Our Two Bits, Part 2: Bank Authentication

Bits of Stock uses bank linking to provide a seemless automatic rewards system

May 6, 2022

Arash Asady

Get Bits of Stock™ Shopping With The Brands You Love

Where did we leave off? Oh right, Fractional Shares. It’s simple, get Bits of Stock™ for free every-time you shop with the brands you love. Like cash back but with stocks! We’re very excited to put fractional shares to use in a very unique way. The best part is that we automate this process so you don’t worry about annoying activities like uploading a receipt or scanning a QR code each time you make a purchase. How do we do this? How do we automatically track your expenses and put fractional shares of stocks into your account?

Bank Authentication

Linking a bank account to a mobile application, especially a new one, sounds frightening at first. But consider how many applications you use today that requires a linked bank account? Most concerns are centered on how the bank authentication process is handled. First off, what does it mean to “link” a bank account? It means you use your banking credentials to verify your identity and bank account. Bits is legally required to verify your identity to open an investment account on your behave. This process reduces the likelihood of fraudulent activity and when you link your bank account with Bits, this step is skipped for you.

Traditionally, this process was done through “micro-deposits” meaning you authorized Bits to deposit a small amount into your account, for example, $.22 cents. Then after 1–3 business days once the deposit is cleared, you verify the transaction in the Bits application. As a result, Bits know you are the account holder and the likelihood of fraud is low. This process is not ideal and studies show consumers do not like with nearly 50% never returning to verify the amount.

However, with Bits, you are not directly linking your account. We allow you to link your account through an institution that employs the best security practices in the world, securely and anonymously handle your data and is independent of Bits. The need for this service and independence gave rise to the industry of account aggregators — third-party providers that give access to bank accounts such as Plaid and MX Technologies. Some of the most popular financial apps rely heavily on these aggregators, Venmo, Acorns, Betterment, YNAB, and many more. So what is the new way of linking account? Simply log in with your bank username and password through Bits and an aggregator handles your credentials and instantly verifies your account in seconds.

So Bits has a quick way of verifying your identify and account but how does that help Bits automatically reward you with fractional shares of stocks? The reason we ask to link your account is so we can access your transaction data, the same way personal finance management apps like Clarity Money or ask to link your bank account to analyze, categorize, and monitor your spending habits. The reason apps like Clarity Money or add so much value is because they are good at analyzing and making sense of transaction data. With Bits, the only information we access is the merchant ID (merchant you shopped), the transaction amount, and the date. We also use this information to track your spending habits in order to automatically reward you with stocks when you spend with the bank account that is linked to Bits. The more accounts you link, the more rewards you earn. It’s that simple! The best part, your data is not handled by us but rather the data aggregator, MX Technologies, and anonymize and clean before we process it.

Now with Bits, you can afford shares of expensive stocks like Amazon, Google, Tesla with little as $5. Matter of fact, we can help you get started. Sign up for Bits below and when you refer a friend to join, you receive $5 in free stock with participating brands (Amazon, eBay, Marriott, Target, etc.). Bits will go live in May. Stay updated!

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