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But, notably, it’s not just startups that started off life looking to build a neo bank who are building out banking-like services. In fact, so many startups are racing to offer banking tools that an had to be amended to break the examples into several sections for the sake of bucketing and clarity.

In the coming weeks, we’ll explore more deeply why the startup banking gold-rush is under way. Today we’ll lay out the players and talk over the broad strokes of what’s going on.

Recent News

News broke earlier this month that , a well-known startup that we’ve covered before, is in the process of raising new capital at what a “valuation north of $5 billion.” The news wasn’t too surprising. Chime has been on a tear lately, raising this March, the preceding May.

A quarter-billion of venture capital in under a year isn’t enough for Chime, which appears ready to take on more capital. It’s a leading company in the neo banking rush, which, suddenly, is looking more and more like a crowded race as participants of all sorts join the fray.

Chime’s success in terms of fundraising and valuation growth is a good indicator that it’s doing something that investors covet. And as private investors value growth above all else, it’s easy to guess that revenue expansion is what Chime is delivering.

Interchange, Part One

The sheer number of startup players moving into banking services is staggering. (You can see the players from this piece in a list .)

Crunchbase News was tipped off about the boom last year when covering , a company that was initially focused on providing a savings service to users. Acorns moved into the banking space , and at the same time, was hunting a $100 million round at a valuation of $700 million move, which we wrote about, too.

When we caught up with Acorns, CEO cited the firm’s debit card as a revenue source. And that brings us to interchange, a key method by which companies in the space make money.

Skipping all the technical talk, interchange fees effectively allow companies like Acorns and Chime to charge a small fee when one of their customers uses one of their debit cards. This makes offering a debit card (and constituent accounts) an attractive offering.

Of course, banks make a ton of money off interest rate spreads. But the quick and regular influx of revenue from interchange has helped attract outsized interest in becoming a bank. In short, lots of startups that started somewhere else in the world of finance have slowly come to circle more traditional banking services as a way to add growth to their businesses.

After all, why not expand into something that seems like a sure win?

Consumer Debit

The Acorns example is canonical in some ways, but also nearly too simple; the startup was already focused on a savings product, adding a way for its users to spend some of their money wasn’t a hugely surprising move.

It also wasn’t shocking that and , two early leaders in the robo-advising space are also launching checking and debit services. Wealthfront announced a high-yield savings account and promised a debit card later this year. Betterment also put together banking accounts and debit cards for its users .

But moving into checking-styled accounts was a bit more of a stretch. The well-funded startup has launched cash management accounts .

, the popular consumer-to-consumer money-transfer service? It .

There are even more exotic examples. , a unicorn best known for student loan debt refinancing and its , earlier this year, a “new, hybrid account” that includes “debit card functionality” among other things.

Then there’s Uber, . The group is working on an Uber debit card for drivers to manage real-time earnings and track spending and a re-launched Uber credit card for riders to gain points and rewards. The team will also roll out a digital wallet and connected bank accounts in the coming year, per a blog post from the company.

Interchange, Part Two

Let’s return to the engine powering all the news we just summarized, namely interchange revenue.

The that Chime made money off debit card interchange fees in 2018, saying that the company generates revenue “by collecting a fee from Visa every time its customers use [its] debit card to make a payment.” CNBC Betterment was going to “profit off of part of the interchange fee charged when you swipe a debit card” in 2019. TechCrunch Robinhood’s debit card earlier this month, noting that the firm “earns money by taking a chunk of the interchange fees from transactions on its debit card.”

You get the picture. But there’s even more activity than merely the consumer-oriented banking boom.

Corporate Revenue

Oftentimes, it’s hard for startups, innately risky and volatile, to get a traditional bank to give them a loan. They just don’t fit the bill. So, naturally, a slew of startups are rising to help with this pain point and become banks and check-writers as a result.

Let’s start with the billboard in the room, Brex. The startup created a charge card for startups that otherwise wouldn’t get money through traditional lending

Most recently, the San Francisco company has created a new offering to compete with traditional banks: cash. Brex Cash was created to minimize the expense and time of wiring money through a traditional bank. Intelligently, this is tapping into startups that its original Brex Card wouldn’t fit well, namely small businesses that need to meet invoice charges, unexpected purchases, and salaries.

