New banks

New entrants spark interest in teen banking in the U.S.

  • Teen banking is seeing new tools and products.
  • While hard to monetize, new entrants are throwing their hats into the ring.
close

Email a Friend

New entrants spark interest in teen banking in the U.S.

With the rise of challenger banks, we’ve seen two different approaches to growth. The first, employed by the largest challengers like N26 and Revolut, is a horizontal approach. These firms target pretty much everyone who’s comfortable with a digital bank. They position themselves as a substitute to customers’ traditional banking relationships by rebundling banking, lending, and investing services.

The other path is more niche, catering to a defined demographic and providing services attuned to their specific needs. For example, Joust serves self-employed workers and OakNorth attracts entrepreneurs with lumpy cashflow.

Teens and their parents are seeing a new swath of options, too. Paris-based PixPay just closed an investment round to help expand its replacement for pocket money. Banking the ‘pre’-banked’ is becoming increasingly popular as tools and services are being built to help parents and their children learn about money and control its spending and saving.

Of the 2.2 billion children globally under the age of 18, about half of them live in poverty. The United Nations believes youth banking provides a path toward economic power and freedom. Generation Z also wields $44 billion in buying power.

The challenge of creating a company in this space is monetization. Because the end clients are children, providers find it hard to charge traditional bank fees. That leaves interchange fees and subscription fees as the obvious foundation for revenue models. Some of the banks targeting teens offer loans or plan to offer them in the future, as well.

The big challenger banks have teen offerings. Starling has a teen bank account, as does Monzo. Revolut is working on a highly-anticipated product targeting teens called Youth. N26’s roots were in providing budgeting and spending tools for young people. Visa offers its own prepaid reloadable Buxx card targeting parents of teens. Most large U.S. banks provide a form of teen checking accounts.

In addition to PixPay, Kard is like a European challenger bank for teens. These firms join Osper, a popular long-time favorite used by parents to help their children save and spend.

Here are some noteworthy competitors in the teen banking space in the US

Step
Step claims it built a waitlist of over 500,000 in just a few months. The founder hails from Gyft, a gift card platform, which he sold to First Data.

Total raised: $23.6M
Investors: Stripe, Sesame Ventures, Crosslink Capital and Collaborative Fund
Bank partner:Evolve
Revenue model: Free app, monetize lending and interchange fees

Greenlight
Greenlight has received investment by some of the leading financial institutions in the US interested in its technology that allows parents to control where teen money is spent.

Total raised: $81.5M
Investors: Ally Financial, New Enterprise, SunTrust Bank, Amazon Alexa Fund, Drive Capital, Wells Fargo, JPMorgan Chase
Bank Partner: Community Federal Savings Bank
Revenue model: Free app, monetize lending and interchange fees

Current
Current looks to subscription fees to monetize its 400,000 young users

Total raised: $52.6M
Investors: QED, Fifth Third Capital, Wellington Management
Bank Partner: Metropolitan Commercial Bank
Revenue model: Subscription fee, monetize lending and interchange fees

0 comments on “New entrants spark interest in teen banking in the U.S.”

New banks

‘We want to get to a segment of one’: Inside Citi’s 5 year plan for digital

  • Citi's digital channels have spiked in usage since the beginning of the pandemic.
  • The consumer bank's chief digital officer Mike Naggar shares where he's headed with technology.
Zachary Miller | October 20, 2020
New banks

Challengers Conference 2020: All the session videos

  • Challenger banks have grown rapidly in the U.S. market and incumbents have accelerated their digital banking products.
  • Last month's Challenger Conference addressed the most important issues facing the industry.
Tearsheet Editors | October 15, 2020
New banks

Navigating the ‘convergence’ of product streams: Conclusions from the Tearsheet Challengers Conference

  • Challenger banks have grown rapidly in the U.S. market; brands contend the opportunity is only getting larger with younger consumers feeling less attached to incumbents.
  • Direct-to-consumer models have potential among niche consumer groups, but some companies are pushing business-to-business partnership plays to diversify revenue streams.
Suman Bhattacharyya | October 14, 2020
New banks

‘Banking enables us to play a bigger role in our customers’ lives’: Stash CEO Brandon Krieg

  • The banking and investing platform has grown a lot during the pandemic.
  • CEO Brandon Krieg joins the Tearsheet Podcast to pull back the curtain on what's driving that growth.
Zachary Miller | October 08, 2020
New banks

‘We had the audacity to think big and execute on that bold vision’: Goldman Sachs internal memo includes interview with outgoing head of consumer business, Harit Talwar

  • Harit Talwar built Goldman's consumer banking business.
  • Now, as he transitions out of the role, he looks back on how GS transformed itself.
Zachary Miller | October 05, 2020
More Articles