How you doing?
Good. You?
Good. Yeah. Ooh, excellent. Well, we'll go ahead and get started. Welcome to the SoFi presentation at the Goldman Sachs Communacopia & Technology Conference. I have the privilege of introducing Anthony Noto, CEO of SoFi, since 2018. Anthony joined SoFi after serving as CFO and COO of Twitter. He was also the co-head of Global TMT Banking at Goldman Sachs, and the CFO for the NFL. My name is Mike Ng, and I cover SoFi and Fintech here at Goldman. We have about 35 minutes for today's presentation, inclusive of Q&A. So if you have a question, please raise your hand towards the end of the session, and we'll go ahead and get a mic run over to you. First, thank you, Anthony, for making the time and coming out to be here with us today. Really appreciate it.
Thank you for having me.
Great. So since obtaining a bank charter in February of 2021, SoFi's steadily executed on its bank strategy, with deposits of nearly $13 billion, leading to funding costs being lowered, increased lending capacity, improvements in NII, a more stable funding model. So to start things off, could you just give a little bit of background on the evolution of the SoFi platform, from a student lending platform to a financial services one-stop shop that it is today, and a tech platform? And success, what does SoFi ultimately look like?
Sure. When I was talking to the board about potentially coming on as CEO, I had laid out what I thought would be a great mission and strategy for the company. And at the heart of it is I really wanted to help people get to the point that they had enough money to do what they want. Many people have been successful academically, professionally, but they couldn't really live the American dream and how they defined it. We call that their ambitions. In order for them to get to the point that they had enough money that they wanted to be able to own the home they wanted, have the size family they wanted, live where they wanted, the career they wanted, retire when they wanted, we really had to help them in every step of their financial lives.
We had to be there for all the major financial decisions they made in their lives and all the days in between. The reason why is, you know, if you are successful academically and professionally, and you're making above average household income of $100,000 or $200,000, it's really hard to get there. So we have to help them avoid overpaying for what their education is relative to what they can make when they get out. Avoid over buying a house in terms of it being too large relative to their income, because if they make those decisions early in their lives, then they miss investing in their twenties, and they miss 10 years of compounding, and it's really hard to catch up after having lost those 10 years.
Similarly, if they actually don't make those decisions, but they're spending all of their income and they're not investing, they're making bad choices, or they run up their credit card debt. So, at the end of the day, our job is to help them get their money right. That's what they should hire us to do. And for us to get their money right, we have to help them borrow better, save better, spend better, and protect better, which is basically a one-stop shop, and that's what led to the strategy of being a one-stop shop on your mobile phone. At the time, we were just desktop, just in student loan refinancing and just in personal loans. So 2018 was really about building the mobile platform and the foundation.
It was also about building out the organization to build business plans, and SoFi Money, and SoFi Invest, and SoFi Credit Card, and SoFi Relay, and then some other products that we've introduced, like Lantern. 2019 was about executing against the rollout of all those products with a general manager structure. By the end of 2019, we had rolled out everything other than credit card, and we were stepping on the gas to scale. It was really just a blitzkrieg approach to building our brand awareness and driving adoption and learning really fast. 2020 was about adding in the final products of credit card, but then also the acquisition of Galileo. The thought process behind Galileo was really leveraging our learnings and loans.
We own the technology and loans from the servers to the glass, from the metal to the glass. It allows us to innovate faster than anyone else. We're a low-cost operator. We can personalize, we can test, and it really allows us to really iterate and iterate, which drives innovation and gives us a competitive advantage. And we can drive unit economics, which also lends itself to better value in loans and better interest rates and, and more innovation. As we thought about that, and we launched SoFi Money, which is a checking savings account in one, we really struggled partnering with FIS. They couldn't innovate as fast as we wanted to. They're expensive, and I felt like we could never really win and gain a competitive advantage on unit economics or innovation, which led to the acquisition of Galileo.
We've since done the same thing in mortgages, and we have the technology and Technisys to be able to provide an operating system for all of them. And so 2020 was the beginning of building out the technology strategy. So at the heart of what we're doing is we're trying to help people make all the best decisions in their lives, have great choices in between in their day-to-day products, and then leverage our technology to differentiate those products, but also to have the lowest, lowest cost and the best unit economics. And the big reason why they have to have that innovation and best unit economics is we're indifferent with what first product to use. But when you're picking that first product, we have to win. And if we do win, we'll have great economics.
