Could Happy Hour Help You Better Manage Debt?

By Brittany Lyte on 23 August 2016 0 comments

Millennial-focused lender SoFi offers its members a long list of crazy perks. Should traditional lenders — and borrowers — take note?

First off, it's important to understand that social hour is in SoFi's DNA. After all, the alternative lender's name is shorthand for "social finance."

Next, consider the company's short history. Upon launching in 2011 as a start-up student loan lender for Stanford grads, SoFi has massively grown in popularity. Ditching the Stanford niche, SoFi now accepts borrowers from a much larger, but still exclusive, list of accredited colleges. Of course, SoFi's member's-only vibe is not for nothing.

SoFi's Secret Social Formula

In curating a group of educated borrowers with vetted incomes and credit scores, SoFi's 150,000 members actually have quite a bit in common with one another socially. SoFi knows this and capitalizes on it. The lender's series of free happy hours, cooking classes, and brewery tours are highly attended and often booked solid by members. And that's because if you are a SoFi member, chances are pretty good that you'll get along, or at least find common ground, with other SoFi members. While attending a SoFi social event, you might even strike up a beautiful new friendship — or score a date. (You guessed it: There's a SoFi matchmaking app in the making.)

Now, think about the last time you visited a traditional, brick-and-mortar bank. Would you want to dine under the stars with the folks you encountered in there? No, probably not.

Of course, SoFi's social events calendar has more to offer than fancy cocktails. Piggybacking off Millennials' comfort and familiarity with social networking, SoFi taps into borrowers' alumni networks, connecting them to investors from the same alma mater. It's sort of like banking meets LinkedIn. SoFi makes borrowing personal, which is why not only its happy hours, but also its opportunities for career advising, networking, and entrepreneurial support are so well-received by members. For the most part, SoFi borrowers are young, responsible, and successful. And those are exactly the type of people the typical SoFi borrower wants to share company with and take advice from.

A Revolution in Banking?

That's all well and good, but why should traditional banks take interest?

Well, for one thing, SoFi isn't playing social events chair solely for the fun of it. By engaging members in fun and beneficial activities, SoFi is boosting members' camaraderie amongst each other. This also boosts members' feelings of connectedness and loyalty to the SoFi brand. And that loyalty directly translates into cash. The more connected and loyal a SoFi member feels toward SoFi itself and other SoFi members, the greater the odds that the member will fulfill his or her financial duty to pay loans back in a timely manner.

Turns out it's true: SoFi borrowers tend to pay off their loans quickly, and in many cases they are pre-paying more than the monthly minimum. And it makes sense: We're much more likely to pay back our friends than we are to make good on our debts to a giant corporation without a face. All of the career coaching and networking that SoFi provides is also a help to the company's bottom line. It's in SoFi's best interest that its membership is well-employed. And this is where traditional banks might want to take a lesson.

Indeed, Goldman Sachs already has taken a lesson. The 147-year-old investment bank is preparing to launch its own online peer-to-peer lending platform. While a few traditional banks, such as JP Morgan Chase, have announced partnerships with peer-to-peer lenders, Goldman is the first bank to attempt to build its own online lending platform from the ground up. It's an indication that even the biggest of banks knows that the future of lending is mobile and more personal.

But only time will tell if banks will begin launching happy hour clubs. 

Would you drop your stodgy bank for a younger, hipper lender?

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