How Does Acorns Make Money?

Acorns is a fintech platform providing services related to Robo-investing and micro-investing. The company makes money primarily through three subscription tiers: Lite – ($1/month), which gives users access to Acorns Invest, Personal ($3/month) that includes Invest plus the Later (retirement) and Spend (personal checking account) suite of products, Family ($5/month) with features from both the Lite and Personal plans with the addition of Early.

Origin story

Acorns is an American financial technology and services company founded in 2012 by Walter and James Cruttenden.

The father and son duo created Acorns to educate others on passive and incremental investing. Once a user has signed up for an account, they can select from a range of pre-built investment portfolios.

The portfolio can then be grown through micro-investing once the user connects a valid debit or credit card.

In recent years, the platform has expanded to offer checking account services and individual retirement account (IRA) products.

The company also strengthened its product offering by appointing behavioral economist Shlomo Benartzi to an Acorns committee tasked with investigating consumer spending.

As of 2020, Acorns had $3 billion in assets under management spread across 8.2 million customers.

How Acorns makes money

First and foremost, Acorns makes money via three subscription tiers:

  1. Lite ($1/month) – which gives users access to Acorns Invest, allowing them to round up their spare change and invest it into an exchange-traded fund.
  2. Personal ($3/month) – including Acorns Invest plus the Later (retirement) and Spend (personal checking account) suite of products.
  3. Family ($5/month) – encompassing features from both the Lite and Personal plans with the addition of Early. This allows parents to create an investment account for their kids and save money on capital gains tax.

Referral fees

When an Acorns member purchases at one of its 350 partners, the company earns a referral fee.

The fee is usually a small percentage of the total purchase amount. Acorns then distribute a portion of that fee to members – either as a direct deposit or re-invested on their behalf.

Management fees

For investment portfolios exceeding $5,000, Acorns charge a flat annual management fee of 0.25%.

Portfolio owners whose balance does not exceed $5,000 will not pay a management fee. However, they will be required to pay for one of the above-listed subscription plans.

Interest on cash

Acorns also make money by lending the money sitting in member accounts to other financial institutions and collecting interest.

Future growth strategies

Many Acorns accounts are only netting the company $12 annually, which is not a lot of revenue.

Recently the company has made a concerted attempt to increase revenue through growth.

The first such action is the establishment of Acorns Later, where the company hopes to secure customers early in their careers and help them build a sizeable nest egg.

Acorns also formed a strategic partnership with PayPal to expand their customer base and get access to bank account services.

Based on recent acquisition activity, some speculate that a B2B offering may also be under development. B2B services are a significant avenue for revenue generation, as evidenced by Acorns competitor Stash.

Key takeaways:

  • Acorns is an American fintech company with a focus on micro-investing and other services such as retirement planning and investment accounts to fund future tuition expenses.
  • Acorns charge a management fee for each of its three investment subscription plans. Portfolios with a value exceeding $5000 are also charged a flat fee of 0.25%.
  • Many Acorns customers with low-value investment portfolios are returning very little revenue to the company. It has sought to remedy this situation with a focus on retirement products and strategic partnerships. There is also the potential that Acorns will enter the lucrative B2B market.

Read More: How Does TD Ameritrade Make MoneyHow Does Dave Make MoneyHow Does Webull Make MoneyHow Does Betterment Make MoneyHow Does Wealthfront Make MoneyHow Does M1 Finance Make MoneyHow Does Mint Make MoneyHow Does NerdWallet Make MoneyHow Does Acorns Make MoneyHow Does SoFi Make MoneyHow Does Stash Make MoneyHow Does Robinhood Make MoneyHow Does E-Trade Make MoneyHow Does Coinbase Make MoneyHow Does Affirm Make MoneyFintech Companies And Their Business Models.

Related FinTech Business Models

Acorns Business Model

Acorns is a fintech platform providing services related to Robo-investing and micro-investing. The company makes money primarily through three subscription tiers: Lite – ($1/month), which gives users access to Acorns Invest, Personal ($3/month) that includes Invest plus the Later (retirement) and Spend (personal checking account) suite of products, Family ($5/month) with features from both the Lite and Personal plans with the addition of Early.

Affirm Business Model

Starting as a pay-later solution integrated into merchants’ checkouts, Affirm makes money from merchants’ fees as consumers pick up the pay-later solution. Affirm also makes money through interest earned from the consumer loans when those are repurchased from the originating bank. In 2020 Affirm made 50% of its revenues from merchants’ fees, about 37% from interests, and the remaining from virtual cards and servicing fees.