We don't have to rely on you taking a second or third product, which allows us to be patient and meet your needs when you have them for that second product and build trust and reliability with you. If you take a second or third product from us, our economics improve quite dramatically, and that's where we gain competitive advantage.
Right.
And so here we sit in 2023. We're on track to do over $2 billion of revenue, up from less than $500 million in 2018. We'll do over $330 -350 million of EBITDA versus losing close to $200 million in 2018, and 6.2 million members versus 500,000.
Great. That's a fantastic overview, and I, you know, did want to talk a little bit about, your member growth. You know, in the past, you've talked about the, financial services productivity loop, you know, to outline SoFi's approach in growing the member base, but also serving existing members. You know, for those who may not be as familiar with the financial services productivity loop, I was wondering if you could describe it a little bit, talk about what the typical SoFi member journey looks like, and, what is that typical first product, second product, third product as you work on that cross-sell?
At the heart of the financial services productivity loop is building a best-of-breed product, differentiated on fast selection, content, and convenience, and we want our products to work better when you use them together. So each product on its own has to be best of breed versus competition and have the best unit economics at steady state. As I mentioned, they'll pick one product along the way, and hopefully we build that trust and reliability that will lend to a second and third product. It was hard to know when we kicked off that strategy, what would be the first or second product, but we had an intuition that the most broadly appealing product with the highest utility and daily engagement would be at the top of the funnel, and the things that are less appealing or less broadly applicable at the bottom of the funnel.
And that's exactly what's happened. So Relay and SoFi Money are at the top of the funnel. They're the two largest products that we have, fastest growing, both over 2.5 million today, and growing quite rapidly. They have the largest contribution to cross-buy into Invest, into loans, into credit cards. About 25%-30% of our loans are from existing members. It used to be the case, about 45% of Invest was from existing members. It's up to 65% now from existing members, and Money and Relay are the biggest contributors to that cross-buying. So that's the typical pattern. They'll come in through Relay, where they may check their credit score. They may connect a couple of accounts to start doing budgeting. We have data on them when they do that.
We could offer them loans against their credit cards, a better direct deposit product, a better invest product. When someone signs up for SoFi Money, we're very fortunate in that 50% of our funded accounts are direct deposit accounts. They have average balances of over $20,000, a direct deposit customer does. We have their daily activities, so we know where they're spending, we know what loans they're paying, what credit cards they're paying, if they have student loans, if they're investing, and we can use that data to give them great suggestions. We try to answer for them every day what must they do in their financial life, what should they do, and what can they do? We do that proactively through email, but also within the app, where it's personalized in the member home feed. So that's the typical journey.
Great. You know, in the past, you've talked about the ROE potential for SoFi, due to the mix of businesses and the improving profitability across many of those businesses, the benefits from the financial services productivity loop, the bank license. Could you just talk about the path to get to that 20%-30% target ROE level?
I mean, there's two ways to look at it. One way is, what would this—what does our EBITDA margin and net income margin need to be to get there? And our EBITDA margin needs to be 30%, and our net income GAAP margin needs to be 20%. The things we have between EBITDA and GAAP net income will be about 10%, and that's kind of where they are today. So one of the things when I was a research analyst like yourself, I used to do to convince our investing partners about the long-term margins of a fast-growing company, was I looked at their incremental EBITDA margins, so change of EBITDA year-over-year divided by change in revenue. And if the incremental EBITDA margin was 30% and it was consistent over time, asymptotically, you get to 30% margin.
Well, this year we've driven over a 40% incremental EBITDA margin while growing over 40% as a company. So I'm very confident our long-term margins can be 30%. In fact, some people may not realize this, our loans have a 70% contribution profit margin, and that's steady state. I wouldn't expect it to go higher. If it did, I would reinvest to keep it at that level. Our technology platform segment is a 20% contribution profit margin that will go to 30% over time. Our consumer products margin, though... our financial services product margin, though it's CP, is negative. Second quarter, we lost $4 million in contribution profit in that segment. In Q1, we had lost $24 million, and in Q4 of 2022, we lost $45 million.