The last time we caught up with Henrique Dubugras, a co-founder of Brex, he said the company is looking to be a bank account replacement.

He also pointed to an anecdote: was able to grab money from Brex when it was only four people and at a seed round. Now it’s a unicorn, surpassing $1 billion in valuation. (Brex itself is valued at $2.6 billion.)

Let’s get back to listing examples. Beyond and before come and . Stripe is best known for its work providing payment technology to digital companies. Square is best known for its work providing payment technology to IRL companies.

Each, however, are adding banking services to their product mix. Stripe, after adding lending services, is . Square, in contrast, is .

Of course, it’s not all interchange in the corporate world. Stripe and Square both offer lending and so forth. But it seems reasonably clear that the bug that has bitten the consumer-focused fintech and fin-services world has bitten its corporate-focused analog as well.

More To Come

We need to look more into the mechanics of the debit card boom, because like all booms, it will eventually oversaturate and lead to consolidation. But for now, it’s all systems go on becoming a bank.

It’s odd, though. Back in 2017, we bet folks would have expected crypto to have taken over this market by now.

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as a trading platform was predicated on of low-cost services and mobile accessibility. Offering free trades on the go, Robinhood became a popular hub for to get into buying and selling equities for less.

Rounds and rounds of capital later (Robinhood has ), the company’s model, proven out by swelling usage numbers, is attracting copycats. As we reported a few weeks back, traditional online brokerages have begun swinging towards Robinhood’s most-famous price by offering zero-cost trades.

Robinhood showed the market that customers were ready to stop overpaying for equity trades. But now that Robinhood has shamed incumbents into following suit, what’s next for the company?

Now What?

Robinhood has changed its market, yes, but in the process has seen one of its key advantages diluted by larger trading companies following suit. The scale of the copying is now pandemic. Here’s (condensed and reformatted by Crunchbase News):

Fidelity announced Thursday that it will no longer charge customers to trade US stocks, [ETFs] or options. The company […] joins a growing list of brokers that have slashed online trading fees in quick succession. Charles Schwab last week eliminated commissions for trading stocks [while] TD Ameritrade and E-Trade have also ditched commissions.

So much for low-cost trades setting Robinhood apart.

Robinhood’s mobile app could remain an advantage, but certainly its pricing scheme is no longer going to direct as many users through the door as it once did. Could the changed reality of the market that the unicorn is competing inside of slow Robinhood’s growth, and thus curtail its future fundraising ability?

Perhaps, though the company is well-capitalized. DST Global led Robinhood’s $110 million 2017 Series C. And its $363 million 2018 Series D. And its $323 million 2019 Series E. Surely Robinhood has a chunk of that money left over. But past having cash-on-hand, the trendy unicorn has something else up its sleeve.

Banking

It would be too easy to say that the increasingly competitive, zero-fee trading landscape is very worrisome for Robinhood if the company didn’t have other products that could pick up slack in its growth figures.

You recall that Robinhood has crypto trading (notably crypto competitor Coinbase recently  to ). However, Robinhood has also moved, yet again, into banking services.

Here’s , announced earlier in the week:

This time it actually has insurance. Zero-fee stock-trading app Robinhood is launching Cash Management, a new feature that earns users 2.05% APY interest on uninvested money in their account with the ability to spend it through a special Mastercard debit card.

Crunchbase News has learned that Robinhood has more than 300,000 people on the waitlist for the feature.

Moving into banking is something of a regular step in 2019 for companies that work with money in some capacity. SoFi moved into the cash-and-debit market earlier this year with an offering which it called “a new, hybrid account offering high-yield interest” after starting out with student loan services. Acorns added a debit card after starting in savings accounts and easy investing. Chime started off as a bank, but also features the usual debit card service. ( that Chime is raising new money at a new, higher $5 billion valuation.)

Competition

Why is every service getting a debit card into the hands of its users? In 2014, back when Chime raised its $18 million Series B, TechCrunch reported that the company “earns about 1.5 percent in fees per transaction” that went through its debit card.

So Robinhood has a second and third act underway while its former rivals match its low-cost equity trades. But will crypto trading and banking move the needle when each category has a host of well-funded competition?

