Stash debuts its own core system

Stash, a banking and investing app, is charting new territory for itself by building a proprietary core.

The New York City company, which offers brokerage accounts, retirement accounts, robo advice and banking services through two different subscription plans, announced on Wednesday that it had built and launched Stash Core. At the same time, Stash also announced several new fintech partnerships. It also said a patent for its Stock-Back debit card, which earns rewards in the form of stock of companies from which the customer is making purchases, was approved.

"Stash Core gives us flexibility and ownership of every customer touchpoint," Stash co-founder and CEO Brandon Krieg said in a press release. 

Stash's move is uncommon in the world of neobanks. Current is one other example of a challenger bank that built its own core. One, the neobank founded by Bill Harris, is another. 

"The advantage in building your own core is that you have a lot more control, so you can more easily support the launch of new products or features that may fall outside of what a standard core system can support," said Alex Johnson, author of the Fintech Takes newsletter. One example is when a fintech offers subaccounts, such as for teen banking or couples banking. "While it costs more upfront to build your own core, you realize cost savings on the back end because you're not paying a third party to provide the system."

A post on the Stash website noted that it undertook this project in 2022. "As we scale and grow, our technology needs to keep pace," reads the post. "We imagined an infrastructure that could serve as a bedrock to allow us to more quickly innovate and introduce new products and services faster to serve our customers and give them the best experience possible."

There is an explosion of options in the core vendor market, said Brad Smith, who leads Cornerstone Advisors' transformation service line. That includes the traditional vendors FIS, Fiserv and Jack Henry; more modularized or unbundled cores, some of which are built for cloud-first environments; and "fintech lite" cores that are customer-facing platforms for digital banks and fintechs that also provide an integration platform across other back-end vendors.

"It's more common for challenger banks to use an existing 'fintech lite' core, but we've seen some build out their own, or even buy them," such as SoFi Technologies' acquisition of Technisys, said Smith.

"Challenger banks do not want to build a traditional core or take on the mandatory, but low-value, responsibilities of traditional cores like tax reporting and regulatory compliance," he added.

The Stash blog said the new technology will help Stash take control of its payment operations. "With Stash Core, Stash now owns the real-time money movement infrastructure," the blog stated. "For example: we read and write actual NACHA files in-house for ACH; we make real-time decisions for debit card authorizations and ATM withdrawals; we actually manage the ledgering of every customer account and general ledger in-house across dozens of processes and files everyday; and we are always the final say for a specific customer's balance and available balance."

As the company developed its own core system, it chose technologies that it felt were fast and easy to learn and already standard in the industry, such as using Go as the primary programming language. It formed "squads" focused on different components of the project that all included employees from product, engineering, design, operations, data science and other teams. It created new roles for site reliability engineers and network operations center technicians to focus on reliability and form remediation policies in the case of outages.

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"Ideally, we want a system where no engineer is on-call … and all failures are either caught before code reaches production or by a very well established process to be run by the NOC," the post said.

Stash's banking services are now provided by the $2.4 billion-asset Stride Bank in Enid, Oklahoma, and the debit card is issued by Mastercard. Previously it was Green Dot Bank and Visa, respectively; Green Dot essentially served as Stash's core platform at this time. Stash is now using application programming interfaces from Marqeta for banking and money movement services, technology from cloud banking company Mambu to power Stash's ledger and identity decisioning services from Alloy to eliminate fraudulent customers and, in the future, rethink its customer requirements. 

The company also extended customer support hours and added more self-service options in the app, such as the ability to raise a dispute. It raised the rewards rate for its Stash+ tier of customers from 0.025% of spend to 1% back in stock on all purchases up to $1,000 each month.

"Before Stash Core was built, we weren't in a position to fully control the experience or scale efficiently as we grew the business," Claudio Esposito, senior vice president of product, said by email. "Now although we have new partnerships, we own the underlying tech stack."

The company said in the press release that it has more than 2 million customers.