When you shop at certain stores with this debit card, you earn fractional shares of that business

By Talib Visram

Only 58% of Americans own stock, and the wealthiest 10% of Americans now own 89% of all stocks—a record high. The disparity tracks along socioeconomic and racial lines, with 89% of adults in households that earn more than $100,000 owning stock, compared to 25% of those earning less than $40,000; and 34% of Black American households own stock, versus 61% of white households.

A new partnership between a traditional bank and a fintech company aims to offer an entry point for economically marginalized and financially undereducated individuals to gain a footing in the stock market. A new debit card gives customers stock rewards in nationwide companies, including Amazon and Starbucks, every time they shop at those retailers. Though the shares earned are fractional, the partners behind the debit card say this is an easy way to earn stock, streamlined into everyday shopping, and could make a dent in the wealth gap.

The partnership is between TAB Bank, a traditional bank based in Ogden, Utah, and Bumped, a fintech company that works with banks and businesses to reward customers with stocks. “Everything ends up being a reiteration of points, miles, cash back,” says Amy Dunn, Bumped’s chief marketing officer, of old-fashioned rewards systems. That’s why they wanted to innovate in stock rewards. Bumped has an API platform that partner brands use for their customer stock-rewards apps—but she says that partnering with banks has an especially large-scale impact for everyday consumers.

When you shop at certain stores with this debit card, you earn fractional shares of that business | DeviceDaily.com

[Photo: Bumped]

The debit card in partnership with TAB launched earlier this month, with 3,000 cards so far out to customers. Applicants open a TAB checking account and receive a corresponding card while simultaneously opening a brokerage account with Bumped, which is required by law to trade shares. Whenever they shop at six mainstream staples—Amazon, Walmart, Disney, McDonald’s, Starbucks, and Chevron—they earn stock in those very companies. With TAB Flow’s free plan, they’d earn 0.5% stock rewards—meaning on a $6 Big Mac Meal at McDonald’s, they get three cents invested in McDonald’s stock. On a $400 TV at Walmart, they’d earn $2 in Walmart stock.

 

If customers choose the subscription option, TAB Flow Plus, at $5 per month, they earn 1% in rewards from those six brands’ stock—as well as 14 others, including Target, Hilton, Delta, Uber, and AT&T. And, when they shop at stores not on this list (or not publicly traded), they still earn 1%, which is distributed evenly between four brands out of 100 options of their choosing, as well as an ETF, essentially a basket of stocks (in this case, the VTI ETF by Vanguard).

Part of the goal is to increase access for the large chunk of the population not currently invested in the stock market, including historically marginalized groups and young people who haven’t received ample financial education. The simplicity is key: the process doesn’t require extra funds to dedicate to investing, instead connecting everyday purchases—like groceries, coffee, and gas, which they’re likely to make anyway—to the act of investing. “It makes investing and earning ownership a part of your daily life,” Dunn says. “You don’t have to research. You don’t have to think too much about it.”

Along the way, the app contains nuggets of financial wisdom aimed to help people improve their financial outlooks, like explanations on how dividends work. According to Bumped’s internal data, the majority of its customers are between ages 30 and 40, and “making do” in life, with account balances between $4,000 and $6,000. (The smallest group of customers is high earners, with balances around $80,000.) Once these customers are more comfortable, they may choose to graduate to the paid plan, to control more of their investing.

“The big thing for us is meeting our customers where they’re at,” says Nick Craven, VP of commercial and consumer banking at TAB. The fact that it’s a debit card is key to that accessibility, as many people they aim to serve may not yet qualify for credit cards. And opening the brokerage account takes less than two minutes, with personal details like a social security number. “It’s pretty miraculous that a customer can get both a brokerage and a checking account in less than five minutes,” Craven says, because the two offerings are controlled by two distinct regulatory bodies.

Michaela Pagel, an associate professor at Columbia Business School, was the coauthor of a 2021 report based on Bumped transaction-level data that found a “causal link between stock ownership and consumption.” Once investing in a certain brand, people keep consuming at that store. The researchers found that weekly shopping at selected brands rose by 40% after people opened brokerage accounts. When granted with stock at companies like Taco Bell and ExxonMobil, their weekly spending at those brands increased by 100%.

Speaking on this particular partnership, Pagel calls it “a good idea in principle,” but she says it may mainly attract those already invested in the stock market, rather than new starters. To that point, John Huntinghouse, TAB’s VP of marketing, says that instead of relying solely on digital marketing to promote the card, which he says has a tendency to run into algorithmic bias, they will employ trusted community influencers to reach out to neglected groups, such as the Polynesian community in the Salt Lake Valley. “Polynesians are typically not only underbanked—they’re just not banked at all,” he says.

Pagel also worries that though the incentive of the stock rewards should drive consumers to shop more, the share sizes are small. Craven counters that while they are fractional, they still accumulate in value: If a company’s share price increases, so does your share, by the same percentage jump. (In other words, if Walmart’s stock rises by 20%, your $2 investment from the TV becomes $2.40.)

What’s more, most Americans don’t have emergency savings. And Craven says that the usual bank reward alternatives, like deposit interest rates, end up being meager. “When people don’t have a lot of deposits, you can pay them as much as you want in interest, and it’s not going to be meaningful to them,” he says. “It’s going to be cents and pennies.”

But when they’re earning on what they’re already spending, “Now they’re getting rewarded on where they’re at in their life, and it starts building up from there,” he says.

Fast Company , Read Full Story

(10)