The line between banks and brokerages is blurring.
Investing apps and e-brokerages such as Acorns,
TAB Bank in Ogden, Utah, is capitalizing on this trend in a different way.
TAB, whose full name Transportation Alliance Bank reflects its original audience of truck drivers who conducted their banking on the road, has broadened over the years to become a more general consumer and small-business digital bank. On Wednesday it announced two new checking accounts, TAB Flow and TAB Flow+, that use application programming interfaces from investing startup Bumped Financial to reward customers for certain debit card purchases with fractional shares of the companies from which they purchased.
This type of reward is less risky and arguably more consumer-friendly than other forms of investing, because the investments are funded by cash back from everyday spending, not pulled from a customer’s savings. Because they receive rewards through a debit card, customers may be more inclined to move this card to the top of their wallets, a goal for most banks and challenger banks.
“Stock ownership, when you look at behavioral science, triggers more engagement than just checking your account or mobile banking app,” said Curt Queyrouze, CEO and president of TAB Bank.
The ability to accumulate a chunk of savings through fractional investing, combined with other personal finance tools, could help customers feel financially healthier and engender long-term loyalty and stronger primary relationships. TAB will also market to Bumped’s existing direct-to-consumer base.
This sense of ownership may also lead to higher debit card usage. A 2020 study from the Columbia School of Business about the impact of stock ownership on individual spending used data from Bumped. It found weekly spending at selected brands increases by 40% once users receive their brokerage accounts.
It could also help new investors get into the market for the first time.
“When a consumer gets a latte from Starbucks, that might be the first time they experience drinking a latte from a coffee shop they own,” said David Nelsen, CEO and founder of Bumped.
TAB Bank, which has $1.2 billion of assets, is Bumped’s first FDIC-insured bank client to go live with fractional stock rewards. Bumped introduced an API suite for financial services last July. A few fintechs offer a form of investing rewards as well: Stash customers, for example, get a percentage of their purchases back in stock at eligible retailers for a tiered subscription fee and at a rate of 0.125% stock on everyday purchases or up to 5% at certain merchants with bonuses. Acorns customers can earn bonus investments when they activate offers at eligible retailers. Moves Financial, an app for gig workers to manage their money, is another Bumped client; contracts with three other traditional banks are in the works. Investment adviser Save Advisers provides debit and credit cards with investment rewards.
But TAB Bank appears to be the first chartered bank to do the same. TAB built middleware and an API stack several years ago to onboard and quickly integrate technology used by fintechs. It has a dedicated compliance team that focuses on fintech partnerships. Bumped acts as TAB’s brokerage for its new Flow accounts behind the scenes.
With the basic version of the Flow account, customers who shop at Amazon, Chevron, Disney, McDonald’s, Starbucks or Walmart will earn 0.5% back in fractional shares at those companies. Bumped and TAB looked at customer behavior data to figure out which retailers would appeal to TAB’s customers. Flow+ users get 1% back in fractional shares on all purchases made at 20 publicly traded retailers, including the six available to Flow customers, in the form of that company’s stock. For all other purchases, they can receive 1% of their purchase in fractional shares from a merchant they choose from a broader list of around 100 publicly traded companies. They also get a suite of financial health tools such as the FinStrong financial health score from MX Technologies, which measures a person’s financial health based on spending, saving and borrowing habits.
There are no fees to maintain a basic Flow account, to sell shares, or for investment management. Customers can sell shares and collect their earnings at any time, even if those earnings amount to a few cents.
“A lot of our partnerships are focused on, what would be a differentiator and what would help consumers participate in better financial health?” Queyrouze said.