That improvement from 45 to 4 million was largely driven by money. In that segment, you know, we said we'll be contribution profit positive by the end of the year. That's with us losing about $150 million in unprofitable businesses, that if they went away, our total contribution profit and EBITDA would be $150 million higher. So that incremental margin I was mentioning of 40% this year, that's with that investment in investing credit cards still existing. So I feel really confident in long-term margin on an EBITDA basis. I know our equity base and where our revenue will be in the next several years.
and so getting to $1 billion of net operating profit after tax is something that will take us a while to get there, but when we do, we'd be at that 30% ROE. The other way to look at it is we're already hitting a 40% ROE in our loans. Our bank has been over 20%, and our tech platform's ROE really uses very little equity at all, and so the ROE in that is well in excess of 35%. So we're on our way there, and you can approach it those two different ways.
Great. And you know, that's a good segue into the next question, which is, you know, really about the, the success that you guys have been able to achieve today, right? You know, you're, you're a one-stop shop for financial services, and that's been operating through relatively volatile, I mean, very volatile, recent times. Could you talk a little bit about, you know, the product development and your process of innovation during this period? You know, you guys have launched seven businesses, and in five years that you've been operating, you're, you're EBITDA positive. Organic growth and tangible book value is growing. You're about a quarter away from GAAP profitability, while still growing the, the top line at a very rapid pace.
So, maybe you could just talk through the innovation process and, you know, how you're managing to profitability.
Yeah, I think about our innovation process in two ways. One is the product experience, and that's its core value proposition to the consumer, and the second is its financial value prop to us as a company. When I looked at Twitter and what you saw from a lot of direct consumer technology companies and social media and otherwise, is they built a big audience, and then they figured out the financial model later. Well, in the financial services industry, they're one and the same. The product by itself is financial in nature, and so when we architect it, we have to differentiate it versus other products that a consumer would care about on those, those factors of choice.
But we also have to architect the right unit economics from day one, 'cause if we don't, we'll just mean, t he magnitude of losses we'll have beyond customer acquisition cost and beyond building that audience and that customer base, gets exacerbated on a factor of ten. And so for each one of our products, we look at the competitive set, we try to differentiate on fast selection, content, and convenience. We want to make sure that product appeals to a specific person. So I'll take Invest as an example. There's a lot of different ways to appeal to an Invest customer.
Our approach was, we're probably gonna acquire people that are new investors or very novice investors, and so we wanted our Invest product to be simple for them to use so they could get in quickly, they could buy a stock for dollars, not in shares, and get out quickly. And so we architected that product to meet their specific needs.
Then over time, the team's challenged to iterate in that product, to not only continue to meet that member's needs, but the next ring of potential adopted members and the next ring. So the product started very simple, going after novice and beginning investors, and we iterate like crazy across fast selection, content, convenience, over and over and over, to continue to drive adoption and broader awareness. At the same time, we're improving the monetization of that account, we're improving the variable cost of that account, and on the customer acquisition side, we're fine-tuning what segments we're going after, in what channels, with what language, with what offers. So 6.5 years later, we're sort of experts in differentiating on the consumer side of the equation, really good at marketing at an acceptable cost and delivering a great lifetime value.
But we have a core value called learn, iterate, learn, iterate, and then that will lead to innovation. And before you know it, six years later, you have something that no one else has. So in Invest, we're the only place that you can buy single stocks without commissions, fractional shares, which we pioneered without commissions. We have six of our own ETFs, SoFi ETFs, that are specifically built for our members and their needs. We have four different robo accounts, many of which are award-winning, cited by Barron's. We have cryptocurrency, we have IPOs. We've done a number of IPOs. We're on the Instacart IPO, and we'll soon be launching, hopefully in early next year, alternate asset classes. We're the only place you can be a one-stop shop within Invest and get a free certified financial planner and have no fees.
I know I talk with a lot of the market constituents around the, you know, financial elements of SoFi's business. You know, at times, it almost feels like that discussion overshadows the fact that, you know, SoFi is a consumer tech company, and there's a lot of value in the brand, the tech, the app, that probably, you know, doesn't get an appropriate amount of airtime in discussion. So, you know, maybe you can talk a little bit about the app and, you know, how the app plays into the SoFi, you know, consumer value proposition.
Sure. When we were developing the mobile app in 2018, I really wanted to have a reason for people to use the app beyond just sending money to a friend or checking their investments and how the stock prices are doing, to buy a stock or to sell a stock. I wanted it to be more than individual products. I thought about our job to be done, to help people get their money right. I thought there was an opportunity for us to program by looking at all the data on them, and all the data on other people like them, to answer three questions for them in their financial life every day.
