TAB Flow debit card gives you inventory for shopping at McDonald’s, Amazo

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

A new partnership between a traditional bank and a fintech company aims to provide an entry point for economically marginalized and financially undereducated people to gain a foothold in the stock market. A new debit card offers customers stock rewards in national companies, including Amazon and Starbucks, every time they shop at those retailers. Although the shares earned are fractional, the partners behind the debit card say it’s an easy way to earn shares, streamlined in day-to-day purchases and could close 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 stock. “Everything ends up being a repeat of points, miles, cash back,” says Amy Dunn, marketing director of Bumped, old-school rewards systems. That’s why they wanted to innovate in equity rewards. Bumped has an API platform that partner brands use for their customer stock reward apps, but it says partnering with banks has a particularly big impact for everyday consumers.

[Photo: Bumped]

The debit card in partnership with TAB was launched earlier this month, with 3,000 cards so far distributed to customers. Applicants open a TAB checking account and receive a matching card while simultaneously opening a brokerage account with Bumped, which is required by law to trade stocks. Every time they shop at six core stores — Amazon, Walmart, Disney, McDonald’s, Starbucks, and Chevron — they earn shares in those same companies. With TAB Flow’s free plan, they would earn 0.5% stock rewards, which means that on a $6 Big Mac meal at McDonald’s, they would get three cents invested in McDonald’s stock. On a $400 TV at Walmart, they would earn $2 in Walmart stock.

If customers choose the subscription option, TAB Flow Plus, at $5 per month, they earn 1% rewards on stock from these six brands, plus 14 others, including Target, Hilton, Delta, Uber and AT&T. And, when they buy from stores that aren’t on this list (or aren’t publicly traded), they still earn 1%, which is split evenly between four brands out of 100 options of their choice, plus an ETF, essentially a basket of stocks. (in this case, Vanguard’s VTI ETF).

Part of the goal is to increase access for the large portion of the population not currently invested in the stock market, including historically marginalized groups and young people who have not received a financial education. sufficient. Simplicity is key: the process doesn’t require extra funds to spend on investing, but instead connects everyday purchases – like groceries, coffee, and gas, which they’re likely to do anyway – the act of investing. “It makes investing and owning an integral part of your daily life,” says Dunn. “You don’t need to do any research. You don’t have to think about it too much. »

Along the way, the app contains nuggets of financial wisdom aimed at helping people improve their financial outlook., as explanations of how dividends work. According to internal data from Bumped, the majority of its customers are in their 30s and 40s and “doing it right” in life, with account balances between $4,000 and $6,000. (The smallest group of customers are high earners, with balances around $80,000.) Once these customers are more comfortable, they can choose to upgrade to the paid plan, for more control over their investments. .

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

Michaela Pagel, an associate professor at Columbia Business School, was the co-author of a 2021 report based on Bumped transaction-level data that found a “causal link between stock ownership and consumption.” Once they have invested in a certain brand, people continue to shop at that store. Researchers found that weekly purchases at certain brands increased by 40% after opening brokerage accounts. When they got shares in companies like Taco Bell and ExxonMobil, their weekly spend in those brands increased by 100%.

Speaking about this particular partnership, Pagel calls it “a good idea in principle”, but she says it can mainly attract those who have already invested in the stock market, rather than new entrants. At this point, John Huntinghouse, TAB’s vice president of marketing, says that instead of relying solely on digital marketing to promote the card, which he says tends to run into algorithmic bias, they employ trusted community influencers to reach underserved groups. , such as the Polynesian community of the Salt Lake Valley. “Polynesians are generally not just underbanked, they’re just not banked at all,” he says.

Pagel also worries that while the incentive of stock rewards should entice consumers to buy more, the stock size is small. Craven counters that even though they are fractional, they still accumulate value: if a company’s stock price goes up, your stock goes up too, by the same percentage. (In other words, if Walmart shares rise 20%, your $2 investment from the TV becomes $2.40.)

Plus, most Americans don’t have emergency savings. And Craven says the usual bank reward alternatives, like interest rates on deposits, 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 won’t make sense 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 rewarded based on where they are in life, and it starts to add up from there,” he says.

Comments are closed.