Samantha Lee/Business Insider

MoneyLion executives spoke with Business Insider about the digital banking app's roadmap.

• MoneyLion, the digital banking company geared toward people who need help managing their finances on a day-to-day basis, will roll out commission-free stock-trading capabilities in 2020.
• "Right from the outset, it'll be fractional and full shares," Jon Stevenson, MoneyLion's head of wealth management and banking, told Business Insider. "But right now the focus is so much on fractional, which - it's an overused term, but it truly does 'democratize' access to investing in single stocks."
• Stevenson estimated that roughly 90% of MoneyLion customers had never opened an investment account before.
• The New York-based startup launched in 2013 and uses a flat-fee subscription model for customers who want access to its banking, lending, and investing products. MoneyLion says it's amassed six million customers.
• MoneyLion already has core lending and savings offerings. The move to add commission-free trades comes as many discount brokerages and big banks have slashed commissions in recent months.
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A startup that's raised more than $200 million in funding on the premise of offering digital banking services to financially-distressed customers will start offering commission-free stock trading next year - including the option to buy small slivers of pricey shares.

MoneyLion, the digital banking company that is geared toward people who need help managing their finances on a day-to-day basis, will roll out stock-trading capabilities in 2020.

"Right from the outset, it'll be fractional and full shares," Jon Stevenson, MoneyLion's head of wealth management and banking, told Business Insider. "But right now the focus is so much on fractional, which is - it's an overused term, but it truly does 'democratize' access to investing in single stocks."

The commission-free trades will mark a departure from MoneyLion's core lending and savings offerings - Stevenson estimated roughly 90% of MoneyLion customers had never opened an investment account before - and comes as many discount brokerages and big banks have slashed commissions in recent months.

The New York-based app that launched in 2013 uses a flat-fee subscription model for customers who want access to its banking, lending, and investing products. The zero-commission stock-trading will be part of that service. MoneyLion says it's amassed six million customers, and has raised more than $200 million from investors including Edison Partners, Dunha Capital, and Greenspring Associates.

It's an overused term, but it truly does 'democratize' access to investing in single stocks.

MoneyLion's most recent cash infusion, a $100 million Series C round announced in July, included a strategic investment from Capital One.

While MoneyLion already offers customers investing options through a managed portfolio of exchange-traded funds, Stevenson said pushing into self-directed investing is a logical next step.

And the fractional shares provide a way for people to get in cheap on big consumer names that have a high price per share. With one Amazon share alone costing around $1,780, investing in the full complement of the so-called FAANG stocks (Facebook, Amazon, Apple, Netflix, and Google parent Alphabet) requires a decent chunk of change.

"They can have an asset-allocated portfolio with $10 or $5. And the perfect complement is, okay, I am not going to spend whatever it would be to build a portfolio of FAANG stocks, but if I can do it for $100. That is a wonderful way to get started," said Stevenson, who previously held managing director roles at Stifel Financial and Barclays Wealth and Investment Management before joining MoneyLion in April 2018.

The broader investment community has increasingly embraced low-cost, passive investing. But Stevenson said customers are increasingly interested in stock-trading, particularly on a fractional basis.

Still, offering trading to a customer base with little experience in self-directed investing is a delicate process, Stevenson said, and said MoneyLion will focus on educating customers around trading single stocks.

The company will also have an on-boarding process that includes a different set of questions geared toward risk appetite, and other controls to ensure the app is "keeping people on sound footing," he said.

In 2018, a MoneyLion affiliate paid $2.7 million to settle charges by Virginia's attorney general that it offered overpriced loans to customers.

An industry-wide trend

The brokerage space has seen an industry-wide move to eliminate commissions on US stock and ETF trading.

Six-year-old Robinhood, which Business Insider reported is also rolling out fractional stock-trading capabilities, has built its brand as a zero-commission online brokerage catering to millennials and first-time investors.

This year, Robinhood announced a $323 million Series E round that moved the startup's valuation up to $7.6 billion, and surpassed 10 million users with approved (though not necessarily active) accounts.

This fall, fee pressure across the brokerage landscape intensified when the major discount brokerages and some big, self-directed platforms like Merrill Lynch's Merrill Edge said they would drop commissions for online trades.

As competition has ramped up, industry giant Charles Schwab surprised the investment community when it said it would buy rival TD Ameritrade.

Even with the new trading capabilities, MoneyLion says its main focus will continue to be on its lending and other offerings. Samantha Roady, who MoneyLion named chief operating officer last month after having served on its board since 2016, told Business Insider that the core of the platform's wealth offering still sits with its ability to help people save.

"The savings account and the auto-investing account that we have are really the hallmarks of our wealth offering, because we're trying to get people to start a savings and investing program," Roady said.

She added: "I think that trading is a natural extension of that, but for me I think it comes after those first two things for the majority of our clients."

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