How Does Stash Make Money?

Stash is a FinTech platform offering a suite of financial tools for young investors, coupled with 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.

Aspect	Description
Subscription Plans	Stash offers subscription plans that provide users with access to a range of premium features and benefits. These subscription plans are typically offered on a monthly basis, and users can choose from different tiers, each with its own set of features. The subscription fees constitute a significant source of revenue for Stash. These premium features may include personalized investment advice, access to financial education content, and additional investment options.
Investment Fees	Stash provides users with the opportunity to invest in various exchange-traded funds (ETFs) and individual stocks. While Stash aims to make investing accessible and affordable, it charges investment fees on users’ investment portfolios. These fees can include expense ratios associated with the underlying ETFs and any additional management fees imposed by Stash. The fees are typically calculated as a percentage of the user’s invested assets and contribute to the company’s revenue.
Banking Services	Stash offers banking services through its Stash Banking feature. This includes a Stash debit card, a checking account, and savings tools. While Stash promotes itself as a user-friendly banking platform with no hidden fees, it may generate revenue through interchange fees charged to merchants when users make purchases using their Stash debit card. Additionally, Stash may earn interest income on user deposits held in the Stash banking account.
Stock-Back Rewards	Stash offers a unique feature called Stock-Back Rewards, where users earn fractional shares of stock in select companies as rewards for making purchases with their Stash debit card at certain merchants. Stash may generate revenue through partnerships with these merchants, receiving a portion of the fees paid by merchants for participating in the Stock-Back Rewards program. This can serve as a source of income for Stash.
Stash Learn	Stash provides a platform called Stash Learn that offers educational content on various financial topics. While this content is typically available for free, Stash may monetize it through partnerships and sponsorships. Companies or financial institutions may pay Stash to feature their products or services within the educational content. This can result in advertising or promotional revenue for Stash.
Challenges and Competition	Stash faces challenges related to competition in the crowded fintech and robo-advisory space. The company must continually differentiate itself by offering unique features, providing a seamless user experience, and keeping fees competitive. Ensuring regulatory compliance and addressing user concerns related to security and data privacy are also ongoing challenges.
Future Growth Strategies	Stash’s future growth strategies may involve: – Product Expansion: Introducing new financial products and services to cater to a broader user base. – Enhanced User Engagement: Fostering user engagement through improved financial education and personalized offerings. – Sustainable Investing: Expanding its range of sustainable and socially responsible investment options.

Table of Contents

Background

Stash is an American financial technology company founded by Brandon Krieg, David Ronick, and Ed Robinson in 2015.

The platform offers a suite of financial tools aimed squarely at young investors to encourage them to spend, save, and invest wisely.

To that end, Stash offers personalized investment advice and a life insurance option. For those with children, there is also the capacity to set up a custodial account.

Stash is an integrated product. When a consumer purchases with a Stash debit card, they receive Stock-Back® rewards in return. This allows them to invest in fractional shares or exchange-traded funds (ETFs).

Stash revenue generation

To drive revenue, Stash offers investment, banking, and retirement services via the subscription model. The company also makes money from referral fees and any returns Stash account holders make on their investments.

Let’s take a look at the mechanisms for revenue generation in more detail.

Subscriptions

Consumers can sign up for one of three subscription plans: Stash Beginner, Stash Growth, and Stash+. Each plan offers varying degrees of personalized investment or retirement advice.

The premium plan, Stash+, incorporates the Stock-Back® rewards system.

In 2020, Stash removed asset-based pricing on its plans. It now charges users a flat fee for each plan irrespective of the amount of capital invested.

However, the company does charge an investment management fee of 0.16% for non-thematic funds and 0.25% for all other funds.

There is also a $75 fee for an outgoing transfer.

Cashback scheme

When a consumer uses their Stash card to buy from a participating merchant, a percentage of the purchase price is invested in that merchant’s stock.

With every eligible transaction, Stash collects a fee for connecting the buyer with the seller.

Payment for order flow (PFOF)

When an investor using the Stash platform places a stock order, it is then sent to a market maker who compensates Stash for bringing in deal flow.

PFOF processing is a somewhat controversial practice, so the exact compensation amount is not public knowledge.

Interests

Stash also makes use of the cash sitting in member accounts by lending it out to other institutions.

In return, the company collects interest from these institutions – otherwise known as net interest margin (NIM).

Again, the exact compensation Stash receive is unclear. But according to research agency Statista, the net interest margin for all U.S. banks was 3.35% in 2019.

