September 23, 2022
A Q&A with Dan Mendes of Stash, a personal finance app
For millions of Americans who live paycheck to paycheck, personal finance apps like Stash are providing an easier way to build wealth. With more than 380,100 ratings on the App Store and Google Play, Stash recently earned a spot on the list of Forbes Advisors’ Best Budgeting Apps. Its popularity can largely be attributed to how accessible it is for everyday users–with easy-to-use budgeting tools, a taxable brokerage account, a digital checking account, and a debit card that earns you stocks each time you use it. As for investing, Stash enables users to get started with just a few dollars, and buy what are called fractional shares, or portions of a single share of a stock, as opposed to having to buy an entire share all at once.
To start delivering value to its customers, Stash first needs access to their outside financial accounts. In its early days, Stash relied on micro-deposits to authenticate accounts, which was slow and prone to errors, driving down conversation rates. That’s when they turned to Plaid. Here, Stash’s VP of Product, Dan Mendes, talks about how they’re using Plaid to provide customers with a simple, fast, and reliable way to connect their outside financial accounts and create personalized user experiences with transaction insights.
Plaid: Dan, let’s kick things off by talking about how you first started with Stash.
Dan: I was in my mid-twenties and like a lot of us, I was trying to figure out my finances. I ended up on the waiting list for Robinhood, Acorns, and Stash because I saw their names on TechCrunch. Eventually, I was able to join each of those platforms but Stash was the first tool that helped me invest in the stock market. As a first generation American, I didn’t grow up learning about any of that which is why Stash clicked for me. Two years later, I ended up interviewing and starting a new role there. I’ve been at Stash for four and a half years so it’s been a journey.
Plaid: Let’s talk a little bit more about Stash. Stash was founded in 2015 and it’s a leading investment banking and education platform for middle class Americans, helping educate them and build wealth. So it serves the 99%. It’s a subscription based service and it’s one of the fastest growing investment platforms in the market with more than six million users and over three billion dollars in assets under management. We’ll talk more about how they're building personalized experiences for users but before that, I wanted to follow up with something you said earlier. You said that 39% of Americans don't currently invest in the public markets. Can you share a little bit more about and why that's relevant to Stash’s mission?
Dan: Like you mentioned, Stash is for the 99%. We focus on everyday Americans who are, quite frankly, struggling to build wealth. The majority of Americans are living paycheck to paycheck so Stash is a set of tools, educational resources, and financial products that are designed to help customers build long-term wealth. That long-term piece is really important. At Stash, we have this philosophy called “The Stash Way” and it’s essentially our belief in doing regular long-term diversified investing. So invest as often as you can, as long as you can, and in as diverse of a portfolio as you can. The beauty of that is that it works really well when the markets are up but even in times of uncertainty, like we’re in now, it still benefits those customers because we have our eyes set on the future.
Plaid: Can you tell us a little bit more about Stash’s products and services?
Dan: We try to keep it simple. That’s why we have three tiers–a one dollar, three dollar, and nine dollar tier–each one balanced between the right type of financial products, tools, education, and advice. What that really means from a tactical perspective is that we offer personal brokerage accounts, managed accounts, retirement, custodial, and a checking product as well. And then within the checking product, we have things like budgeting and spending insights as well as Stock-Back.
Plaid: What do you think differentiates Stash from every other platform out there?
Dan: I think “The Stash Way” sets us apart. But also, when we think about our customers, we’re really thinking long-term. In other words, we’re not just focused on their first interaction or the first week or the first month but really years on the platform–decades even. We really want to be focused on providing customers with as much value and direction and advancement as possible, at every stage of their financial journey.
Plaid: Stash has over six million users today, which is really impressive. Can you tell us more about what the average user, or “Stasher”, looks like?
Dan: Our users are everyday Americans and what that really means is that 95% of our customers are first-time or beginner investors. They’re saving and investing an average of $31 at a time with a median household income of $50,000 a year. So when I think outside of the bubble of San Francisco and New York City, that’s really the heart of America and that’s who we’re serving.
Plaid: Now that we understand a little bit more about your customer, tell us more about the tailored experiences you're building for them?
