Stockpile's Tech Turns Banks into Simple Brokerages

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As Stockpile prepares to launch its digital gift card for stock purchases, it is lining up partnerships with banks and credit unions to host its software.

The Palo Alto, Calif.-based startup has partnerships in place with several financial companies, including a top-20 global institution and some smaller ones, said Dan Schatt, Stockpile's chief commercial officer. Banks can work with Stockpile to sell stock gifts through their branches or offer them as part of a rewards program alongside retailer gift cards.

"What we'll be injecting into loyalty catalogs for banks is, you can now redeem rewards points for stock," Schatt said. "You can redeem rewards points for $10 or $20 of Google stock or Apple stock, whatever you like. If you own half a share, you get half a dividend. You really are an owner of that stock."

Banks can integrate Stockpile's software into their online banking sites to allow users to purchase partial stocks through an interface that resembles that of Facebook or Pinterest. Stockpile presents stocks as thumbnail images inspired by the design of Monopoly cards, and the user's activity is viewable in a "timeline" format where each transaction is represented by its own card.

"Very few [financial institutions] actually have a brokerage," Schatt said. "Even those banks that do have brokerages, the brokerages appeal to high net worth clients … they never appeal to the common person."

Financial institutions would share in the revenue from fees paid by end users to purchase stocks. During its beta phase, Stockpile has a fee of $1.95 per transaction, with plans for an all-you-can-eat monthly fee option for high-volume traders. The per-transaction fee is comparable to the fee buyers pay when purchasing an open-loop gift card, Schatt said.

Stockpile plans to launch its service by the end of the year, and the bank and credit union integrations would go live afterwards.

If a bank or credit union hosts Stockpile's interface, it would draw more traffic from the people who bought stock through it, said Avi Lele, Stockpile's co-founder and CEO.

"The thing the banks crave is engagement, and they don't have much engagement," Lele said. Bank customers check their balances every few days or weeks, but stock owners check the value of their investments on a daily basis, he said.

Consumers typically have an affinity for companies they have invested in, Schatt said. Consumers would be more likely to bring more of their business to a company they own stock in, he said.

Stockpile's goal is to make it possible to give gifts of stock — "Everyone appreciates a gift that appreciates," Schatt mused — as well as lower the barrier of entry to people who are interested in purchasing stock but did not have the funds or the knowledge to begin investing.

Its user interface is designed to require minimal effort on the part of the stock owner. For example, rather than request a scan of a photo ID, Stockpile uses a Lexis Nexis service that leverages a data base of challenge questions to verify the user's identity. Senders of the gift need to know the recipient's email, and do not need other information. The gifter is essentially buying a digital gift card and does not need to open a brokerage account.

The gift value can also be exchanged for a different company's stock or for a gift card that can be spent at a retailer. This is meant to provide flexibility for the recipient and ease the gifter's concern that the gift will not be well received, Lele said.

"We expect the banking channel to be significant for us because it's a natural place that customers would go when they're thinking about a financial gift or investing in the stock market," Schatt said. "We don't expect the world to know about"

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