The news: The digital broker launched the Robinhood Cash Card, a new debit product that replaced the Cash Management debit card it launched in 2019. The card, which is linked to a separate account from users’ brokerage accounts, has a few standout features, per The Verge:
The opportunity: The card will help Robinhood capitalize on shifting payment preferences and cater to younger users, CPO Aparna Chennapragada told Reuters.
The card also fills an unmet need in the market for debit rewards. Fewer than 1 in 5 US consumers have debit rewards programs, and just 8% can earn points or cash back, per PYMNTS. Interchange and other fee rules make debit cards less lucrative for issuers and therefore make rewards harder to fund.
What it means: We predicted credit card issuers would embrace mounting interest in day trading and personal finance to launch features akin to Robinhood’s—but a debit offering separates Robinhood from the pack.
It also helps Robinhood compete on new fronts against a range of other firms at once:
This positioning can create a flywheel for Robinhood: By combining debit rewards, financial services, and trading features, the app can attract new users. And then it can leverage those benefits to drive these customers toward its core products, like investing, which are likely more lucrative—bolstering engagement as it angles to reverse losses.
Go deeper: Check out our ‘Spotlight: US Digital Stock Trading’ report, and our ‘Payment Methods and Funding Mechanisms’ section of the 2022 Payments Ecosystem.
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