Dan: Plaid is an integral partner when it comes to how we serve our customers. That journey really starts right at onboarding. We obviously leverage Auth and Identity data as well but as soon as a customer authenticates their account, Plaid allows us to start gathering insights via their transactions data. So as we try to better understand their financial health we’re able to answer a lot of questions like, what is the financial health of that customer outside of our platform? What is their money in, money out? What is their inflow? How do they handle their cash? Do they pay a lot of fees? How often do they get paid? Do they spend more on weekends or during the day? By being able to answer those questions, we can quickly build an accurate view of that customer but none of that’s possible without the transactions data. So for example, if a customer chooses to link their bank account using another method like micro-deposits, we’re not able to get that full picture, which means we’re in less of a position to deliver value to them.
Plaid: I'm glad you mentioned the types of trends and the things you're noticing as you're taking a look at user behavior. What kind of data has been the most helpful in that process?
Dan: For us at Stash, personalization isn’t just about gleaming a transaction insight and serving some content based on that. It’s more holistic. Are you risky? Or are you not risky? All of those things count within personalization and the data we get through Plaid is super critical for us to be able to create that evaluation. But if you think about transactions in general, one of the great things that exists within the data object itself is categorization and I know Plaid has done a lot with its taxonomy over the past couple of years and continues to invest in that. So it’s really nice to be able to look at your categories and subcategories and be able to put together customer insights. And then from there, we can extrapolate that out to the entire customer database. You can look at how anomalous a customer is to the rest of the base and you can segment based off of those types of things.
Plaid: You’re right, Plaid has invested a lot in its categorization and I know that’s an area that we’re continuing to invest in. In fact, we just revamped our categorization earlier this year and I’m excited to hear how Stash is taking advantage of those updates. Now that you have their transaction history, tell me more about the features you’ve built at Stash to better serve customers.
Dan: We have two buckets of features. There are the features that you can build directly on top of the raw data. Then there are features that you can build off of the insights and the derived values that you get. A good example is when a customer comes to the platform. I mentioned that 95% of them are new or beginning investors so for them, it can be really hard to commit to a purchase or investment. If you think about it, they just joined the platform, they’re excited, they’re ready to invest in themselves–they’re going to do this. Then they’re like, “Wait, what’s an ETF? What’s a stock? Is this one good? Or bad? Do I want growth stocks or dividends? Is this up? Or is it down?” All of those questions can be overwhelming.
Ultimately, what we’re trying to do is incentivize this savings behavior. We had an hypothesis that if we can tie savings behavior to things that they’re already doing outside of the platform, it can be a really simple way for them to take that first step. And then once they take that first step, they can come back later and actually make that first investment. An example of that is our Round-Ups. If you’re not familiar with those, every time you transact in your third-party account, we round up the dollar amount. So if you spend $2.25, we’ll round up $.75. And we’ll add up those Round-Ups until it meets a certain threshold. At Stash, that’s five dollars, at which point we’ll transfer those funds into your Stash account on your behalf. And the amazing thing is that for the users who are overwhelmed, this beautiful thing happens which is maybe three weeks or a month down the road, they’re like, “I should really commit and make my first investment.” So they’ll go back to the app and see that they have $15 or $30 there that they didn’t think they could save at first. That’s a good example of building right on top of the transaction data.
Plaid: One thing that is interesting is that you started off doing Round-Ups with checking accounts. How did you iterate on that feature?
Dan: You’re right, we started with checking accounts and what we did is we took a look at the customers who were engaging with Round-Ups and then we looked at their transaction data. What we realized is that for a good portion of them, they were actually transacting more on their credit cards than their checking accounts. So based on that insight, we built a toggle within the Round-Up space that featured a simple CTA. I think it said, “Extra Round-Ups with your Credit Card”. What we found is that for customers who landed on that screen, 32% opted in and that’s without any additional marketing, no in-app messaging, no nudging–just an organic conversion rate on wanting to save more based off of their outside spend. So that’s how we use the transaction insights to actually iterate and improve on a feature that was built on just the raw data itself.