The funding point isn’t an exaggeration. , a crypto trading competitor, has in known capital to date from investors like , , and . Chime has in known capital to date, including money from , , , and, notably, DST Global. Acorns, completing our point, has raised $207 million, including raising from and .

There are two stories here, then. First, that Robinhood attacked a market with radically low pricing (thanks to the power of software), drawing blood early and forcing change from competitors after it had racked up a substantial user base. However, Robinhood’s second act could prove tricky given the number of players in the cash-and-debit-card game.

In a nearly ironic sense, then, Robinhood’s runaway success growing its market footprint with free trades worked so well that its competitors broke out the copy machines. Now Robinhood has to craft a more diversified growth path, but where there’s more competition and it’s not the first mover.

We’ll see!

Illustration: .

News broke this morning that will reduce its commissions . As while reporting the news this morning, the move is part of a trend that has also seen and reduce trading fees.

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Shares of Schwab competitors and Schwab itself are down today. This, of course, brings up Robinhood and its platform that charges end-users nothing to trade stocks.

The genius of early product work was that it took something that could be priced nigh-zero in a digital world (trading) and set its actual price near the marginal cost of the transaction. By excising the margin, the then-startup attracted legions of fans, and, afterward, .

According to its most recent funding round, a $323 million Series E in 2019, Robinhood is worth $7.6 billion today. That’s not to say that its road has been smooth. The company ran afoul of effectively everyone when it ; Robinhood has also , something not uncommon for high-growth startups.

All the same, Robinhood’s pitch to consumers that there was no reason to pay $4.99 or $7.99 or $9.99 just to execute an equity trade worked. Throw in the company’s tools like options and margin products, and Robinhood was offering quite a lot for not too much money. Incumbents had to compete, therefore, on price and features.

Robinhood’s launch was an asteroid impact into the fees-for-trades equity world. Schwab’s move today is the first die-off of a dinosaur revenue stream.

Yet Again

Before I torture that analogy further, let’s remind ourselves of when we last touched on the theme of startups impacting incumbents. In early August we wrote that , a publicly-traded banking service, had been repriced by the market by nearly half after it disclosed a diminished future outlook in an earnings report.

Green Dot placed the blame for its smaller revenue and profit expectations on the back of what its CEO described as “so-called neobanks,” the sort of firm like Chime and Acorns that we’ve covered extensively over the years.

In the case of Green Dot, well-funded upstarts were taking parts of the market away. and et al often have a focus on slim fees, and features. In that way they are similar to Robinhood as we’ve seen above; a market that was too comfortable in its pricing found itself under attack from younger competitors unfocused on short-term profitability.

������Ƶ tend to win in these situations, even if they don’t switch providers. Schwab customers just got a fee cut, for example, without having to move to a startup platform. I’ve written skeptically (here, here) about Robinhood’s valuation, yes, but I also want to note that its impact on regular folks has so far been positive at least in one way.

There is excess amidst tech startups and other venture-backed companies. There are silly valuations. There are bad actors. But let’s not forget that sometimes startups do have the ability to disrupt pricing regimes that made no sense. As marginal costs fall, so should prices. And quickly.

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Today that , a neo-bank we’ve covered before, picked up one million new accounts since June. Chime now has five million accounts, and its CEO indicated to the publication that when his company was smaller it took four years to collect one million subscribers—the same feat it accomplished during 2019’s Summer season.

Growth looks quick at Chime, a fintech startup which , led by , in March of this year. The company’s other roughly $100 million in comes from , (a firm I recently interviewed and should write about), , and .

Looking back through the public archives, here are a few milestones regarding Chime’s growth:

• Summer, 2018: 1 million accounts.
• March 2019: (“triple” its tally from “last summer”).
• June 2019: (“quadrupled its customer base to 4 million in a single year”).
• September 2019: 5 million accounts.

Chime was founded in 2013, so you can see the company’s growth has mostly come in the past 12 to 18 months. Those growth figures do come after the firm raised its two largest rounds: its and the previously-mentioned $200 million round from March 2019.

The firm, therefore, had more capital on-hand to help it power its growth figures. We’ve covered both the rise in neo-banking capital infusions, the rising customer acquisition costs in the space, and the impact that the sector’s growth appetite is having on incumbents.

