Microinvestor steps into neobanking clique
The microinvestor Stash Invest is throwing in with the neobanking crowd, announcing plans on Thursday to launch savings and checking services next year.
The move signals a competitive rush by young fintechs to lay claim and grow with millennial clients, as microinvesting apps adopt the cross-selling techniques of big banks and wealth management firms they aim to disintermediate.
“We really listened to our customers over these last two years and they need more,” said Stash Invest CEO Brandon Krieg. “They needed guidance in savings and investments, but they need even more guidance managing their money.”
The company currently has 1.2 million users and projects it will have 2 million by the end of the year, with about 25,000 users signing up a week. According to its latest ADV form filing, Stash has roughly 983,000 investment accounts and $125 million in assets under management.
Krieg wouldn’t disclose which institution Stash has partnered with in creating these new services. Unlike many brick-and-mortar banks, he said, the company’s banking services will have no maintenance fees or account minimums.
Stash banking clients will be given a debit card and will have free access an ATM network of 55,000 ATMs across the country, according to the company.
Krieg added that Stash, whose average user is 29 years old, is not ready to offer a credit card. Instead, they will emphasize saving, which is why they will offer a personalized spend-and-bill tracker and an auto savings feature that puts small amounts of money away.
“Some people believe that consumption models are the best, but we believe in helping people save,” Krieg said. “This isn't for the wealthy and rich. What happens if someone trying to pay student debt is having a bad month? We want to help that maximize every dollar they have.”
Stash’s foray into banking is the latest example of a fintech offering a mobile-only bank account tied to a value-added service such as microinvesting.
Simple was a pioneer in integrating personal financial management tools into a bank account and was acquired by BBVA in 2014. Moven, another early digital-only pioneer, now white labels its service to some banks in addition to offering its own product.
More recently, some banks have also tried their hand at creating mobile-only bank accounts. These include BankMobile, a division of Customers Bancorp in Wyomissing, Pa., and MemoryBank, a unit of Republic Bank & Trust Co. in Lousiville, Ky.
It’s a logical progression of offerings, said Lex Sokolin, director of fintech strategy at Autonomous, a U.K.-based research firm.
“Like SoFi, N26 and other neobanks, the most feasible strategy to survive once you reach scale at the attention level is to broaden the product offering,” Sokolin said. “It's the elusive cross-sell that Citi went after back in the last century.”
Stash’s investment offering has a $5 minimum to open an investment account. Stash charges a monthly $1 fee for investment accounts under $5,000, and 25 basis points on accounts higher. Users are left to make their own investments, as opposed to robo-advisers that automatically allocate assets.
A broader product set would make Stash’s app more valuable as a holistic offering, Sokolin added, and gaining deposits could serve as a monetization strategy.
Davis Janowski, senior analyst at Forrester Research, suggests Stash is able to offer these free services by absorbing bank costs, using a portion of the $40 million in its last round of funding from Coatue Management to do so.
It will be difficult to differentiate offerings, too. San Francisco-based Digit, for instance, also has a feature that automatically transfers funds from checking to savings regularly in amounts determined affordable by its algorithms.
Janowski says it may still be an uphill battle for Stash, pointing to a number of digital bank failures, while those that have found success, like Ally Bank, weren’t startups.
“If you’re already a banked person," he said, "as much as you might dislike the bank, are you really going to give that up?”