A surprising trend is developing among financial technology companies. Increasingly, popular smartphone financial apps like Acorns®, SoFi, and Venmo are offering physical payment cards, in a bid to both increase customer wallet share and capture additional income. This shift toward the tangible realm is the result of several dovetailing factors impacting the payment sector.
As with many stories, this one begins with millennials, who have led a recent resurgence in debit card usage. According to a 2017 Boston Fed study, debit cards account for 32 percent of payment transactions by US consumers over 18 years of age, ahead of both cash (27 percent) and credit cards (23 percent). Having watched their parents struggle through the financial crisis under mountains of debt, younger consumers are fearful of making the same mistakes. They see debit cards as a convenient way to manage spending without accumulating high-interest credit card balances.
Moreover, according to CB Insights, 73 percent of fintech customers aged 18 to 34 are open to trying new products and services from a fintech firm they already use, as compared with 60 percent across all age groups in the US.
The fintechs have taken notice. As digital wallets like Apple Pay wane in popularity (the percentage of consumers planning to use wallets grew by only two percent between December 2014 and September 2017, firms like SoFi, Venmo, PayPal, Square, and Acorns have individually partnered with community banks to release their own physical debit cards. Square was among the first movers, introducing its Cash Card in mid-2017. By June 2018, Square’s debit card was generating $3 billion in spend, a tripling in volume in just six months.The physical cards feature slick designs and innovative materials and allow cardholders to easily access their money via ATMs, brick-and-mortar retailers, and e-commerce sites across the country. They also allow fintechs the opportunity to extend their brand promise, control a larger slice of the customer relationship, and earn interchange income.
When Acorns announced its debit card offering in mid-2018, the micro-investing app’s loyal users were abuzz with excitement. Acorns’ debit card is bright green and features the company’s iconic acorn logo and oak tree design in a portrait orientation. Made with tungsten, the card is heavier than many metal cards currently on the market, offering users a satisfying “plunk” at the checkout counter. Reportedly, the firm had accepted over 35,000 pre-orders before the card began shipping in early December.
Clearly, this is a trend worth watching.
“Acorns" is a registered trademarks of Acorns Grow, Inc.
Written by: Jack Jania, VP of Product Management and Innovation for Secure Cards at CPI Card Group.