If you’re looking for a new credit or debit card, you’ll quickly notice that there are a lot, and I mean a lot, to choose from. Uber Technologies will let you work toward free food deliveries; Amazon.com’s includes a gift card; Ikea's looks like it's made of wood.
From the card operators’ perspective, you had better make sure you have a unique enough offering to stand out in a massive pool of options. The latest company to try is Stash Financial. The New York-based personal finance and investing startup plans to announce on Tuesday a new “stock-back” feature on Stash debit cards.
The pitch: Next time you shop at Amazon, pay your Netflix bill or pick up groceries from Kroger rather than earning cash back, you’ll earn fractions of shares of the companies' stock. The rewards start at 0.125% of spending, less than some other cash-back credit cards, though the company said the rate could reach as much as 5% depending on deals and promotions. For purchases at, say, a local restaurant that doesn’t trade on the public markets, customers will earn shares in a related exchange-traded fund.
Stash also plans to announce on Tuesday that it has closed a new funding round of $65 million, much of which will go toward adding additional products like this card. The startup joins a growing number of fintechs that are dabbling in more banklike services. In Stash’s case, it will partner with an existing bank, Green Dot. The company hopes to generate a profit from transaction fees and driving people to its other investment products.
Competition, of course, is fierce — and not just from the likes of PayPal Holdings, Visa and American Express. This week, it was reported that Goldman Sachs Group and Apple selected a payments processing firm to aid in their planned credit card partnership. Analysts’ tepid reaction to that pairing, despite the companies’ huge scale, may be an indication of how hotly contested this space has become.
“There’s nothing about what Apple is launching that makes it look like it will be particularly successful,’’ MoffettNathanson analyst Lisa Ellis told Bloomberg. Ellis points out that when two large companies typically launch a cobranded card, it's heavy on rewards. Apple isn’t known for discounts, so it’s hard to imagine what exactly is going to grab the attention of consumers, especially when adding a new credit card or closing a different credit card in order to get this one are all actions that affect a person's credit score.
Stash will try to do a few things differently. For one, it's pitching a debit card, so purchases are likely to be smaller and won't affect users' scores. And stock rewards, unlike airline miles, are less likely to induce additional shopping, the company points out. Stash's idea — promoting financial restraint to boost spending on its cards — might be just backward enough to get some attention.