Competition

In the spirit of fairness, I reached out to , which works in similar spaces as Chime (the two don’t like to be compared directly), regarding its account growth history. The company got back to Crunchbase News this evening. We’ve included their new number in the below, which includes numbers found in various media reports:

• December 2016: .
• May 2018: .
• July 2018: .
• November 2018: .
• January 2019: .
• September 2019: 6.2 million accounts.

Plotting both companies’ accounts growth onto the same chart, we get this:

Well-funded startups, to be precise. , a company that provides banking services with a focus on pre-paid cards, saw its share price fall from the upper $40s to the high $20 after reporting its second-quarter earnings.

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What caused the firm to lose such a sharp percent of its worth? Green Dot pointed at competition from one of our most-watched startup categories, the neo-banks.

Downgrades

Green Dot did not disappoint investors by reporting underwhelming . In fact, the company beat on revenue ($278.3 million; GAAP) and earnings per share ($0.90; non-GAAP, diluted).

So what caused the firm to drop so sharply? The future. As :

Shares in the bank known for issuing prepaid debit cards fell 42% to $27.42 on Thursday after it scaled back its revenue and profit outlook for the rest of the year, citing competition from financial-tech startups that offer checking and savings accounts.

How sharp were the changes that led to such a dramatic repricing of Green Dot’s equity, and therefore the company itself? Pretty sharp, as it turns out.

You can read the company’s entire “Updated Outlook” in its earnings report , but the short version goes as follows:

• Full-year non-GAAP revenue of $1.060 billion to $1.080 billion against prior guidance of $1.114 billion to $1.134 billion. (The company employs precise revenue numbers due to the granularity of its growth.)
• Full-year adjusted EBITDA (an adjusted profit metric) of $240 million to $244 million, down from prior guidance of $255 million to $261 million.
• Full-year adjusted earnings per share (EPS) of $2.71 to $2.77, lower than the previously expected $2.82 and $2.91 in per-share adjusted EPS.

So Green Dot expects smaller revenues, lower adjusted profit, and slimmer profit-per-share. Investors reacted by hitting the “sell” button. Let’s return now to who is to blame, from the company’s perspective.

Who Is To Blame?

Companies like , , and others are at fault, it seems. According to the , Green Dot’s CEO said the following:

Several so-called neobanks flush with new rounds of venture capital [are] spending a record amount of marketing dollars to convert customers to their largely free bank account offerings. […] There’s little doubt in our minds that the increased marketing spend from so many competitors in aggregate is taking its toll on our new-customer acquisition.

Astute and regular readers of Crunchbase News should not be surprised at this result.

Continuing our coverage of neo-banks, we noted a slide in Mary Meeker’s Internet trends report showing that, among the startup cohort, customer acquisition costs (CAC) are rising. Why would CAC rise among neo-banking startups? In short because as more companies with more dollars pursue the same sorts of channels to reach the same sort of customers, the cost to acquire a marginal customer increases.

Startups are tasked with growth. So, when a number of startups target the same customers, they are going up against companies with similar charters (fast growth) and bank accounts (venture-backed).

This happens in any category where companies compete. Especially startups. The market has seen, for example, as more companies have been founded, more money invested, and the startups themselves have gone hunting for new signups in similar space.

Your Instagram feed is a good reminder about where some venture dollars go: , , and more. The list and creative marketing campaigns continue.

Regarding neo-banks, recall how much money they have raised in rapid succession. From our coverage from just two months ago:

Money is chasing the [neo-banks]. Chime has raised a , including  earlier this year. Robinhood has , including  last year. SoFi has , including $500 million this year. Acorns has , including .

To summarize, neo-banks are well-financed and in a hurry. Their hunger to buy new users and — hopefully — customers, is leading to more expensive CAC. And that’s dragging incumbent growth rates down.

The question now becomes can any of the wealthy neo-banks do what Green Dot already has: Grow, , and generate profit. (Green Dot had positive net income of nearly $35 million in Q2 2019. That’s more in net income than most neo-banks did in total revenue during Q2 2019, I’d reckon.)

Illustration: .

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Over the past year we’ve kept tabs on companies like , , , and as a trend we call neo-banking grows.