Plaid: What are some of the other features that you’ve built and leveraged at Stash like transactions and balance data?
Dan: If we go into that second bucket of features that I mentioned, one thing that we’ve been iterating on for a long time now is understanding when a customer might not be able to cover a transfer. It’s becoming common for third-party institutions to not have insufficient funds fees but I think the last article I read said it’s still a nine billion dollar business for big banks to charge fees when you don’t have the money–which is completely counterintuitive. At Stash, we try to understand whether or not they might not be able to cover that in certain cases in which case we can say, “Hey, maybe you shouldn't save today because we don’t think that you’re going to be able to cover the transfer.” So that’s one example.
In terms of going into the data itself and seeing how we can better serve our customers, one thing that we’re constantly evolving is our understanding of what our customers are doing and where they’re spending and then seeing if we can tie Stash’s value to that. For example, we have customers who have some very common subscriptions like Spotify, Netflix and those types of things. What we can do is say, “Hey, if you actually pay for those subscriptions with Stash, we can offer you a higher stock back so that you can invest in the companies that you’re already spending money with.” And we could do that for any publicly listed company.
If you’re buying groceries at Walmart, for example, you’re already spending money at that institution. And ultimately, by shopping there, you’re showing your belief in their future value, right? So it’s a nice value add to the customer to say, “While you’re here, you can also invest and start building your wealth and you can do it with the power of fractional shares.”
Plaid: To summarize, there are three ways you’re using transactions and balance data. The first is through Round-Ups, by enabling users to seamlessly round up every purchase. The second way is just by being customer centric. If you see that they can’t afford to make a transfer or pull money from their account, you’re able to flag that and let them know that they need to wait until they have sufficient funds. And lastly, the piece you mentioned around Stock-Back. I think that’s exciting because as a user, there are certain brands that you’re drawn to and so having the opportunity to get those rewards back is fulfilling. So with all that’s going on, what Plaid features are you most excited about going forward?
Dan: We're always looking to innovate and find more ways to collaborate with Plaid. What’s super interesting to me is what you’re doing to fight fraud and the kind of signals you’re generating. Ultimately, every financial institution can gauge what’s happening within their walls but there are massive blindspots that keep them from fully understanding what’s happening outside. Given Plaid’s reach, it could be a really powerful product or feature to incorporate whether you’re doing your own internal modeling or starting from ground zero. So the features you’re developing there are really cool. I’m also interested in learning more about Guarantee. That’s pretty sweet as well.
Plaid: Awesome! What’s next for Stash and your six million “Stashers”?
Dan: It might sound funny but it's more of the same. There are millions of people out there who really need financial help, guidance, and reassurance. And when the markets are so volatile, it’s more important than ever to think long-term. The more everyday Americans can focus on the long term, the easier it will be for them to build their wealth. So that’s going to remain our focus for a while.
We’ve also been doing some more work around education with Stash 101, which is an online tool to help teachers teach financial literacy. Those kinds of initiatives will help improve the financial health of everyone.
Plaid: I know there are lots of product managers and developers here so I’m curious, what are some key learnings or takeaways you’d like to share with them?
Dan: Tie your customer outcome to your business outcome. It’s an amazing thing when your customers’ success is directly connected to your success as a business. I’d also say in general, personalization should start the moment someone downloads your app. Obviously with Plaid Transactions but also everything you know about that customer coming in. All of that is crucial to understanding your customers’ needs. And then if you’re looking at the Transactions product, I’d go into the categorization to understand what and how your customers are spending.
Plaid: When you first started at Stash, you had less than a hundred people on your team. Now, you have closer to 500, not to mention millions of customers who have been impacted by your products. When you look back on your journey, what are you most proud of as a product leader?
Dan: There are two things. One is simply hearing from customers and knowing that our impact is real. I’ve seen customers write us letters because Stash helped them save their first hundred dollars. That’s powerful. There are other stories, too, where someone didn’t have to miss a day of work because they had enough saved up money to fix a flat tire. The second thing is just the team that I’ve been able to build and be a part of. When you’re mission driven as a company, it’s just a great place to be. And I can still say that after being there for almost five years.