Youth banking market heats up

  • By Christine St Anne

UK fintech Starling Bank recently announced the launch of a debit card for children, a move that is resonating in both the UK and Australian markets. 

Starling’s Kite debit card for children can be applied by parents through the bank’s app. It can be used by children under the age of 16 for spending online, instore and withdrawing cash from ATMs.

Parents can also check, control and limit specific functions such as online payments and ATM withdrawals, and set a daily transaction limit which can be controlled and adjusted as the child's financial needs and awareness grows.

Fintech specialist Marcel van Oost sees plenty of activity in the youth banking market both in the UK – as well as in wider markets.

Specifically to the UK he points to Challenger bank giant Revolut and its offering branded Revolut Young as well as GoHenry, the latter he believes to be a leader in that market. 

“Founded by a small group of friends who wanted a simple, meaningful and common-sense solution for kids’ money management, GoHenry had an exponential growth in recent years, proving that this market has a potential to scale there,” van Oost said. 

In Australia van Oost notes that the app Spriggy has gained a lot of press attention for being a new option for parents wanting to teach children about digital currency.

He also highlights digital money solution ZAAP as another initiative in Australia’s youth banking market.  

"In addition to a prepaid card, ZAAP provides a payment chip that can be inserted into a wearable wristband or into a mini silicone "keeper" that can slide onto an existing fitness band, watch or bracelet. 

The prepaid card is managed via an app that both the parent and child can access, each with different logins.

van Oost also points to neobank UP’s easy-to-use interface and features like scheduling payments and salary identification appealing to younger people. 

The cool cards

van Oost also sees scope for cards that give children more control. 

“What I like is the cool brands out there, like Kard and Rebellion.

“Kids can get used to paying with their own card and banking app, and still be cool," he said. 

“Of course, this is personal,” he quips adding: “I don’t think I would like to use a card that is completely under control by my parents at a young age. I am quite happy that my parents gave me pocket money in cash, and he could buy whatever he wanted from it.

Importantly he notes that initiatives like Kard and Rebellion also give children a bit more freedom, and less control by the parents,” he said. 

“Instead of Starling for example, that gives the parents complete oversight of the account.” 

Youth banking products play an important role in this, and a role that our research suggests is recognised and valued by parents, and good youth, Kate Wilson, RFi Group 

For RFi Group general manager Kate Wilson, young banking propositions are a reflection of the key trends playing out in the market including the accelerating decline in cash and shift towards card payments and the  high rates of digital banking. 

“We can expect that younger generations will be largely reliant on card payments and will monitor and manage their accounts via apps,” Wilson said. 

Wilson sees financial literacy underpinning the roll out of youth banking products. 

“Teaching children how to budget, without relying on cash, is something that financial institutions should be focused on to help support financial literacy and independence among current and future customers. 

“Youth banking products play an important role in this, and a role that our research suggests is recognised and valued by parents, and good youth,” Wilson said. 

Furthermore she believes that these products can help to support children in setting good money habits and, more broadly, can support financial wellness in the next generation of customers.

For van Oost, educating too is key in providing youth banking products but so too is the opportunity for financial institutions to target a younger group. 

“It is a great way to build your brand amongst younger targeted audiences,” van Oost said adding that in the case of Starling, the Kite account automatically converts into a full account when the child turns 18. 

“This generates leads for the bank at a young age hoping they will eventually turn into customers for their full products suits like credit cards, loan or mortgages when they progress in age and life”

Youth banking products will also play a key role in helping and supporting young people along their financial journey.

The latest study from RFi Group found that Australians will begin to take their finances more seriously as they become more independent and enter the work force. 

Source: RFi Group 

According to RFi Group research 71 per cent of consumers feel that they are thinking seriously about their finances by age 18 or 19. 

Additionally, around 1 in 2 consumers between the ages of 16 and 17 have started to think about their finances. 

“This highlights the importance of meeting these needs and providing youth banking propositions and tools for teenagers that will help them to support customers in setting and meeting financial goals,” Wilson said.