vacancies, but offers resources and advice. For now, the model makes sense, given SoFi’s homogenous, and highly employable, demographics. It’s unclear what might happen if its business model expands to take on a more diverse range of borrowers.

The program is run by Mark Gasche, who joined SoFi last year after a long career in higher-education career services, including at Northwestern and the University of Chicago. His main concern is ensuring career services can forge tighter bonds with the SoFi borrower. “We can be helpful, and the loans will come,” he said.

For her part, Mathews, the strategist who moved from Dallas to Seattle, said she understood SoFi’s motivation, “but that’s not how the relationship felt with the coach,” she said. “It didn’t feel corporate at all. I think I might have wound up in the same place [without SoFi] but their advice made what is a very dramatic process a little less dramatic.”

“The biggest part was having an actual person to talk to,” she added. Mathews never met her coach in person—but they plan to get together over coffee soon.

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