The collection of companies we keep in mind didn’t necessarily start life as banking startups. Indeed, Acorns started off life as a savings app before adding a debit card. Robinhood began life as a company that let you trade stocks for free. Last year it tried to create high-yield savings accounts before messing it up. SoFi was famous early for its work in student loans, now it offers “online and mobile banking” per its website.

Chime has been a neo-bank since I can recall, but as you can tell from the list, there’s a lot of action in the market for your deposits and debit transactions.

Money is chasing the trend. Chime has raised a , including earlier this year. Robinhood has , including last year. SoFi has , including $500 million this year. Acorns has , including .

All that money is going to product and teams and work and offices, of course. But I wonder if a large chunk isn’t also earmarked for customer acquisition (SoFi’s stadium deal fits here, I reckon) costs. And those, we just learned, are rising.

Here’s a chart from (our notes here):

I think that that is pretty easy to read, but here’s what I’m seeing regardless: A rising customer acquisition cost (CAC) for the type of company we’ve been tracking.

This should not surprise. If you give a lot of competing companies a lot of money, they tend to spend it trying to grow faster than their rivals. Incumbency is the ultimate cool in Silicon Valley. And if someone will pay you to buy that status, hey, why not.

As we wrote back when Chime raised its latest round:

Chime CEO  told Crunchbase News that Chime has gone through “explosive, triple-digit growth rates” since its May 2018 Series C. Last year, the startup had about 1 million accounts, and upon announcing this new round, Chime has 3 million bank accounts.

Growth is easy when your channels aren’t saturated. This can give a company a lower-than-reality view of its long-term CAC. But as you raise more, you can eat a higher CAC as you add features and tooling and the like that adds lifetime value to each customer.

But costs still go up. And as Meeker’s chart makes plain, we’re seeing the effects of that now.

Illustration: .

This week news broke that , a savings and banking startup, raised a $105 million Series E. The new capital comes from , , and several private equity firms. Prior investors took part as well.

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The Irvine-based startup has now , according to Crunchbase data.

Acorns is now worth $860 million according . If this round sounds familiar, it should. We’ve written about it a few times. Let’s go back in time to see how this deal came about, and then what it might mean for the startup.

Revenue And Product

In November of 2018, it was rumored that Acorns might raise $100 million or more. The new capital was said to value the company at as much as $700 million. As you can see, the was damn near spot on.

I was a bit skeptical at the time about the expected valuation. Given what was known about the number of Acorns accounts, and its revenue per year, the valuation felt high. I did a relatively pedestrian walk-through of the numbers as we knew them, and moved on. The company itself, however, wanted to talk further.

My work underestimated a few elements of Acorns’ business, namely that its partner work was revenue-positive, and its then-nascent debit card business would also accrete interchange fees. That meant there was more revenue tumbling into Acorns’ accounts than I had figured; the deal as leaked made more sense in the light of our fuller picture of the company.

I say all of that to help underscore Acorns’ ambitions instead of just mocking myself for missing things. Acorns, it appears, want to be more than a savings app. By moving into the debit space, it feels more like a neo-bank with a savings focus than a nifty app to help people save their first few hundred dollars.

And that’s why its new round (the $105 million Series E) is interesting. With so much new capital, Acorns can afford to do quite a lot on the product front; I’m curious how far it will take the banking side of its service, and how much focus the savings element will receive.

Acorns is not alone in working to change banking for younger generations. It’s something we’ve written about on Crunchbase News a few times — this and this, from , are a good start — and a topic I suspect we will continue to cover.

Modern American banking is a system designed for the wealthy and so ridiculous that they form a . If Acorns can do better for regular people and perhaps even reach some of the underbanked, it would be good. And the firm now has the money to do pretty much whatever it wants for a few years. We’ll see.

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Acorns is a company with plenty to like. It helps round people’s purchases up, investing the difference. As I noted at the time, Americans on average haven’t saved enough money for emergency funds, let alone retirement. So, apps and services that help make saving money easier and simpler are solid in my books.

But a $700 million valuation? That was the question. I noodled a bit on the firm’s for its investment products, noting its assets under management (we could only get so close to the correct number) and prior business model that charged 25 basis points on saved funds. (Acorns now charges flat $1, $2, and $3 monthly rates depending on your goals, instead of a percentage of savings.)

