Prepaid card distributor Blackhawk Network Inc. announced this week that it will be placing StockPiled Inc.s’ gift cards for stock in its distribution network. The gift cards can be redeemed for shares of company ownership.
Stockpile’s gift card comes in fixed denominations of $25, $50 and $100. It may be redeemed for a variety of popular stocks or exchange traded funds (ETFs) such as the NASDAQ or S&P 500. When you redeem a Stockpile gift card and open a brokerage account, you get fractional shares of real stock that you choose.
The company began to sell virtual cards redeemable by stock in 2014, according to Digital Transactions. This week’s announcement gets the cards into physical retail with more exposure to customers shopping for a gift.
The company’s founder, Avi Lele, told the Wall Street Journal that he wanted to make the complicated and expensive business of investing in equities accessible to more people. High minimum balances and the process of registering for an investment account can keep average people out of the stock market.
Similar ideas have been tried in the past. A company called Gratio Capital tried to sell gift cards for mutual fund investments in 2011. The mutual fund behind it was liquidated in early 2013. It was aimed at low-income people as a way to help them start investing.
Stockpile may do better because its cards will feature the logo of the stocks that it is offering, which are for major companies, and may be a more obvious investment. However, it will need to work to educate people on what it is actually selling and provide them with sufficient value for the fees charged with each card.
The tool may be a good one for getting people interested in investing, but it faces risks if buyers don’t feel they can build sufficient value quickly enough or if they start to lose money in the stock market and feel as though the gift (or investing method) is too risky.
However, if the company can gain enough attention, that it may, as one observer suggested, replace the old government savings bond as a way of giving a long-term asset to kids and others who might need a push in the direction of financial literacy.
Overview by Ben Jackson, Director, Prepaid Advisory Service at Mercator Advisory Group
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