Money apps: how do they work?

Technology allows us to manage almost every single aspect of our finances through our smartphones. We can pay bills, invest, check our accounts and make money. But as most of these apps are free, how do they make their money?

Although the business model varies from app to app, they all have a revenue stream that ranges from advertising to referrals to subscriptions. Here are different app types and how they work:

1-    Money transfer apps

Apps like PayPal, Venmo or Dwolla are usually free to use, but they make their money by charging a percentage of every transaction. Venmo, for example, also has a social feed that eventually leads to advertising revenue.

2-    Investment apps

These apps are designed to make it easier for people to invest their money. Apps like Acorns and Stash charge $1 per month until you have $5,000 in a portfolio. Once you reach that number, they both charge 0.25% of your account balance.

3-    Billing and Invoicing apps

These apps, like Harvest, allow users to track and bill services. Harvest, for example, is free for one person and up to two projects, but will charge $12 per month for one person with multiple projects. Similar apps charge similar amounts, but they also make money every time you use their payment processing features or if you pay for other upgrades.

4-    Credit score checkers

There are some apps that will let you keep an eye on your credit score and get alerts for any unusual activity. The most popular apps are Credit Karma, Credit Sesame and WalletHub, which are free to use but make money through targeted advertising, loan management and referral partnership.

5-    Account aggregators

These apps are the ones that let you link all of your accounts in order to get a complete view of your overall financial situation. Apps like Mint, for example, make money from different sources, like advertising, product referrals, and from selling users’ aggregated data.

On the other hand, Personal Data gets its money from the management fees tied to their Robo-advising service

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