In this article, I talk about how Stash - a new entrant on the UK Fintech scene - go about encouraging financial behaviour change and the impact their presence might have on UK customers, incumbent financial providers and other challenger banks.
First things first, Stash don’t have an exact launch date in the UK, but across the pond they offer an all-in-one financial platform offering banking, investing and education and have started building a team in Reading. This has been enough to get us thinking.
Stash aim to fulfil a higher-order customer need than just making banking an easier and more pleasant experience. They want to demystify investment products for the masses and help people get the most out of their money through an accessible and rewarding experience.
This is great news for the majority of people who don’t fully capitalise on their money and are putting off, or don’t know how, to take the leap into investing.
Only 2.2 million people were subscribed to a stocks & shares ISA account in 2019. That’s fewer than 5% of those eligible.
A total solution
We’ve become accustomed to homegrown challenger banks like Starling or Monzo competing on service. They’ve done this by building digital banks with customer-centricity at their heart. They also help encourage saving and better budgeting behaviour through some clever, embedded features like roundups or automated saving. Both of them now also offer savings accounts with interest. These are examples of core features done well; banking and saving that’s easy to use.
When it comes to investing, commission-free stock trading services like Freetrade, US-based Robinhood or Australia-based Stake are disrupting the traditional market offering free trading, simplicity of use and fractional shares. The more daring of us might buy a share or two for bragging rights, but for most the concept of buying a share remains a leap too far.
Then there are savings and finance plug-ins like Moneybox that invest your roundups in tracker funds or Plum who analyse your spending habits and automatically invest small amounts on days when you have more money.
Where Stash shine is in offering a complete package; allowing people to bank, invest and save within a single ecosystem, surrounding all of these actions with education and safe-to-fail experiments that boost financial literacy.
It offers what I, as a customer, love about Monzo, Nutmeg and Freetrade, all wrapped together with a sprinkle of clever automation and empowering content on top.
The only debit card and investment account that work together
The proposition might be compelling, but practically how do you get people bought into a bridge between banking and investing?
Stash connects the two in a way that’s both relevant and low risk for their customers.
Enter Stock-Back, a feature that rewards spending on Stash’s debit card with stocks in the company you buy from (or a tracker fund if the company isn’t available).
For example, if you buy something from Starbucks, you’ll earn a fractional share of the SBUX stock (a small piece of ownership in the company) as a reward.
This helps build investment portfolios that make instinctive sense to people, as they reflect their purchasing behaviours. And the fact that this is done automatically and through a rewards program, overrides the initial hurdle people often encounter when it comes to investing and putting their own money at risk.
This low-risk experimentation helps people gain confidence in investing. According to the CEO, Brandon Krieg, nearly 30 percent of Stash customers who received a reward in stock went on to make additional investments.
Stash’s rewards program is also unique, as unlike a static points system with an expiration date, stock should appreciate with time.
Building financial literacy
Stash have also placed education at the heart of their content strategy. They invested and are actively growing their content team which make up about 10% of their current workforce.
“Stash Learn” offers plenty of articles and tips, but personalised guidance is also embedded within the whole user experience and product features, helping people progress as they go about their day-to-day spending.
Here’s Brandon Krieg again talking about the behaviour the platform looks to promote - “It’s about ingraining an investing mentality and changing people’s mindsets.”
This certainly helps build people’s confidence in investing, but it’s the automation offered through features like Stock-Back and Smart-Save that are the real learning tools and game changers. They help people learn new behaviours which benefit them and cut through the barriers that stop us from doing new things or changing what we do.
Who is Stash great for?
Stash will appeal to people who have missed out on advice from wealth managers and want their money to work harder and go beyond traditional saving. 86% of their US-based customers are beginners or first timers when it comes to investing.
But it could also draw in thematic investors, those interested in particular missions, industries or locations, who are often willing to pay more to invest in causes or companies they believe in.
Whilst its stock universe is currently smaller than Freetrade’s or Robinhood’s (not to mention Hargreaves Lansdown’s), Stash theme their stocks and funds making them more palatable to browse and choose from:
- SPDR® SSGA Gender Diversity Index ETF -> Women Who Lead
- Schwab US Dividend Equity ETF -> Delicious Dividends
What can we expect to happen?
Stash have found a seamless and meaningful way to get people started on investing through its automated features. And this experience is only possible through offering fractional shares as well as having a banking licence.
At this time, none of the other players are able to respond. Incumbent banks aren’t offering fractional shares, challenger banks are in the process of mastering saving pots and haven’t really touched investing, and the low-cost trading platforms don’t have (and aren’t aspiring to get) banking licences.
More than that, Stash are also initiating an interesting industry shift - away from financial service companies being a provider and guardian of people’s money, towards becoming a true partner and educator.
Will traditional banks be able to fight off another challenger scenario? Now would be the time to start thinking about fractional shares and building a compelling proposition to encourage a large-scale adoption of investing behaviours.
Personally, I’d love to see the word ‘stock’ enter the common language, the iOS Stocks app being used by non-bankers, people choosing Stock-Back as a preferred reward system from their banks (replacing free overdrafts or cash-back).
At a higher level, it would be great to see a more complete provision of financial services available to all, or at least to many. And for managing money to be seen as a delightful and rewarding experience, not just an easy one. Stash could be one way we can get to this.