Data

With Acorns deal, PayPal turns into a bank

  • PayPal is bringing investment services to its underbanked customers and letting them manage their money movement and investment activity entirely from within PayPal
  • The agreement will bring more data points for PayPal, who will be able to read consumers' investment monitoring and transferring activity, while continuing its mission to serve the underserved
With Acorns deal, PayPal turns into a bank

PayPal is introducing its customers to investing.

The third-party payments giant now allows its customers to set up and use Acorns, the micro-investing app that lets users invest “spare change” into one of five low-cost ETF portfolios, within PayPal — both online and in the mobile app.

PayPal has 16 million merchant accounts and 203 million consumer accounts. To date it takes deposits, offers reloadable debit cards and has consumer credit and small business loan offerings, though it just sold its consumer credit business to Synchrony Financial; it owns the popular Zelle-rival Venmo and is growing its own PayPal mobile offerings; and it’s extending its reach into brick-and-mortar through mobile wallets and through recent collaborations with Visa and Mastercard — it’s even bringing Venmo to in-store merchants.

Add a wealth management offering to its non-payments financial services offerings. PayPal, the biggest U.S. non-bank financial services provider, has practically become a bank — and it’s executed every move on its mantra of bringing financial services to the underserved, a demographic of little interest to its larger financial services peers. Now, it’s customers with small deposit accounts who, in some cases, probably aren’t able to access investment services because small account holders are generally seen as too expensive for traditional financial firms to service will be able to invest their funds into an ETF via PayPal.

“It’s been clear for a while that PayPal has a vision to democratize financial services,” PayPal told Tearsheet earlier this year. “A lot of this stuff we’re doing specifically to hit the underserved.”

That’s why while startups like Wealthfront and Betterment are probably more interested in competing with legacy firms like Vanguard and Charles Schwab, partnering with Acorns helps PayPal execute on its mission, providing a previously exclusive financial services offering to the underbanked population PayPal has been targeting so aggressively.

GoToWebinar 005

Acorns attracts a lower-income part of the market but beats other robos at scale. It manages $528 million, as of this September, and 2.4 million accounts. Other digital investment companies have fewer users with significantly larger accounts: Wealthfront has $8.2 billion in assets under management and 194,000 accounts as of October, and Betterment manages $10 billion in assets and 353,000 accounts, according to recent SEC filings.

The average minimum deposit required to work with traditional wealth management firms is $50,000, according to CB Insights.

On top of having better scale, trading frequency is significantly higher at the micro-investing level than it is for the higher net worth investor. Acorns is set to have done a billion trades by the end of 2017, according to Lindsay Davis, an analyst at CB Insights, which would be about 17 times Fidelity’s trading volume.

Acorns also has both merchant and consumer partnerships that PayPal can bring into its network. Today more than 150 big-name consumer brands like Nike, Apple and Expedia are part of Acorns’ Found Money program, which allows users to automatically “round up” the amount of a purchase when shopping with certain merchants and invest the difference.

PayPal, which led Acorns’ $30 million funding round last year, began its rollout of the service today and plans to complete it by early 2018, at which point PayPal will have yet another feature to monitor customer data and behaviors: checking Acorns account value, monitor investment contributions and managing recurring and one-time transfers to Acorns. PayPal already has one of the most aggressive partnership strategies, using its more than 22 partner agreements with the biggest banks and tech companies to bring more customers into its consumer network à la Alipay.

Data

Plaid adds credit card data to Liabilities product

  • Earlier this summer, Plaid launched Liabilities to help technology firms tackle student loans.
  • Now, the data firm is back with coverage of credit card data.
Zoe Murphy | September 18, 2019
Data

Dozens of industry influencers, executives, and thought leaders to participate in Digital Banking Week

  • Digital Banking Week is the first of its kind online event.
  • Tearsheet has published a preview guide for participants to prepare for all the sessions.
Michael Deleon | September 12, 2019
Data, Podcasts

Plaid’s Lowell Putnam: ‘Liabilities gives student lenders access to a whole new set of data points’

  • Fintech activity is heating up to address the student debt crisis in the U.S.
  • Plaid's new product gives needed data points to players in this market.
Zack Miller | August 26, 2019
Data, Podcasts

FDX’s Don Cardinal: ‘Standards lower the barrier to financial innovation’

  • FDX is the leading standards group around sharing financial data.
  • Managing director Don Cardinal explains what the industry is doing around securing and sharing information.
Zack Miller | August 14, 2019
Data, Podcasts

Equifax’s Bill Phelan: ‘With PayNet, we now cover 30M US businesses and about $4 trillion of capital’

  • PayNet is one of the largest sources of data on private businesses in the US.
  • Founder Bill Phelan talks about his merger with Equifax and where the combined entity is headed.
Michael Deleon | August 02, 2019
More Articles