Value Proposition:

Accessible Investing: Stash offers an easy-to-use platform that enables individuals to start investing with as little as $5. It aims to make investing accessible to everyone, including beginners and those with limited financial resources, by providing user-friendly tools, educational resources, and personalized guidance.
Diverse Investment Options: Stash provides a wide range of investment options, including stocks, exchange-traded funds (ETFs), and themed investment portfolios (known as “Stash Invest”), allowing users to build diversified investment portfolios aligned with their financial goals and interests.
Financial Education: Stash offers educational content and resources to empower users with financial knowledge and literacy. Through articles, tutorials, and investment guides, Stash helps users understand basic investing concepts, develop sound financial habits, and make informed investment decisions.
Customization and Personalization: Stash offers personalized investment recommendations and portfolio suggestions based on users’ financial goals, risk tolerance, and investment preferences. Its platform enables users to customize their investment portfolios, track their progress, and adjust their investments over time.

Marketing Strategy:

Digital Marketing: Stash utilizes digital marketing channels, including social media advertising, search engine marketing (SEM), email marketing, and display advertising, to reach and engage potential users. It targets audiences interested in personal finance, investing, and financial literacy to drive user acquisition and subscription sign-ups.
Content Marketing: Stash produces educational content and resources, such as blog articles, infographics, videos, and webinars, to educate users about investing and personal finance topics. By providing valuable content, Stash attracts and retains users, establishes thought leadership, and builds brand trust and credibility.
Referral Program: Stash incentivizes user referrals through its referral program, offering rewards or bonuses to users who refer friends and family members to join Stash. This word-of-mouth marketing strategy helps Stash expand its user base through existing users’ networks and encourages user engagement and loyalty.
Partnerships and Collaborations: Stash may partner with other companies, brands, or influencers in the financial industry to extend its reach, enhance its brand visibility, and attract new users. Partnerships may involve co-marketing initiatives, affiliate marketing programs, or integrations with complementary products and services.

Distribution Channels:

Mobile App: Stash primarily distributes its services through its mobile app, available for download on iOS and Android devices. The Stash app serves as the primary interface for users to sign up, manage their accounts, make investments, access educational content, and track their investment portfolios.
Website: Stash also provides a website (stash.com) where users can learn about its services, explore investment options, and sign up for accounts. While the website serves as a supplementary distribution channel, the mobile app remains the primary platform for user engagement and interaction.
App Stores: Stash distributes its mobile app through app stores, such as the Apple App Store and Google Play Store, making it accessible to users worldwide. App store listings provide visibility and reach to potential users searching for financial and investment apps.
Referral Program: Stash leverages its referral program as a distribution channel, encouraging existing users to refer friends and family members to join Stash. Referrals drive user acquisition and account sign-ups, expanding Stash’s user base and increasing its market reach through word-of-mouth recommendations.

Key takeaways:

Stash is an American financial technology company with a focus on improving the financial literacy of young investors.
Stash derives the majority of its revenue from a subscription-based model comprising three, tiered plans. Each offers varying access to personalized advice and added features. In 2020, the company switched to a flat fee plan structure instead of taking a percentage of the total amount of capital invested.
Stash also makes money from the somewhat controversial practice of order flow payment where a financial institution acts as a broker for the customer. The company also takes a percentage of eligible transactions as a commission under the Stash rewards scheme.

Key Highlights:

Overview: Stash is a FinTech platform founded in 2015, offering a suite of financial tools for young investors, including personalized investment advice and life insurance. The company primarily generates revenue through subscriptions, cashback, payment for order flows, and interest earned on cash sitting in members’ accounts.
Subscription Plans: Stash offers subscription plans with varying tiers, providing users access to premium features such as personalized investment advice, financial education content, and additional investment options. These subscription fees constitute a significant source of revenue for Stash.
Investment Fees: Stash charges investment fees on users’ investment portfolios, including expense ratios associated with underlying ETFs and any additional management fees. These fees are typically calculated as a percentage of the user’s invested assets and contribute to the company’s revenue.
Banking Services: Stash offers banking services through Stash Banking, including a debit card, checking account, and savings tools. While promoting itself as a user-friendly banking platform with no hidden fees, Stash may generate revenue through interchange fees charged to merchants and interest income on user deposits.
Stock-Back Rewards: Stash offers Stock-Back Rewards, where users earn fractional shares of stock in select companies as rewards for purchases made with their Stash debit card. Stash may generate revenue through partnerships with merchants participating in the Stock-Back Rewards program.
Stash Learn: Stash provides educational content through Stash Learn, monetizing it through partnerships and sponsorships with companies or financial institutions featured within the educational content, resulting in advertising or promotional revenue for Stash.
Challenges and Competition: Stash faces challenges related to competition in the crowded FinTech and robo-advisory space. The company must differentiate itself by offering unique features, providing a seamless user experience, and keeping fees competitive. Regulatory compliance and addressing user concerns related to security and data privacy are ongoing challenges.
Future Growth Strategies: Stash’s future growth strategies may involve product expansion, enhanced user engagement through improved financial education and personalized offerings, and the expansion of sustainable and socially responsible investment options.