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>Acorns is a financial-technology firm that allows customers with balances as small as $5 to invest in groups of funds based on their risk tolerance. Users link

>Acorns is a financial-technology firm that allows customers with balances as small as $5 to invest in groups of funds based on their risk tolerance. Users link their debit- or credit-card accounts to Acorns, and the firm rounds up the users’ purchases to the nearest dollar and invests the change on their behalf. So their entire business model is investing change from transactions into index funds? Why couldn't any major bank or credit card company implement this and blow them completely out of the water? >Two of the seven ETFs that Acorns includes in its portfolios are run by BlackRock, while the remainder are run by Vanguard. I guess I don't get who this service is for. People who want to invest but don't want to "invest" any of their time? Why not setup a Roth IRA and get the same thing but tax-free?

freeone3000 8y ago
Contribution limits?
- jschwartzi 8y ago
  As in they're abysmally low? $5500/yr as a 1099 or W-2 employee is pretty pathetic.
hkmurakami 8y ago
I think acorns is targeted to the low end of the consumer finance spectrum so they are not sophisticated or knowledgeable enough to do this. Also regarding banks it’s likely not high enough ROI?
nowarninglabel 8y ago
This is one of those interesting knee-jerk HN reactions that miss the entire point. Acorns built a product that people love. As to "why couldn't any major bank or credit card company implement this and blow them completely out of the water", why not ask instead why they haven't successfully done so? They've certainly tried and failed, and for the most part seems like they are turning to investments/acquisitions of companies in this space since they can't build something successful on their own.
- charlesdm 8y ago
  Honestly, I don't get this product. Aren't you dealing with minimal amounts? How much can a customer who adds a few dollars a month to his account be worth anything to an asset manager? Won't it take years before even the user acquisition cost is recouped?
  - prklmn 8y ago
    I don’t really think it’s an investment in the product itself, but rather a nice touch point that will be used to market other investment vehicles.
  - jmathai 8y ago
    I have an account and it's up to $2k in under a year. I think I have an automated $100/month deposit too. It's money I don't notice missing that's bring saved. It's not a lot but it's easy and a lot better than nothing.
- lavezzi 8y ago
  Acorns is also expanding their services, roundups isn't their only offering anymore
- colemannugent 8y ago
  >Acorns built a product that people love. I'm sure they'll love it right up until it gets scrapped. Businesses can't run on love alone. Startups need growth to survive, as soon as this product gets big enough to interest the banks or credit card companies they will make their own and it will be better and cheaper since they can eliminate the middleman. Maybe they're positioning themselves for an acquisition, but anyone who bought them would just be buying the idea of investing change. The app itself would be killed as its functionality would be combined into the buyers existing app ecosystem, and the backend that takes the change and makes the investments would be largely unnecessary as the banks already have the infrastructure to nickel and dime people. The context of this article was BlackRock trying to get younger customers. To accomplish this, they invested in a startup whose target audience is apparently people who want to invest, but don't really want to put in the effort. To me that sounds like a questionable investment. You could argue that they're providing the change investment thing as a loss-leader to try to get people interested in investing, but something like RobinHood already gives inexperienced traders the tools with which to bankrupt themselves.
vthallam 8y ago
Not investing into index funds, but Bank of America checking account provides an option to take some money out and put it aside. But as you said unless they are banking on moving fast and getting the market share first, this is a very low entry product. BoFa and JPM Chase, which has both consumer and IB/trading operations can do this in a week.
- mseebach 8y ago
  > BoFa and JPM Chase, which has both consumer and IB/trading operations can do this in a week. They can "do it" in the same way everyone on HN can build a Facebook clone in a week: by skipping all the parts that make it hard. Banks are huge, bureaucratic, political organisations with fifteen layers of CYA and red tape around everything that moves. They couldn't change the favicon on their website in a week if the survival of the human species depended on it -- to build and deploy a product that actually shuttles consumer cash around in the market, you're looking at years of planning alone.
  - vthallam 8y ago
    I worked for one of the two banks I mentioned and while it is definitely slow compared to the tech companies, it's not even remotely close to years to ship a product. Things have changed with banks with people more open to MVP's.
bladecatcher 8y ago
A product like this makes sense for Blackrock because they also are in the privileged position of creating the ETFs in the portfolio.
henrypray 8y ago
Few notes to consider as well... Acorns was thought to be one of the best designed apps in the App Store back in ~2014[1]. The original target demographic and way they got such a huge user base (AFAIK) was going after a specific group of people who had never heard of the Vanguard/BlackRocks of the world and instead were looking for an entry point into investing. Coupling an amazing user interface with the simple idea of turning pennies into dollars proved to be a good enough value proposition to get the first mover advantage on all of the young 20 somethings who had never even heard of a Roth IRA in the first place. Now look at customer acquisition costs and lifetime value of customers for investment firms and IMHO it makes perfect sense on why BlackRock would want to become a large stakeholder in a company like Acorns due to the brand loyalty. [1]. https://drivenxdesign.com/USAPPS14/project.asp?ID=13420 https://drivenxdesign.com/USAPPS14/project.asp?ID=13420
propogandist 8y ago
Bank of America had a similar program for debit card consumers years ago, called Keep the Change (iirc) and I believe other firms have tried it too. It was designed to move money into a savings account, but there's nothing stopping from getting their massive customer base to start using their MerrillLynch products with an offering that competes with this (across debit + credit cards). That said, Im not sure how they can sustain rounding up credit card transactions without taking a big financial hit.
- maxerickson 8y ago
  It's sustainable because it isn't their money they are using to round up the transactions. https://www.bankofamerica.com/deposits/keep-the-change/ https://www.bankofamerica.com/deposits/keep-the-change/
  - propogandist 8y ago
    I meant this firm BlackRock's backing and specifically credit cards. BoA's program's limited specifically to debit cards and money is just moved to savings account from your checking account.
Arbalest 8y ago
Seems people here have missed the news that they are diversifying, and going public. Acorns is now called Raiz (a rubbish name). I use it myself, for lack of any other financial infrastructure with which to put my money. Low barrier to entry, and yeah, don't have to invest lots of time into it.
toomanybeersies 8y ago
Back when I was living in New Zealand, this was basically possible. I could get my bank to round up all my debit card transactions to the nearest $1 to $10, and put that money into a savings account. I could then transfer all that money from my savings account at the end of the month into Sharesies [0], an ETF investment platform, where the minimum investment is $5. It's not quite seamless, but it's close to seamless. I wouldn't want it to be more automatic than that, personally. [0] https://www.sharesies.nz/ https://www.sharesies.nz/

