Acorns Business Model: How Does It Work and Make Money?

Acorns Business Model

Acorns is a US-based financial technology and services company. The company specializes in micro-investing and robo-investing. Currently, Acorns’ headquarters are in Irvine, California. The company provides a platform that allows its users to invest by saving small sums of money. This process is known as micro-investing. Its primary users include individuals seeking to build a retirement fund for themselves.

Acorns also provide various other financial services. One of these includes a basic banking service. Unlike other online platforms, this service comes at a lower cost for users. Similarly, it involves offering a debit card and retirement savings accounts. It also allows users to define and achieve their savings goals through these processes. Most of these services come at an affordable price for users.

Acorns divide its service into three categories. The first category allows users to create and fund an IRA through the platform. Similarly, the second enables users to invest their spare change in ETFs, also known as micro-investing. Lastly, the third category provides users with a debit card through well-known payment card companies. The company uses subscription fees to produce these services, which fall under various packages.

Acorns began its operations in 2012 under Walter Wemple Cruttenden III and Jeffery James Cruttenden. These were a father-son duo whose objective was to promote incremental and passive investing. The platform then launched in 2014 on iOS and Android devices. However, they also obtained the services of a Nobel laureate, Harry Markowitz, for portfolio options designing.

Over the year, Acorns has expanded its operations through various products and services. Similarly, it acquired other companies, which further increased its range of products. Acorns also built a substantial portfolio of both well-known clients and common users. Throughout the years, the company has also raised millions in capital fundings.

Acorns’ rise to the top has seen many ups and downs over the years. However, the company has survived those and brought various innovations to attract more users. One of the primary factors behind the company’s success has been its business model. Acorns’ business model also describes how the company makes money. Before understanding that, however, it is crucial to know how Acorns works.

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What does Acorns work?

Acorns is a FinTech company that provides various investment, spending and saving products and services. The company offers several accounts. One of these includes the Invest account, which provides users with the ability to invest small sums of money. The company uses an automatic process for it, which invests the spare change for users.

Acorns also enables users the opportunity to use various banking and saving services. Users can connect their credit cards and bank accounts to their Acorns account. When they transact through these accounts, the platform monitors them. Any spare change balance from these transactions gets recommended for investments. Acorns provides these investments in exchange-traded funds (ETFs).

Acorns has a user-friendly platform, which allows users to build an investment portfolio straightforwardly. Once users register with the platform, they can choose their investment plan. Usually, it offers them the opportunity to modify this plan based on their tolerance level. Acorns then invests the money in ETFs. However, this only occurs when a user’s account balance reaches $5. This service falls under the Investment account.

The company also offers a retirement account, known as Later. Through this account, the platform saves for retirement by setting easy Recurring Contributions. This process occurs automatically. Usually, the platform allows users to choose their retirement plans. However, it also recommends one when the user signs up, based on their goals, income and employment.

The other account is the Acorns checking account. Through this account, users can save, invest and earn while they spend. This checking account allows users to use services similar to banking accounts. There is no minimum balance requirement or fees. Similarly, the company does not charge an overdraft charge. Users can also get a debit card with this account.

Acorns categorizes its services into three categories. These involve the Acorns Core, Later and Spend. Firstly, it consists of the Core category includes the Invest account mentioned above. Similarly, Acorns Spend focuses on the checking account as stated above. Acorn Later covers the individual retirement account. As mentioned, the company charges a regular subscription fee for users to use these services.

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What is the Acorns business model?

Acorns operates in the fintech industry. This industry includes products and services aimed at improving and automating the delivery and use of financial services. Traditionally, these services fell under the operations of financial institutions or brokers. However, fintech companies introduce innovations and technologies to the process to make it more streamlined.

Most fintech companies use a commission-based business model. With this model, companies charge users a commission based on every transaction they complete. However, the Acorns business model differs due to its subscription-based nature. The company has various subscription packages to which users can subscribe.

Through the subscription-based business model, Acorns provides regular services to its users. However, it does not charge them for every transaction. Instead, those transactions get completed automatically without any significant charges. Most users prefer this model as it does not involve sharing a portion of their investments or profits.

However, the Acorns business model does not involve subscriptions only. It also includes several other methods of making money. The company is similar to financial institutions and handles substantial monetary reserves for users. For these reserves, the company also uses a management fee model. However, this model does not apply to every account.

Lastly, the company also uses users’ account balances for investments. Acorns provides institutions with money in the form of loans. On these loans, the company charges an interest. In this regard, Acorns uses a similar business model as banks and other financial institutions. However, its primary business model is the subscription-based model.

How does Acorns make money?

From the above explanations of how Acorns works and its business model, it is clear how it makes money. The company generates revenues from various sources. However, it also makes money from other sources. All these sources combine to help the company generate funds to continue operations. Given below are how Acorns makes money.

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Subscription fees

The primary source of income for Acorns is the subscription fees it charges its users. The company’s pricing options are affordable for all users. Currently, Acorns offers two packages, which it names Personal and Family. The lowest package costs $3. This package falls under the Personal plan, which includes Invest, Later and Banking.

The Family package costs $5 per month. It includes all the features that come under the Personal plan. However, it also has an Early product, which is an investment account for kids. Both packages offer affordable options for users to use the platform’s services. The company also had a Lite package, which it has discontinued since then.

Interest on loans

As mentioned, Acorns accumulates and handles users’ balances. Usually, this balance stays with the company for a long time. Therefore, the company lends these amounts to various institutions, including banks. These institutions pay Acorns interest based on the agreed terms. Through this process, the company makes income.

Management fees

Management fees do not apply to all user accounts. Instead, Acorns charges a 0.25% annual administration fee on accounts with balances over $5,000. The company offers these accounts with more specialized and customized investment plans. However, these management fees do not include commissions on transactions.

Referral fees

Acorns has several partners, which it calls Found Money partners. These include over 350 associates that use the company to offer their products or services. Whenever Acorns refers a customer to those products or services, it charges its partners a referral fee. This fee varies from one partner to another. However, these incomes are minimal compared to the other income sources.


Acorns is a fintech company that specializes in micro-investing and robo-investing. The company uses automated systems to help users streamline their investment processes. Primarily, Acorns makes money from several sources. The sources fall under its business model, which describes how the company attracts business.

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