NewsWire: 12/02/2020
- New digital banks aimed at youth are hoping to become the next “Venmo for kids.” Apps like Greenlight and Starling help kids and their parents keep track of spending while also teaching lessons in money management. (Reuters)
- NH: For years banks have offered child saving accounts with minimum opening deposits as low as $25. And just as the "adult" banking world is going digital, so is the "kids'" banking world. (See “Pandemic Spurs Fintech.”)
- A growing number of banks and startups are creating banking apps for children. JPMorgan recently partnered with Greenlight to offer digital accounts for kids. Within one year, they have gone from 500K to 2 million accounts. Starling Bank, a UK-based digital bank, just added child accounts to their offerings. And apps like Copper Banking are only focusing on teen accounts.
- Some analysts have questioned the profitability of child banking. But while kids might not have much money now, many of these banks are introducing kids to their brands early to turn them into loyal customers when they're older.
- So what do these apps do? They allow kids to deposit small amounts of money for a minimal fee. With their account, they get a debit card and can digitally transfer money between family and friends. Through the app, parents can track their children's spending and even block it if they need to. Adults can also transfer allowances directly to the accounts.
- Analysts have compared these apps to Venmo, but they are fundamentally different. Venmo is not a bank. It's an app that works with consumers' established debit and credit cards to allow P2P transfers. These new apps offer actual bank accounts that additionally have built-in P2P transfer mechanisms.
- Cashless finance fits the Homelander peer personality well. Their finances are organized and in one place. They don’t have to deal with the danger of losing physical cash (siblings often have sticky fingers). And many of these apps make finance into a social media-like experience.
- Of course, the hands-on Gen-X and Millennial parents love these apps as well. It allows them to teach their kids about finance from a young age. And they can continuously monitor their children's every transaction. What’s a Homelander without an ever-watchful parent? (See “Don’t Go to That College Party...Your Parents Are Tracking You.”)