After that post went out, the company reached out to link me to its CEO. We spoke earlier today, and he provided some extra context on the company’s revenue profile. So, let’s talk about what I learned.

Two Things

Acorns CEO  declined to disclose company’s current revenue but highlighted two places where the firm generates top line that I missed.

First, its “Found Money” program that provides savings for Acorns users from partner retailers and service providers, generates revenue for the startup. That’s a pretty damn good deal — Acorns gets more value into its users’ accounts while making money for itself.

And, the company’s debit card-checking account program has 300,000 pre-orders according to Kerner. As Acorns is providing the program as part of its $3 per month service, which includes its normal savings program (called “Acorns Core”) and its retirement account service (“Acorns Later”), it doesn’t look like a revenue driver at first blush. But, I , which are . (More , if you are curious.)

So how do interchange rates help Acorns? Observe how the New York Times how Chime, a neo-bank, makes money from the system:

“Chime, which has 100 employees in downtown San Francisco, makes money by collecting a fee from Visa every time its customers use Chime’s debit card to make a payment. The company has received $105 million in investments from venture capital firms.”

That’s what Acorns is doing as well, I reckon. (Acorns has raised .)

We can’t work our way to a sufficiently solid revenue figure for Acorns from the above to determine a revenue multiple range, but I can safely say that I was undershooting the company’s top line before. Which is good for Acorns and its investors, and probably its users as well, who depend on it to help them save.

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This morning that , a startup that helps people save and invest small amounts of money from everyday transactions, is “looking to raise more than $100 million” at a valuation that could be “north of $700 million.” If successful, it would put quite a lot of money into the class of services that help people get into a savings routine.

Acorns has , including earlier this year.

The small savings apps are a group of services that we’ve covered here before at Crunchbase News.  wrote about it twice for us, first looking at Acorns and competitors, and then later on when she drilled into Stash, an Acorns challenger.

The context helps make the Acorns round sound more reasonable. As there are a group of services that are growing concurrently in the market for small savings, demand must run deep. And that makes sense, as Americans often struggle to save. (It that makes the point.)

A large market means big companies can form. But Acorns is still small, as it turns out. The same Bloomberg story pegs Acorn’s assets under management (AUM) at “more than $1 billion.” That’s pretty low, especially given the company’s business model which charges a small-dollar amount ($1, $2, or $3 per month) for its various service tiers.

Prior reports indicate that Acorns had a different model before, taking a 0.25 percent fee off accounts of greater than $5,000. I suspect that that was just too high a cost, especially as Fidelity and other large financial providers look to that can sometimes have no fees at all. Paying Acorns 25 basis points was steep.

We can tell, therefore, that the firm is a SaaS business that drives revenue based on account volume, not AUM. So let’s play a game. Let’s say that the average Acorns account has $1,000 in it. I bet many accounts have a few dollars, but some also must have a lot more, so let’s toss out $1,000 as a starting point. At a billion dollars in AUM, that’s a million accounts. At the mid-point of its pricing, $2 per month, that would shake out to $24 million a year in revenue. At $1.5 billion in AUM holding our other estimates static, it grows to $36 million.

(You can quickly come up with your own estimate by changing average account balance to raise and lower the number of accounts that Acorns may have off its AUM. You can raise and lower its AUM and tinker with its average revenue per account. Email in your estimate if you are especially proud of it.)

That’s not bad! But we don’t know the firm’s cost of revenue. If we presume software-level margins, Acorns’ revenue is somewhat impressive. But if it costs more to create, invest, and manage investment and savings account than it costs to support enterprise software, Acorn’s revenue would be less attractive than it may appear in relation to its peers.

All that is a little riff on where Acorns may be and nothing more. But I think that we can see that at a $700 million valuation Acorns will be pretty richly valued. Even if you cut the average savings amount to get a higher number of accounts, the firm’s revenue multiple is going to be high, unless its AUM is far over the $1 billion mark, or perhaps its customers love to spring for its more costly plan.

But it’s 2018, and there’s a lot of money around. Acorns can probably raise again, and more, at a higher valuation than it did this summer.

But a rank of new apps hope to change that.

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In the last few years, apps like , , , and —among countless others—have infiltrated the consumer “save and invest” space. Essentially, where savvy savers of yesteryear might open a taxable account with thousands of diligently-saved dollars, investing today requires little more than a few dollars to start.

