Stockpile Emerges To Offer Digital Gift Cards Backed by Stock to ‘Everyday’ Consumers

A new type of gift card is set to debut this summer that will be backed not by cash but by shares of stock. The virtual card will come from a startup called Stockpile Inc., which has created a waiting list for interested potential accountholders and is planning to market the product in part through financial institutions.

Stockpile’s management likens the company to PayPal Inc. in its early days in the sense that it is setting out to simplify the buying, selling, and gifting of stock in the same way PayPal simplified the act of sending money. “In a way, it’s PayPal for stocks,” Dan Schatt, who left PayPal last summer and is now chief commercial officer at Palo Alto, Calif.-based Stockpile, tells Digital Transactions News.

With Stockpile, users will select a stock, set a dollar amount, designate a recipient, and write a gift message. Stockpile will deliver the virtual card by e-mail to the recipient, who must then log in or set up an account, a process Schatt says takes only a few minutes. They receive their shares the next morning.

Senders pay for the stock out of their accounts or via credit or debit card. Stockpile runs its own brokerage to handle trades and maintain accounts. Schatt says fees for those who pay for stock from existing accounts will approximate “iTunes-like” pricing, in other words, around 99 cents per trade. Those who pay by card will pay a higher fee.

Fractional shares of high-dollar stocks (for example, Apple Inc., currently trading at $589 a share) are allowed. “It’s a fantastic savings vehicle for the everyday person, someone who just wants to buy a little bit of stock,” says Schatt, who after spending six years at PayPal wrote a book on payments and financial services due out this summer.

Schatt sees distribution avenues opening through banks and retailers. Financial institutions, for example, can receive “wholesale” pricing from Stockpile and reprice the service to their accountholders. “We think banks are in a perfect position to offer [Stockpile] to their customers and earn some income,” says Schatt. Merchants could use Stockpile to offer their own stock as rewards, he adds. “If you make customers owners, they tend to be more loyal,” notes Schatt.

Early indicators appear to be positive for Stockpile. Its concept caught the eye of enough attendees at last month’s Finovate Spring conference to win one of eight “best of show” awards out of 67 competing companies. Finovate is a two-day series of seven-minute demos of new financial-services technology. The award is voted on by attendees not related to companies giving the demos.

Still, there may be some hurdles. Ben Jackson, a senior analyst at Maynard, Mass.-based Mercator Advisory Group who follows prepaid and gift cards, says gifts of stock may not have widespread appeal. While “I like the concept of lowering the barrier of entry to investing,” he notes via email, “ultimately, I think the struggle with gift cards of this type is that they are not the most exciting gift. People might be happier with a card for a store or restaurant they frequent.”

He notes that companies have tried to make a go of a related concept in recent years by offering gift cards backed by mutual-fund shares or funds in which shares could only be purchased as gifts. These efforts have not gained traction, he adds.

Schatt, though, sees Stockpile attracting consumers who want to buy an equities-based savings vehicle but feel shut out by the current brokerage network. “It’s not designed for the day trader,” he notes. “It’s designed for the everyday trader.”