Arunkumar Krishnakumar is a Venture Capital investor at Green Shores Capital focusing on sustainable deep-tech investments.
Catch ‘em young is banker marketing mantra – people rarely change from their first bank. UK with c. 20% of the population under 18 is an example. This is where top neobank Revolut offers “Revolut Youth” for 7-18 years old. Neobanks cannot use the parental inertia route (use the bank that parents always used). This is a parent controlled child account – parents make the decision, but sub accounts are specific to the child – appealing to parents with low fees, controllable, educational. Good for both parent & kids = winner.
Just when I think Fintechs are starting to run out of ideas, I see one that is focusing on kids and teenagers, and my hopes are up again. Almost about a year ago, I did an interview with Arman Rousta, the CEO of Kidcoin.
It was with so much enthusiasm that he described why Financial education at an early stage would help kids with real life challenges as they grow up. Arman explained that kids learn the concept of value at an early stage – as they bargain toffees for good behaviour.
Since then, there have been a series of Fintech firms focused on kids, teens and the next generation of potential users.
As per the Office of National Statistics in the UK, about 20% of the UK population are under 18 years old. That is approximately 13 Million kids. In the context of the UK, that is a shrinking market due to the ageing population, but still a big market. Many top Fintechs have started looking into this space.
Revolut is looking to launch an experience called “Revolut Youth” for 7-18 years old. The roll out will involve first creating a parent controlled child account. In the UK children of this age range earned about £4.5 Billion in 2018. That is roughly about £350 per child per year.
This may not look like a lot of money for a bank. However, these children get absorbed into mainstream Revolut accounts as soon as they hit 18 years of age. As per behaviour of account holders go, customers tend to stick to their first bank account for life. Therefore, this is definitely a market to tap.
On the other side of the pond, Atlanta based Fintech startup Greenlight raised $54 Million in Series B funding. Greenlight provide a debit card and a financial education platform for kids. JPMorgan and Wells Fargo participated in this funding round. The idea is to train kids with financial concepts, and teach them about the importance of saving money at an early age.
The Greenlight app allows children to perform chores and earn money through that. They can also receive funds from parents, with limits defined on spending. Parents will receive alerts when their children spend. The app also allows kids to have savings goals, and allows parents to decide the retail outlets that kids can shop in. The app has brought over 500,000 customers to Greenlight so far.
Greenlight offers parents an opportunity to build that core competency of financial literacy in their child’s formative years.
– Thomas Richardson, Head of Strategic Partnership Investing. Wells Fargo
Another startup, that focuses on Children is Go-Henry, which is a Children’s pocket money card. They have a similar proposition to Greenlight. They put the parents in control by providing them spending alerts on the childrens’ accounts. Kids can learn about money through completing tasks, spending responsibly and working towards savings goals.
While most of these existing apps onboard children through their parents, US based firm Step and France based Kurd, directly go to Children and involve parents in the onboarding process (KYC). It is a riskier strategy, but Kurd reports a 80% success rate with onboarding.
With so many different players getting into this market, and a few different approaches being tested, this space is getting really interesting. I personally believe that Neobanks have an edge here. Revolut has got their noses ahead, can they stay there?