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When markets staged a late-month rally in May, SoFi Technologies (NASDAQ:SOFI) joined it. SoFi stock stalled at the 50-day moving average. This is a technical resistance where selling pressure ended the attempted breakout. Apple's (NASDAQ:AAPL) aggressive promotion of Apple Pay last week spooked SoFi investors. The technology giant already offers convenient monthly payment options. Apple will not only charge zero interest, but it will also forgive customers who do not pay back. Furthermore, the credit rating for those customers will not fall because Apple will not report the non-payment.

Apple's ambitions to increase adoption of Apple Pay casts doubt on SoFi, a fintech.

Fintech Sell-Off Drags SoFi Stock Lower

Apple's BNPL announcement shocked investors exposed to credit services and fintech. Last week, PayPal (NASDAQ:PYPL), Block (NYSE:SQ), Affirm Holdings (NASDAQ:AFRM) and Upstart Holdings (NASDAQ:UPST) fell along with SoFi. Markets are adjusting for the substantial competitive risks ahead.

Credit balances financially stretched consumers. They have too much debt. They will need time to pay back the amount owed. BNPL will become a growing market. Before Apple announced the offering, markets thought that fintech would have an edge in the market. They bid shares of Affirm for over $176 late last year. PayPal stock traded as high as $310.16 in the last year before markets. Soon, investors realized faced a sharp slowdown in the electronic payment supplier's core business.

SoFi Has No Moat

The bears are betting big against SoFi. The short float is 18% as negative investors believe SoFi's business lacks a moat. To outflank established financial institutions like Wells Fargo (NYSE:WFC) or Bank of America (NYSE:BAC), SoFi needs above-average customer growth. As market conditions tighten, it will have higher marketing costs. For example, it must offer higher incentives and offer little to no service fees.

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SoFi's aggressive incentives will likely attract customers who are struggling financially. Conversely, banks have an established infrastructure to service new and existing customers. For example, they have staff to provide customer support in the branch or over the phone.

SoFi is among the many fintech firms with limited customer support services. Customers who need to talk to a service representative must do so online or through email. The response could take days.

Reduce SoFi From Here

Apple disrupted the fintech market with BNPL. It is willing to forgive customers who do not pay back, albeit only once. Still, customers enjoy that comfort in exchange for using Apple Pay.

Once attached to Apple Pay, customers have one less reason to sign up for SoFi's services. Markets are preparing for the severe competition that SoFi faces from here.

On the date of publication, Chris Lau did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.

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