As new challenger banks and financial products emerge, one trend we’re seeing is the targeting of teens. These soon-to-be-adults are experiencing choices in personal finance and banking apps that' they've never had before. Greenlight is a leader of this new generation of services and products. Founded about 5 years ago, the firm is rapidly growing with nearly 1 million users using its platform to help educate and manage young financial lives.
CEO and co-founder Tim Sheehan joins me on the podcast to discuss what problem Greenlight solves and how families collaborate around the financial app. We also drill down into the macro trends that are encouraging the development of new financial tools for the younger generations. Lastly, he shares his view on where Greenlight may head in the future.
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The following excerpts were edited for clarity.
Starting up Greenlight
I learned a lot about personal finance from my parents. Essentially, we're trying to help all parents let their kids learn all these things with Greenlight. It's things like spending wisely, learning the importance of savings and investing, and understanding credit. If you talk to a parent, they all want their kids to be smart around these things. We're just trying to provide the tools to make it easier for parents to teach their kids.
Theres's a section called Earn which has chores-tracking and allowance automation. So, kids can learn that money doesn't grow on trees. There's a spending component that parents can instantly get money to their kids and retain oversight with parental controls around the debit card. There's a built-in giving account for parents that want to teach their kids to give back.
There's also a savings account that has a parent-paid interest rate that parents can set to reward their kids for saving. The average rate across all our customers is 18 percent APY, which is pretty generous. We'll be adding in an investment component soon, as well.
Building versus partnering
The whole product is ours. We have a partnership with Community Federal Savings Bank so that the funds are FDIC-insured. It's a true financial product with all the protections that go along with that. The reason we've built all this software is so that we can deliver a compelling user experience. We want parents and kids to actually use the product and find it easy to use. If it's fast, simple and easy, they'll use it in their everyday lives. That's how kids learn. We're big believers in learning by doing. You can have the best product in the world, but if people aren't using it, it's not going to last.
Solving a problem with the product
First, it starts with solving a real problem in the market. Parents aren't carrying cash as frequently as they used to. Because of that, they don't have the cash to give to their kids. That could be money for a school fieldtrip or a sport's traveling team. We've solved that problem by making it easy to choose the stores and how much can be spent for the kids. By doing that, you have this built-in usage.
I'm a big believer that nice-to-haves are death for products. It must be a must-have, solving a real problem in the market in order to be adopted.
It's really all parents. We have parents with young children who are mainly using chores-tracking, savings, and allowances because the kids aren't really out on their own. We have families with older kids using the spending and giving components. There's a lot of excitement around investing for the older kids.
User acquisition and marketing
It's what you might guess. We use digital channels, including paid search and social. We have the ability to find parents looking for a solution. We're testing some new channels and will see how those go.
Honestly, I think we found a new area that didn't see a lot of activity. The only thing you could point to is the traditional bank youth account. It wasn't particularly a compelling product for kids. From a pure product perspective, it wasn't particularly engaging. The reaction parents and kids have when they hear about Greenlight, they say that they've been looking for something like what we offer.
Why more firms are targeting kids
There are probably a few macro trends. One is the declining use of cash. Number two is the growth and prevalence of smart phones among adults and teens. Third, there's a stronger parental desire for their kids to be smart about money.
I think you'll see us flesh out more in the personal finance spectrum. You can think of the other personal finance topics that would make sense to teach kids about.