Alipay Business Model

Alipay is a Chinese mobile and online payment platform created in 2004 by entrepreneur Jack Ma as the payment arm of Taobao, a major Chinese eCommerce site. Alipay, therefore, is the B2C component of Alibaba Group. Alipay makes money via escrow transaction fees, various value-added ancillary services, and its Credit Pay Instalment fees.

Betterment Business Model

Betterment is an American financial advisory company founded in 2008 by MBA graduate Jon Stein and lawyer Eli Broverman. Betterment makes money via investment plans, financial advice packages, betterment for advisors, betterment for business, cash reserve, and checking accounts.

Chime Business Model

Chime is an American neobank (internet-only bank) company, providing fee-free financial services through its mobile banking app, thus providing personal finance services free of charge while making the majority of its money via interchange fees (paid by merchants when consumers use their debit cards) and ATM fees.

Coinbase Business Model

Coinbase is among the most popular platforms for trading and storing crypto-assets, whose mission is “to create an open financial system for the world” by enabling customers to trade cryptocurrencies. Its platform serves both as a search and discovery engine for crypto assets. The company makes money primarily through fees earned for the transactions processed through the platform, custodial services offered, interest, and subscriptions.

Compass Business Model

Compass is a licensed American real-estate broker incorporating online real estate technology as a marketing medium. The company makes money via sales commissions (collected whenever a sale is facilitated or tenants are found for a rental property) and bridge loans (a service allowing the seller to purchase a home before the revenue from the sale of their previous home is available).

Dosh Business Model

Dosh is a Fintech platform that enables automatic cash backs for consumers. Its business model connects major card providers with online and offline local businesses to develop automatic cash back programs. The company makes money by earning an affiliate commission on each eligible sale from consumers.

E-Trade Business Model

E-Trade is a trading platform allowing investors to trade common and preferred stocks, exchange-traded funds (ETFs), options, bonds, mutual funds, and futures contracts; acquired by Morgan Stanley in 2020 for $13 billion. E-Trade makes money through interest income, order flow, margin interests, options, future and bonds trading, and other fees and service charges.

Klarna Business Model

Klarna is a financial technology company allowing consumers to shop with a temporary Visa card. Thus it then performs a soft credit check and pays the merchant. Klarna makes money by charging merchants. Klarna also earns a percentage of interchange fees as a commission and for interests earned on customers’ accounts.

Lemonade Business Model

Lemonade is an insurance tech company using behavioral economics and artificial intelligence to process claims efficiently. The company leverages technology to streamline onboarding customers while also applying a financial model to reduce conflicts of interest with customers (perhaps by donating the variable premiums to charity). The company makes money by selling its core insurance products, and via its tech platform, it tries to enhance its sales.

NerdWallet Business Model

NerdWallet is an online platform providing tools and tips on all matters related to personal finance. The company gained traction as a simple web application comparing credit cards. NerdWallet makes money via affiliate commissions determined according to the affiliate agreements.

Robinhood Business Model

Robinhood is an app that helps to invest in stocks, ETFs, options, and cryptocurrencies, all commission-free. Robinhood earns money by offering: Robinhood Gold, a margin trading service, which starts at $6 a month, earns interests from customer cash and stocks, and rebates from market makers and trading venues.

SoFi Business Model

SoFi is an online lending platform that provides affordable education loans to students, and it expanded into financial services, including loans, credit cards, investment services, and insurance. It makes money primarily via payment processing fees and loan securitization.

Stash Business Model

Stash is a FinTech platform offering a suite of financial tools for young investors, personalized investment advice, and life insurance. The company primarily makes money via subscriptions, cashback, payment for order flows, and interest for cash sitting on members’ accounts.

Wealthfront Business Model

Wealthfront is an automated Fintech investment platform providing investment, retirement, and cash management products to retail investors, mostly making money on the annual 0.25% advisory fee the company charges for assets under management. It also makes money via a line of credits and interests on the cash accounts.

Zelle Business Model

Zelle is a peer-to-peer payment network that indirectly benefits the banks’ consortium that backs it. Zelle also enables users to pay businesses for goods and services free for users. Merchants pay a 1% fee to Visa or Mastercard, who share it with the bank that issued the card.

Read Next: Fintech Business Models, IaaS, PaaS, SaaSEnterprise AI Business ModelCloud Business Models.

Main Free Guides:

Scroll to Top