Stash launches banking and rewards services (NFLX, SPOT)

This is an excerpt from a story delivered exclusively to Business Insider Intelligence Fintech Briefing subscribers. To receive the full story plus other insights each morning, click here.

Microinvestment startup Stash announced it recently raised $65 million in a Series E funding round and unveiled a move into banking and rewards, per TechCrunch.

Business Insider Intelligence

Using Green Dot’s Banking-as-a-Service (BaaS) platform, the startup introduced a debit card with zero overdraft, monthly, and set-up fees, as well as free access to thousands of ATMs. The firm also revealed its “Stock-Back” program that rewards debit card spending on qualified purchases with fractional shares: When users spend at firms that have stocks listed on Stash’s platform, the reward will be a stock-back in those firms, while when they spend elsewhere, the reward will be a diversified fund.

The startup’s rewards program can help it attract client and partner interest for the following reasons:

Its scheme aligns with the preferences of its millennial user base. Ninety-seven percent of millennials say that they need access to their rewards information on their phones to actively engage with a loyalty program. So, it’s extremely likely that Stash’s customers, with an average age of 29, will be interested in its mobile-based banking rewards program, which links to their everyday purchases.
It allows users to seamlessly familiarize themselves with investing, which could lead to greater activity for the firm’s investing business. Stash’s rewards program essentially gets people into investing and educates them about the process of doing so. As its users seamlessly see the benefits of investing, they might look to invest more of their money using Stash’s investment platform.
The stock-back reward will improve brand loyalty and could lead to more partner deals with merchants. By linking investments to actual purchases, we see the program boosting users’ loyalty to the brands they choose to shop from: Studiessuggest that individuals are prone to repeatedly buy from firms they hold stocks in, for instance. Currently, Stash customers will earn a base of 0.125% stock-back on their purchases, with the percentage reaching 5% in some cases, like for Spotify and Netflix. We expect to see Stash secure more exclusive offers that would bring higher-percentage rewards as brands will look to tap into the customer loyalty benefit.

Stash could successfully differentiate from the slew of debit card offerings available and get more people to switch to using its product. The percentage of US households using debit cards dropped to 58% in 2018 from 74% in 2013; meanwhile, credit card usage grew 32% over the same period, likely because credit card issuers are investing heavily on reward cards.

As the number of fintechs offering debit cards with very low or no fees continues to rise, these players need to find novel ways to lure customers to their products. Of note, UK-based neobank Monese recently became the first current account to link with Avios, allowing customers to collect points for rewards such as flights, similar to Avios-earning credit cards. We see rewards programs as key to a successful proposition by fintechs looking to offer banking services and expect Stash to continue expanding its fast-growing client base on the back of this move.

Interested in getting the full story? Here are two ways to get access:

1. Sign up for the Fintech Briefing to get it delivered to your inbox 6x a week. >> Get Started

2. Subscribe to a Premium pass to Business Insider Intelligence and gain immediate access to the Fintech Briefing, plus more than 250 other expertly researched reports. As an added bonus, you’ll also gain access to all future reports and daily newsletters to ensure you stay ahead of the curve and benefit personally and professionally. >> Learn More Now

Source: Business Insider – edigalaki@businessinsider.com (Eleni Digalaki)