Because if I want to help you get your money right, in all the big decisions and all the days in between, shouldn't I be giving you solutions every day? And so in our member home feed, we're trying to answer three questions every day. And think of our member home feed like you would the home feed on Twitter or Facebook or LinkedIn. On LinkedIn, your feed is about what's going on in business that day. In Facebook, it's what's going on with your friends in that day. And on Twitter, it's what's going on in the news that day. And on SoFi, it's what's going on in your financial life, and we want to answer three questions every day in a personalized way. What must you do that day in your financial life? What should you do, and what can you do?
And if you go into our apps and member home feed, it'll look like those other companies' feeds with cards, and those cards will be addressing those three questions. Now, we don't say, "This is what you must do, this is what you should do, this is what you can do," but that's the answer to that question, you know, you know, implied in what we're saying. So for example, I have a card that says, "Your credit card is 90% utilized," and it says how much I owe, and it offers me a personal loan to term it out over three years at a lower rate, not 25%, but at 12%, so I could save money.
Or if there's a big transaction that day, $2,500, it says, "There was a transaction in one of your external accounts, but it happened in the connected Relay for $2,500. Were you aware of this?" Or I may have gotten a person-to-person payments from a bet I had on the weekend from one of my friends playing golf, and it said, "You were just paid by your friend." And so that member home feed leverages all the data we have on you and everyone else. So as our member base grows, we have more data to personalize for you and help you get your money right every day.
We ultimately want people to come to the app every day, not because they need to do a transaction, but they want to see what's in that member home feed to help them get their money right.
That's great. And shifting gears a little bit, you know, from consumer tech, but to the technology segment, could you just talk about, you know, the role the tech platform plays in SoFi's strategy? And, you know, how would you assess the, the impact and, you know, give us a postmortem on some of the acquisitions inside tech platform, Galileo and Technisys.
Yeah, the first job of the technology platform is to help us innovate faster than we could otherwise. No one has the same approach in being a one-stop shop, all just on a mobile platform as we have. So no one really understands what technologies we need built. So having a tech platform allows us to control our own destiny, innovating faster than we could by just using other people's technology. It also gives us an opportunity to be a low-cost operator, and low-cost being a low-cost operator typically becomes a competitive advantage. So we can innovate faster, we have better unit economics.
But because we're doing stuff that no one else is doing, and we're in the forefront of being the operating system for the fintech world, other people could use that technology, and we want to make it available to other people so they could serve their constituencies as well. It allows the entire tech sort of platform of the industry to be elevated, and at the same time, we can make money from it. A lot of people will ask me: "Do you want to be an enterprise company, or do you want to be a consumer company?" And I want to be 100% perfectly clear. Our mission is consumer-focused. It's to help our members achieve financial independence, to realize their ambition, and everything we do is to serve them. For the tech platform needs to serve us well, so we can serve them well.
It just so happens the tech we're building is world-class, and other people need it, and so we can make money off it, which improves our returns, but it'll always be to serve our end mission of a company, much in the same way AWS helped serve Amazon when people couldn't build technologies for them that they needed.
Right. You know, no better evidence of being a consumer company, I mean, than your sponsorship of SoFi Stadium. Obviously a very large piece of your annual marketing budget. Could you just, you know, talk a little bit about your strategic rationale there? Are you seeing the benefits from that sponsorship as you have expected to when you guys made the decision to do it? You know, what's been the impact on member growth and other, you know, other areas of the business?
Yeah, it was a very controversial decision. The controversy actually started with me. The marketing team, my first week at SoFi in 2018, I wasn't actually even an employee yet, but I was coming in the office in early February 2018, and the marketing team came over, they said, "Hey, you worked at the NFL. We want to name our the stadium down in L.A., SoFi Stadium." And I was like, "I haven't even been here, like, a week. Like, there's no way we're doing that. Like, those deals never work, and we can't afford it." And they came back time and time again. In 2018, we built out our strategy. In 2019, I was presenting to the board, and we were about to launch all the products.
And I literally said to the board, "It's a matter of when, not if, we become a household name, when we become a top ten financial institution." And as I was saying those... And the reason why I said when, not if, is because I knew we were ahead of everyone else in being mobile and being a one-stop shop. We're about to launch all these products that everyone had talked about launching but hadn't done, and to me, they were better than everything else. It was just a matter of becoming trusted and gaining more awareness and more market share.
