Quick Take: SoFi and Galileo CEOs on the Technisys acquisition
- SoFi wants to become the ‘AWS of fintech’, combining Technisys’ and Galileo’s technology stacks.
- SoFi is expanding beyond being just a direct-to-consumer platform, stepping into offering white-label products for other businesses.
Fintech firm SoFi is on a mission to become a well-rounded and fully equipped financial services platform. It wants to enable any firm, ranging from banks to non-banks, to build financial capabilities from scratch and roll out financial products for their customers.
SoFi has thus far operated as a direct-to-consumer platform, while its Galileo division has focused on card and payment products for top fintechs. Its recent Technisys acquisition expands its suite of white-label products for other businesses.
SoFi bought payment processing platform Galileo in 2020 and added the capability to power financial offerings for other firms via APIs, like cards and ACH payments, effectively stepping into the supplier side of the fintech equation. Acquiring Technisys last month adds the other piece of the puzzle — a core banking platform, the tech banks use to perform actions such as managing deposits and loans.
“The response by our members to our innovation across borrowing, saving, spending, and investing has motivated us to think bigger, bolder, and more expansively given the insatiable consumer appetite for financial services innovation,” said Anthony Noto, CEO of SoFi. “Together with Galileo, we will partner to build on our companies’ strengths to drive even greater financial technology innovation, making those products and services available to both current and future partners.”
The AWS of fintech
The acquisition serves SoFi’s greater vision of becoming the ‘AWS of fintech’. The vision manifests in its banking as a service division Galileo becoming able to provide everything a company would need to get the ball rolling on launching a financial product.
“In SoFi’s overall pursuit to build the AWS of fintech, SoFi is looking to become a one-stop-shop financial services platform,” Noto told Tearsheet. “So, it has acquired Technisys to integrate with its fintech cloud services provider Galileo.”
Upon closure of the deal, SoFi will combine Galileo’s and Technisys’ technology stacks. According to the firm, it expects to create the only end-to-end vertically integrated banking technology stack, from user interface development capabilities to a multi-product banking core and ledger with fully integrated processing and card issuing.
How does Technisys add to Galileo?
Technisys is a fully cloud-based core platform and is capable of managing and creating multiple digital banking products. Noto believes it to be a critical next step in SoFi’s efforts to vertically integrate its businesses to further accelerate the pace of innovation.
“The combination of Technisys’ platform with Galileo will uniquely support multiple products — including checking, savings, deposits, lending, and credit cards — as well as future products, all surfaced through industry-leading APIs,” Galileo CEO Derek White told Tearsheet.
The combination of Galileo and Technisys can meet both the expanding needs of their existing partners, as well as serve additional established banks, fintechs, and non-financial brands looking to enter financial services. SoFi expects Galileo to better serve consumer fintech and enterprise partners seeking to add product offerings – the firm currently counts approximately 100 million enabled customer accounts (as of March 1, 2022). These accounts are spread across the U.S., Mexico, and Colombia for Galileo, while Technisys adds with it more than 60 established bank, fintech, and non-financial brands in Latin America and the United States. SoFi also expects an expansion in the two companies’ unified partner base in the U.S. and an addressable market across 16 countries.
What are revenue and profitability expectations following this merger?
SoFi is eating its own dog food – by first integrating Technisys into its own business. “SoFi expects to leverage this modern technology stack to capture significant savings in third-party costs by integrating Technisys,” Noto told us. “Once SoFi has migrated off its current multiple third-party cores to a single owned and operated Technisys core, it expects to be able to innovate even faster, perform more real-time decision making, and offer greater personalization for its more than three million members.”
Over the next two to four years, SoFi will move its SoFi checking and savings accounts, and its credit card products to the combined Technisys-Galileo platform. The integration, and putting multiple products onto one core system is forecasted to save about $80 million in costs between 2023 and 2025 and about $65 million of annual savings afterward.
In 2021, SoFi reported Galileo generated about $178 million in revenue. Meanwhile, Technisys produced $70 million in 2021, amounting to a 24% uptick from 2020. The new combined division promises to contribute meaningfully to SoFi’s bottom line. In numbers, the acquisition is expected to result in cumulative incremental revenue of $500 million – $800 million by 2025. This puts into context the $1.1 billion SoFi paid in an all-stock transaction for Technisys.
What does 2022 look like for Galileo and SoFi?
Galileo remains committed to its evolution of becoming a one-stop-shop financial services platform.
“Integrating with companies like Technisys is part of Galileo’s ongoing commitment to helping brands bring innovative products to life that increase financial inclusion and have the potential to change people’s financial lives for the better,” White said.