Ftechnological disruptor SoFi (NASDAQ: SOFI) officially received regulatory approval to become a bank. At first glance, that doesn’t seem to change much, as SoFi already offers loans, fund management accounts, and many other features you might expect from a bank. However, in this crazy live Video clip, recorded on January 20Fool.com contributors Matt Frankel and Jason Hall explain why a banking charter could be a game-changer for SoFi and its investors.

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Matt Frankel: SoFi, if you haven’t seen the stock symbol, SOFI, the first mobile fintech platform is officially becoming a bank. They had made a deal for a while to go buy Golden Pacific Bancorp. I think it was based near where Jason lived in California.

Jason Hall: It’s in San Francisco. It’s a small local bank.

Frankel: Yes, it’s a small bank.

Room: Yeah. Really small bank.

Frankel: But it was about acquiring a bank charter in the process of buying a charter. That’s what they buy. They don’t really care about branches.

Room: That said, I think they targeted a bank that they could buy that had the right leadership that would fit into the larger organization to continue leading it.

Frankel: Sure.

Room: Because if you didn’t, the regulators weren’t going to approve it and it was going to be harder to move forward because even if you manage to get a purchase, you’re going to have to find someone to manage this part of your Business.

Frankel: Great. Like Jason or I could go to the regulators and say we’re going to start and run a bank and they’d laugh at us from the office. You need to have a better management team in place, with experience, things like that.

Room: To the right.

Frankel: SoFi becomes a bank. At first it may seem like nothing is going to change. If you look at SoFi’s products, they currently have an alternative bank account called SoFi Money, which basically provides most of the functionality of checking and savings accounts. They already provide most of the types of loans you could want. I think auto loans are the one big exception that they’re not making right now. They offer a range of investment products. They have a brokerage account, they offer cryptocurrencies. Did you know that SoFi actually owns six of its own ETFs?

Room: I did.

Frankel: Some of them are actually really neat. the ETF SoFi Gig Economy (NASDAQ: GIGE) is my favorite simply because it’s a real trend. One of my favourites, the favorite stock symbol, the SoFi Weekly Income Fund which distributes every day on Fridays. Its stock symbol is TGIF. How cool is that?

Room: You must like it.

Frankel: But a wide range of financial products is already the point, and it may not change anything, but the thing to know is that these financial products are all offered by third-party banks on the SoFi platform. SoFi cannot make loans directly, they cannot hold customer deposits directly. They have to rely on the banks to do that. It’s not, Jason, why does it matter?

Room: This is exactly what we were talking about earlier with Bank of America. When you are a bank and people deposit money in your bank, you owe them that money. It’s a liability, the deposit is a liability, but you get the money and then you can use it to do things like make loans. It’s really powerful. Because in this environment, you benefit from this low cost of capital.

If you are SoFi, what are your options today? You can sell shares. With the stock market action we’ve seen over the past year, that’s a terrible thing to do. You can incur debt, and you’ll likely pay a higher interest rate for that SoFi-scale debt. Thinking of the risk, if I want to lend that money and the risk, it will probably cost them more money that they would pay on that debt than they could earn, lending the money to someone else. It completely reverses the scenario and allows them to get a better cost of capital to do all the other things that they pay the other banks part of the proceeds to be able to do.

Frankel: Yeah. It’s not just that, it allows SoFi to compete more effectively.

Room: Absoutely.

Frankel: Because right now, let’s say SoFi wants to offer a checking account. It doesn’t have SoFi verification, but the CEO made it clear that it will happen now that it’s approved. If SoFi offered this through a third party and wanted to give people, say, a 2% interest rate on their checking accounts. They should go to that third party bank and say we want to give our customers a 2% interest rate, can you do that? They would say no. SoFi can do it. If they have SoFi verification and they’re the bank, they can set whatever interest rate they want. If they know they can loan that money out at 7% or 8% interest, they could definitely set up a checking account at 2 or 3% interest to beat the competition.

This gives them a huge competitive advantage when it comes to bringing in new customers and getting people to keep all their savings there. I have a SoFi account. It’s not my main account at all. But if you’re going to tell me, you’re going to start paying me a few percentage points, better interest on my savings than my bank, of course I’m going to move my money there. This gives them a big competitive advantage, not just on the cost of capital, as Jason just mentioned. But about being able to compete with other banks on interest rates as much as they want.

Room: It levels the playing field.

Frankel: It completely levels the playing field and allows SoFi to use, its biggest advantage right now is that it’s cool. He has done a great job of attracting a younger clientele that could be lifelong customers. Their cost structure is much lower than that of traditional banks. They don’t have to worry about a branch network. They built their own technology, everything is automated. Now they can pass those savings on to their customers through higher interest rates on savings, and better interest rates are loans that third-party banks couldn’t offer. I’m a big SoFi bull and even after it’s up I think something like 30% in the last few days. Even after that, it’s just back to how it was about a month ago. It’s still a pretty valued stock in my opinion. I think it was higher than it was today when it was first made public. It was one of SPAC’s IPOs. It was IPOE.

Room: Yeah IPOE. I think the bottom line is that it should be trading higher because it’s stronger now that it’s bigger, has a lot more customers and is generating more cash flow. But always on a pure evaluation basis. If you believe the story, if you think it’s going to do everything that you and I, Matt, think it’s going to do. I think you could call it a robbery.

Bank of America is an advertising partner of The Ascent, a Motley Fool company. Jason Hall owns Bank of America and SoFi Technologies, Inc. Matthew Frankel, CFP® owns Bank of America and SoFi Technologies, Inc. The Motley Fool has no position in the stocks mentioned. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.