But when I said the word, a matter of when, not if, we become a household brand name, I literally said to myself: "Oh, we have to do that stadium deal." And the reason why I thought that at that moment was they said: "What do you mean, when, not if?" I'm like, and I said, "When, not if they trust us." It's easy to give people money. They don't have to trust you. They take the money and leave. But for them to give you their money, they have to trust you, and they're not gonna trust SoFi. They don't know. Only two out of 100 people even mention our name when they think about financial services. We need to be, you know, someone they mention 30 out of 100 times, like JPMorgan Chase.
Unaided brand awareness is when you think of a financial services product, name three companies. Well, at the time, two people out of 100 would mention SoFi, but 30 people out of 100 would name the top five banks in the country. I saw the stadium as an opportunity to have broad-scale reach and notoriety really fast. And if you tried to buy. Most people don't realize this, but we did the stadium deal for television exposure, not for game day exposure. My view was that there would be at least four-six prime-time NFL football games at that stadium a year. And each prime-time football game, because I used to be a media analyst and worked at the NFL, and we did the first live NFL games on social media at Twitter.
I knew a live Thursday night game, Sunday night game, or Monday night game had about 20 million unique viewers. Now, the only way to reach that many people in one TV show would have been Desperate Housewives or Grey's Anatomy, like in 2002. Today, nothing's over two or three million. So I knew if we could have the game at our stadium on Thursday, Sunday, or Monday night, four times a year, that was at least 80 million unique viewers or 80 million viewers, 24 times. And that was much more than we were getting out of spending $20 million on four different sponsorships: the X Games, US Open Tennis, US Open Golf, Big East Basketball.
So I thought to myself, "We can move the $20 million from these inefficient things that only reach 15 million people in the entire year to reaching 20 million people at least four times a year, and that would help drive our unaided brand awareness." What I didn't realize at the time was that if you have a game on Monday night and it's at SoFi Stadium Week 1, the same audience is coming back Week two. So in Week one, they hear the name SoFi Stadium 15 times during the broadcast. But they may not know what we do. They come back the next week, and we run ads at the end of the first quarter and the second quarter. They then come back the next week, and we run ads at the end of first quarter and the second quarter.
And the formula when I was at Twitter is, if you want someone to try a new brand, you have to hit them with the same ad 15 times. So all of a sudden, the stadium tied into our media plan, which tied into hitting people, the same people, that we're going after 15 or 20 times in a season, every week with great frequency. I also thought it would be the most ambitious stage in the world, and the greatest acts in the world would want to play there. The World Cup would want to be there. The Olympics would want to be there. That was a little bit of a bet, 'cause Stan had to go out and win those things, and, boys, he hit the cover off the ball. Six shows of Taylor Swift, like, that wasn't in the contract.
The Olympics opening ceremony, that wasn't in the contract. The World Cup, that wasn't in the contract. So it was a big bet. It was one we had to make, and the team's done a phenomenal job turning it into a great value for us, and it's elevated everything we do. In Q2, I mentioned that we're starting to see the compounding effects of the FSPL and the flywheel happening, and we're sitting here in Q3, and it's happening even better, and I couldn't be more excited about the growth we're seeing in members and products, and it just continue to compound on itself.
Seems like an incredibly efficient way to get a lot of impressions. Beats buying ad spots on TV, I'm sure. Maybe shifting gears and talking a little bit about just the financials and guidance. You know, last quarter, you raised a full year revenue guidance, EBITDA guidance, and also reiterated a commitment to becoming GAAP net income profitable by fourth quarter of 2023. Could you just, you know, talk a little bit about how you expect the remainder of the year to play out and, you know, what you see as risks to the guidance, both to the upside and downside?
Yeah. Our outlook called for an economic backdrop of unemployment going to 5%, over the next year, having a, you know, relatively soft landing with flat to down GDP growth. So with that backdrop, you know, Q3 is going pretty much as we thought it would. We were very clear that as federal student loan payments returned, that we'd see a slight uptick in Q3, and a much bigger increase in Q4. Their first payments aren't due till October 1, and they'll feather in throughout the whole month. Bills went out in September. We felt that once bills went out, we'd see an uptick in applications. We've absolutely seen that uptick in applications in line with what our guidance indicated.