freeone3000 8y ago

Contribution limits?

jschwartzi 8y ago
As in they're abysmally low? $5500/yr as a 1099 or W-2 employee is pretty pathetic.

hkmurakami 8y ago

I think acorns is targeted to the low end of the consumer finance spectrum so they are not sophisticated or knowledgeable enough to do this. Also regarding banks it’s likely not high enough ROI?

nowarninglabel 8y ago

This is one of those interesting knee-jerk HN reactions that miss the entire point. Acorns built a product that people love. As to "why couldn't any major bank or credit card company implement this and blow them completely out of the water", why not ask instead why they haven't successfully done so? They've certainly tried and failed, and for the most part seems like they are turning to investments/acquisitions of companies in this space since they can't build something successful on their own.

charlesdm 8y ago
Honestly, I don't get this product. Aren't you dealing with minimal amounts? How much can a customer who adds a few dollars a month to his account be worth anything to an asset manager? Won't it take years before even the user acquisition cost is recouped?
- prklmn 8y ago
  I don’t really think it’s an investment in the product itself, but rather a nice touch point that will be used to market other investment vehicles.
- jmathai 8y ago
  I have an account and it's up to $2k in under a year. I think I have an automated $100/month deposit too. It's money I don't notice missing that's bring saved. It's not a lot but it's easy and a lot better than nothing.
lavezzi 8y ago
Acorns is also expanding their services, roundups isn't their only offering anymore
colemannugent 8y ago
>Acorns built a product that people love. I'm sure they'll love it right up until it gets scrapped. Businesses can't run on love alone. Startups need growth to survive, as soon as this product gets big enough to interest the banks or credit card companies they will make their own and it will be better and cheaper since they can eliminate the middleman. Maybe they're positioning themselves for an acquisition, but anyone who bought them would just be buying the idea of investing change. The app itself would be killed as its functionality would be combined into the buyers existing app ecosystem, and the backend that takes the change and makes the investments would be largely unnecessary as the banks already have the infrastructure to nickel and dime people. The context of this article was BlackRock trying to get younger customers. To accomplish this, they invested in a startup whose target audience is apparently people who want to invest, but don't really want to put in the effort. To me that sounds like a questionable investment. You could argue that they're providing the change investment thing as a loss-leader to try to get people interested in investing, but something like RobinHood already gives inexperienced traders the tools with which to bankrupt themselves.

