SoFi Technologies (SOFI 7.27%) is in motion. The stock recently rose to $10 per share, its highest price since early 2022. That's progress, but the stock is still about 60% below its all-time high reached during the market bubble in 2021. SoFi is a digital bank, but it's not exactly a bank stock. (Well, it's not a traditional bank stock.)

What exactly is SoFi? It could be an industry disruptor with traditional banking features and the added benefits of a technology company.

Here are five reasons why investors should consider buying SoFi Technologies and put it aside for the foreseeable future.

1. It is extremely popular among consumers

On the surface, SoFi Technologies is a digital bank. The company offers banking services, loans and financial products through its website and smartphone app. Unlike many longstanding banks, SoFi has no physical branches. It is a business model born in the digital age. More importantly, SoFi has become very popular. The company's customer base has grown from 1.4 million at the start of 2020 to nearly 8.8 million today.

SoFi's subscriber count grew 41% year-over-year in the second quarter, so there's still plenty of momentum in this trend. SoFi is particularly popular among young, high-earning adults. This is one of the most valuable customer segments in the financial sector as they will drive the economy for decades to come.

2. More than a bank

Behind the scenes, SoFi has financial technology in its DNA. In 2020, the company acquired Galileo, a fintech company that provides payment processing, card issuance and embedded financial services to over 100 companies including H&R Block, toastMoneyLion and others in 16 countries. In total, Galileo customers total 158 million accounts.

SoFi's technology platform segment (Galileo) grew its contribution profit by 24% last year, accounting for about 10% of the company's total profit in 2023. Additionally, Galileo accounts have increased fivefold since the first quarter of 2020. Over time, Galileo could become a significant contributor to SoFi's business and enable investors to see broader growth across the fintech industry.

3. Advantages of a student loan

SoFi started in the student loan business and built a strong reputation in refinancing. In 2019, SoFi borrowed $6.7 billion. However, a federal student loan freeze for most of the past four years and higher interest rates since 2022 have effectively driven up demand for refinances. SoFi had just $2.6 billion in student loans in 2023, despite adding millions of new customers since 2019.

It looks like the worst is over. The nationwide interest rate freeze is virtually over and interest rates appear to have reached their peak. Meanwhile, analysts estimate the private student loan market could grow 10% annually through the early 2030s. SoFi's student loan business could unfold like a spring and spur growth in the coming years.

4. SoFi could rely on fee-based revenue

In the long run, SoFi may not function quite like a traditional bank. Traditional banks hold loans on their balance sheets and collect the interest. Default risk affects the market valuation of bank stocks compared to most other companies. Galileo already represents a non-lending component of SoFi's business, but things have gotten more interesting lately.

Just a few days ago, SoFi announced an agreement to expand its private lending business through a $2 billion financing deal with Fortress Investment Group. Simply put, SoFi takes on personal loans but then sells them off. SoFi will miss out on interest income, but its balance sheet risk will be reduced. CEO Anthony Noto commented in the press release about the intention to grow SoFi's fee-based revenue. If the company holds fewer loans on its books, this could impact the market valuation of SoFi stock.

5. Earnings growth is just around the corner

I often use book value to value bank stocks, but Galileo and a potentially less credit-dependent business model make earnings a viable way to value SoFi stocks. SoFi reported GAAP profit for the third consecutive quarter in the second quarter of 2024. The company is at exactly the point where operating leverage (when revenue grows faster than expenses) leads to rapid profit growth.

Analysts estimate SoFi will grow its earnings by an average of 51% per year over the next three to five years. Given SoFi's popularity and growth opportunities, I wouldn't be surprised to see the company post strong earnings growth in the foreseeable future. For investors, the stock appears to be a candidate for good performance as earnings improve in the coming years.