We also had a belief and thesis that we'd have two type of refinancing members, one of which would have a lower rate, and so they'd refinance with us, 'cause they would save on rate, and that's absolutely been the case. One of which that may not have a lower rate, but they needed to lower their monthly payment, so they were gonna extend the term of the loan even if it was at a higher rate, and we've seen that as well. So we feel good about our outlook for student loans, and we're excited about having that piece of the puzzle back in place. It brings people to the site. It drives other activities, in addition to being a really great product and helping people solve their financial needs and getting their money right.
I mentioned the compounding effect that we're seeing on member and product growth from our native brand awareness, from being more efficient at marketing, more cross-buying. That's continued to play itself out. The tech platform, the pipeline is as robust as it's ever been from big financial institutions. We said we wouldn't see an acceleration of the fourth quarter, but if things would be relatively flat between here and there, and that's been the case, but with improving margins, and we feel great about that still. The home loans business rates are high, but we're really, really happy with what we're seeing from an operational standpoint and reliability standpoint in time to fund in home loans. But there's a clear headwind there from high rates and no refinancing marketing, just purchase marketing. But I think we're set up for great success in 2024.
And then on the financial services side, we talked about $2 billion of deposits each quarter and feel super confident we're on that track, and continue to have a very differentiated product in driving direct deposit and more spending, and we're on that track, and it's helping us out with the Invest product. As I mentioned, 65% are cross-buying and, you know, invested, seeing good net flows. And we're on the Instacart IPO, which will be very nice to have as an additional benefit here in September, and wishing our partners at Instacart great success on their IPO. So we feel really good about the performance of our loans and the demand that we're seeing as well.
Great. You know, I just want to dig into a couple elements of that, and I do want to leave some time for audience Q&A, so maybe I'll just sneak one or two, two more in. But just on the student loan side, you know, could you just talk a little bit more about your expectations around a recovery, not only for this year, but also into 2024 and beyond? You know, is there an opportunity to get back to pre-pandemic levels of, you know, refinance, demand, and originations? Does the kind of specter or, you know, prospect of future loan forgiveness create some sort of overhang?
No, I think we'll see the demand for student loan refinancing continue to sort of move back to where it was in 2019. It may take, you know, several quarters for that to happen. We said we'd see a, you know, a small increase in Q3 and a bigger increase in Q4. You know, we're not looking for a return in Q4 to 2019 levels. It's probably half of that or less than half of that. But there's over 40 million people that still have federal student loans, and it's a real problem for them. $200 billion of that, $200 billion of the $1.4 trillion that's outstanding, is at rates higher than we currently offer in our demographic, and so that's a really big TAM at this price.
At the rate that we're offering now versus what their rate is. That TAM only increases as rates go down, which they will over the course of the next couple of years. So we think it's a really good market for us to continue to build great relationships. But one thing people don't really understand is that in our entire history, we've refinanced less than 1 million people's Federal Student Loans. We have 6.2 million members, which means the bulk of our business is coming from SoFi Money, SoFi Invest, SoFi Relay, and our technology platform revenue. We're not really growing our members significantly from loans. It's a great product. It's a great lifetime value product. We make about $800 in LTV day one if it's a new member.
If it's a cross-buy member that comes in through Relay at a very low CAC, or comes through Invest, or comes through Money, that profit goes from $800 to $1,600 to $2,000. So it's a great revenue-generating product, great LTV product, but it's not gonna drive our member base. It's gonna be part of our members. We get, you know, hundreds of thousands of new members in the other products, and we get tens of thousands of members in our loan products.
Great. You know, you mentioned the momentum in deposits, which has been really impressive to date. Could you just outline the strategy for ongoing deposit growth? You know, how sustainable is it? Where are you gaining share from?
Yeah. So 90% of our deposits are from direct deposit customers, and that's the key to our success. So we wanna have an unmatched product so that we drive direct deposit customers. We're gonna have top-tier APY, no fees, best functionality, free, complimentary certified financial planner. We give rewards across a lot of the activities. They can be redeemed into the money account at 2x what they would get redeemed into credit card. We just launched SoFi Travel, which is a better way to buy travel with reward points and discounts. We'll add other categories like entertainment tickets. So we're helping people use their money the way they want without paying us anything, and we're giving them maximum value. As Fed fund rates go down, non-banks that are competing with us on APY are gonna have their APY go down as well.
