Stash Wants to Turn Your Morning Coffee into Stock
U.S. consumers are justifying faster spending with rewards. But what if they received stock instead of cash back?
Consumers who filled up their gas tank at a Shell station or bought a venti caramel macchiato at Starbucks with their Stash debit card last month earned a small stake in those companies by way of the investment startup’s new “stock-back” rewards program.
Iterating on the nearly ubiquitous cash-back rewards program, Stash offers consumers stock to help them build investment portfolios that reflect their regular spending habits. Since launching the program a month ago, Stash customers have earned fractional shares of stock from 500,000 qualifying transactions, the company said. It declined to disclose the total value of those rewards.
“People are learning more and more that they can be an investor the same way they live their life and that’s the mission: to get more people to be investors and more people to ultimately learn about the companies out there,” the Stash CEO and cofounder Brandon Krieg told Cheddar.
Krieg said he hopes to report “tens of millions” of stock-back redemptions by end of the year. Stash has 3.1 million accounts and $690 million assets under management. About 150,000 customers signed up for its debit card when it launched a month ago and swiped it an average of 10 times.
The stock-back program offers an unlimited base of 0.125 percent stock-back on all purchases everywhere and a rotating selection of up to 5 percent bonus stock-back on popular and high volume retailers like Netflix and Spotify. The company is preparing to unlock a 3 percent stock-back bonus for spending at Walmart and Amazon. If the merchant is not public, Stash will invest 0.125 percent of the transaction amount into a Stash-diversified ETF.
In the last year fintech companies and a growing number of banks have been racing to offer customers the highest-interest bearing savings accounts and zero-fee everything to lure them to their platforms, but now they’re providing cash-back incentives to encourage them to spend more. For example, personal finance content and advice site NerdWallet, Square’s Cash App, and even Chase launched cash-back features.
But the free-cash craze now includes new entrants, and extends beyond financial services providers: The rewards app Drop, which gives users points for shopping and gift cards to redeem with them, raised $21 million in Series A funding last year and the banking startup Zero launched its debit card with a cash-back features. Rakuten, the “Amazon of Japan,” advertises its cash-back shopping platform to U.S. consumers as part of the rebranding of Ebates, which it bought in 2014.
Stash also offers a cash-back feature, but while those perks are nice, it doesn’t exactly provide much in the way of long-term financial health, Krieg said, instead encouraging more spending than saving or investing. (The NerdWallet Cash Back press release said it can save users up to a whopping $56 each year — LOL).
“What they miss out on by not doing it is the power of compounding,” Krieg said. “People who are young who are willing to take the steps to start investing take advantage of putting away small amounts of money over the long term.”
As it’s become less expensive in the past 10 years to invest — with fewer minimums and cheaper advice — companies like Stash, MoneyLion, Acorns, Robinhood have used technology to remove the prohibitive costs for new retail investors. Stash hopes its iteration on the more common cash-back programs will create a new way for consumers to become more active investors.
“It’s revolutionizing banking rewards and fundamentally changing a lot of dimensions — from education to stock ownership to brand affinity and loyalty,” Krieg said.