vthallam 8y ago

Not investing into index funds, but Bank of America checking account provides an option to take some money out and put it aside. But as you said unless they are banking on moving fast and getting the market share first, this is a very low entry product. BoFa and JPM Chase, which has both consumer and IB/trading operations can do this in a week.

mseebach 8y ago
> BoFa and JPM Chase, which has both consumer and IB/trading operations can do this in a week. They can "do it" in the same way everyone on HN can build a Facebook clone in a week: by skipping all the parts that make it hard. Banks are huge, bureaucratic, political organisations with fifteen layers of CYA and red tape around everything that moves. They couldn't change the favicon on their website in a week if the survival of the human species depended on it -- to build and deploy a product that actually shuttles consumer cash around in the market, you're looking at years of planning alone.
- vthallam 8y ago
  I worked for one of the two banks I mentioned and while it is definitely slow compared to the tech companies, it's not even remotely close to years to ship a product. Things have changed with banks with people more open to MVP's.

bladecatcher 8y ago

A product like this makes sense for Blackrock because they also are in the privileged position of creating the ETFs in the portfolio.

henrypray 8y ago

Few notes to consider as well... Acorns was thought to be one of the best designed apps in the App Store back in ~2014[1]. The original target demographic and way they got such a huge user base (AFAIK) was going after a specific group of people who had never heard of the Vanguard/BlackRocks of the world and instead were looking for an entry point into investing. Coupling an amazing user interface with the simple idea of turning pennies into dollars proved to be a good enough value proposition to get the first mover advantage on all of the young 20 somethings who had never even heard of a Roth IRA in the first place. Now look at customer acquisition costs and lifetime value of customers for investment firms and IMHO it makes perfect sense on why BlackRock would want to become a large stakeholder in a company like Acorns due to the brand loyalty. [1]. https://drivenxdesign.com/USAPPS14/project.asp?ID=13420 https://drivenxdesign.com/USAPPS14/project.asp?ID=13420

propogandist 8y ago

Bank of America had a similar program for debit card consumers years ago, called Keep the Change (iirc) and I believe other firms have tried it too. It was designed to move money into a savings account, but there's nothing stopping from getting their massive customer base to start using their MerrillLynch products with an offering that competes with this (across debit + credit cards). That said, Im not sure how they can sustain rounding up credit card transactions without taking a big financial hit.

maxerickson 8y ago
It's sustainable because it isn't their money they are using to round up the transactions. https://www.bankofamerica.com/deposits/keep-the-change/ https://www.bankofamerica.com/deposits/keep-the-change/
- propogandist 8y ago
  I meant this firm BlackRock's backing and specifically credit cards. BoA's program's limited specifically to debit cards and money is just moved to savings account from your checking account.

Arbalest 8y ago

Seems people here have missed the news that they are diversifying, and going public. Acorns is now called Raiz (a rubbish name). I use it myself, for lack of any other financial infrastructure with which to put my money. Low barrier to entry, and yeah, don't have to invest lots of time into it.

toomanybeersies 8y ago

Back when I was living in New Zealand, this was basically possible. I could get my bank to round up all my debit card transactions to the nearest $1 to $10, and put that money into a savings account. I could then transfer all that money from my savings account at the end of the month into Sharesies [0], an ETF investment platform, where the minimum investment is $5. It's not quite seamless, but it's close to seamless. I wouldn't want it to be more automatic than that, personally. [0] https://www.sharesies.nz/ https://www.sharesies.nz/