Ours may or may not. We, because we're a bank, we charge an APY that helps us fund our loans at about a 200 basis point margin. We could bring the APY down when Fed funds goes down, leave our loans where they're at, expand that spread to 300 basis points, or leave it where it's at and gain massive market share because no one else can actually fund the APY where we can. We have a huge competitive advantage because we have the origination product and the deposit product. And so, you know, a world in which rates go down, we're only gonna increase our market share gains or increase our spread, which will allow us to invest more money in acquiring even more customers. And we're acquiring them at a great LTV and 12-month payback now.
The share we're taking is from the top five banks in the country. We're, you know, they probably don't even know that we're taking share because they're so big and we're so small. But we see where the ACH is coming from, so we know who they are, but it's the largest banks, banks in the country that are offering nothing in APY, and they don't have mobile products that are very good. They certainly don't have the added value that we have across our platform, with free certified financial planners and the ability to do these other products at great discounts and, and great value. So, when rates go down, I think our advantage only increases, and if they keep going up, we can continue to pass on higher rates and loans to fund the deposits, which we've been able to do.
It's a very synergistic competitive advantage that no one else can compete with.
Great. And I'll sneak one more in before I see if there are audience questions. But, you talked about financial services segment being contribution and profit positive by 4Q. What's the path look like to get there?
Yeah, so we only lost $4 million in contribution profit in absolute dollars in Q2. The path to get there is continuing to scale money, which is very, very variable profit positive. The invest business and the credit card business I mentioned, those two businesses together are, in an annualized basis, are losing about $150 million. You know, that will start to come down as their variable profitability improves as well, and next year, even more so. And so there's a lot of leverage in the model, and this last leg is really just about scaling the profitable customers relative to the unprofitable.
When I say they're unprofitable, just because it's early stages in their monetization and early stages in getting all their operating costs down, just like it was in our loan products and just like it has been in SoFi Money. So, you know, we've been driving over 40% incremental EBITDA margins this year, despite growing over 40%, and, you know, I think you'll continue to see that happen, and that will also contribute.
Great. Any questions from the audience? I'll pick up the last question. So, you know, I just wanted to talk a little bit more about tech platform. You know, you talked about accelerating your rate of growth in the segment by 4Q. You know, particularly as you start to see revenue contributions from recently onboarded customers. Could you talk about some of the cross-sell traction between Galileo and Technisys, and also talk about some of the success that you've seen in among larger financial institutions?
Yeah. So the cross-selling or introductions that we thought would happen, would happen in LatAm. Galileo is getting a lot of introductions to Technisys partners, and that's bearing fruit for us. The area that's been surprising on the upside is, you know, we had the Galileo platform for two years before we bought Technisys, and we really weren't getting into major conversations with big banks in the U.S. But as the big banks have started to do more RFPs for more modern technology, which has been driven by just a wave of challenges for them, managing real-time assets and liabilities, we've been invited to those RFPs because of the core technology in Technisys.
But as we've gotten into those discussions and been able to explain our capabilities, some of the big banks are just interested in our processing from Galileo now, or the APIs from Galileo, and those introductions wouldn't have happened before. They wouldn't have really known to reach out to us about Galileo. So that's helped us with the big banks. The combination of the both have definitely helped us with non-financial institutions that have big customer bases in non-financial categories, like airlines or other areas, that wanna get into checking and savings into the next sort of frontier of financial products.
One of the things that has not been the case with these big consumer brands is they've found ways to leverage their brands in a bunch of areas, but some have never gone into the financial segment, and they don't want to be in credit cards per se and have their customers owe them debt. They'd love to have daily engagement and opportunity to give offers, and a checking and savings account branded their name as a way to do that. So there's been a lot more interest there as well. In addition to that, it's allowed us to spawn new products. So buy now, pay later is a product that we offer on SoFi. We call it Pay in 4 . That was built completely on Technisys and Galileo and SoFi full stack, and we're now offering that to Galileo's customers that may just have a debit offering.
They can now offer Pay in 4 or Pay in 6 or Pay in 12. So I couldn't be happier with having made the strategic decision to buy those assets and now seeing the benefit from it strategically has been really great.
That's great. That's an excellent way to cap off the session. Anthony, it's been such a privilege to be able to host you here. Thank you so much for your-
Thank you
... your support and participation.
Appreciate it. Thank you.