While this new class of investment apps slightly differ in branding and investment strategies, all of these startups aim to strengthen people’s financial knowledge while making investing accessible to all.

The pioneer of the “round up” saving and investing app scene, , is currently the largest and most popular micro-investing app around. By linking your debit and credit cards, Acorns will round up your small purchase amounts—avocado toast included—and invest the difference. The typical Acorns user makes less than $100,000 per year.

“We think of it as the easiest way to save and invest,” CEO Noah Kerner tells Crunchbase News. “You answer a couple of question to help us build your portfolio based on your risk tolerance—we have five portfolios, ranging from conservative to aggressive— all comprised of ETFs,” a theory designed by Nobel Prize-winning economist Harry Markowitz.

“So you’re not picking stocks yourself, which is very important,” Kerner stressed.

This is called “passive investing,” and is likely the quickest and easiest way to get into investing without having too much experience or resources. It’s perfect for a debt-laden millennial just starting out in their financial career.

Kerner noted that Acorns’ major goal is getting the average user to save every unspent penny.

Acorn And Friends

Next up is Stash, a New York City startup that’s similar to Acorns in that it helps you microinvest small amounts. However, there are no roundups involved; instead, you’re encouraged to invest based on your values.

If you’re a renewable energy advocate, you can pick a complementing portfolio to your general ETFs and invest in clean energy stocks. Given that the average Stash investor is 29-years-old with household income of $45,000 per year, the millennial-geared marketing makes sense.

Cofounder and CEO noted that with millennials being so cause-focused, Stash customizes portfolios with focus on their passions, without having to pick individual companies to invest in. Choices include stocks in clean energy, tech innovation, or “defending America,” in which you can invest in patriotic, weapon-providing companies.

Indeed, customization is probably one of the most wide-reaching trends in finance tech at the moment.

“There’s a lot of focus on delivering insight and experiences to customers based on who they are, instead of bombarding them with every possible bit of information or feature available,” Valarie Hamm Carlson, Vice President of Brand of the digital bank Simple, told us.

“We’re leveraging what we know about our customers,” Carlson continued. “Both in terms of their usage of our product but also their mindsets, to drive our design and roadmap.”

According to Stash’s youth-heavy stats, the company currently has more than 1.2 million customers spread across the U.S., with 86 percent having no prior investing experience.

“Through Stash, this community is given the tools to not only break into the investment world but also develop smart financial habits for the long-term,” the company told Crunchbase News.

“Investment apps are a great way for Gen X and Y to get started with investing,” Abraham Okusanya, Founder of investment & retirement research firm FinalytiQ, told Crunchbase News. “They make investing really easy and accessible, literally at your fingertips.”

However, Okusanya noted, that the sums invested are minuscule.

“This type of investing doesn’t go far enough to amount to any meaningful amount on their own, but at least it’s a start,” he said. “The danger is that the user gets deluded into thinking they are investing. It’s a way to dip one’s toes in, with very little consequence.”

Both Acorns and Stash cost $1 a month for small accounts, and 0.25 percent after an account reaches $5,000.

“There issue with the cost is that for many users, at that rate they’ll need about $5,000 in rounded-up amounts for the account to be cost-effective,” Okusanya explained. “That’s a lot of rounding up!”

Trust

With Acorns and Stash having already established themselves on the scene, up-and-coming financial apps must rely not only on branding but gaining new users’ trust.

“We’re helping people feel confident with their money,” Carlson said of Simple. “That means we’re pretty realistic about the relationship they have with their finances and design our product to meet them where they’re at.”

As for the others in this space, while diverse portfolios make up the bulk of their offerings,  investment platforms such as the mobile-Robinhood boasts itself as the first “completely free” app for trading individual stocks. This gives the app a new twist on investing, considering users’ accounts don’t have maintenance fees or trade commissions.

But there is a catch to the free ride. Robinhood doesn’t offer investment research or portfolio advice, making it tricky to use for an investing newbie.

Whether investment apps can help millennials “get into” long-term investing is still too early to call, Okusanya said.

“I think there’s a place for these apps,” Okusanya said. “Frankly, it’s hard to really say whether they are ultimately good or bad. Only time will tell.”