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:

• “Spare change” investing. Customers can opt to round their purchases to the nearest dollar and invest that money in cryptocurrency or stocks. Robinhood will also use a curve to offer customers bonuses of 10%-100% of their weekly spending, capped at $10, to invest.
• Other rewards. Details remain scarce, but the card will offer cash back at merchant partners like Chevron, Chipotle, and H&M, per The Verge.
• Direct deposit. Users can send paychecks to this account and receive funds up to two days early.
• Free access. The card has no fees—including overdraft—and no minimum deposit.

The opportunity: The card will help Robinhood capitalize on shifting payment preferences and cater to younger users, CPO Aparna Chennapragada told Reuters.

• Debit cards have long been US users’ top payment method, per PULSE. But the method’s use grew during the pandemic—a common recession trend—and we forecast debit’s transaction share will exceed pre-pandemic levels through at least 2023.
• Gen Zers are fairly credit-averse relative to other generations, though that may change as they grow up and gain spending power. Embracing debit could help Robinhood attract this generation as they become old enough to invest.

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:

• Other fintechs. PayPal, Venmo, and Cash App all offer debit cards and crypto services and are exploring trading.
• Other investment apps. Stash and Acorns are among those that offer “spare change” investing.
• Banks. Many banks, including Fifth Third and US Bank, now offer early access to paychecks.

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.