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

Rebundling banking services: Are fintechs trying to be more like banks?

  • Why are fintechs that have grown to a certain size continuing to pursue a banking license?
  • Luis Trujillo, CCO at Alviere sheds light on whether acquiring a license guarantees a successful banking business model for fintechs and if it constitutes a threat to banks.
Sara Khairi | January 09, 2023
Banking as a service, New banks

The Big Bank Theory Conference 2022: All session videos

  • Tearsheet's Big Bank Theory Conference brings together the most innovative players changing the face of the financial institution.
  • Here are the videos from this year's conference, held in December online.
Shabih Rao | December 21, 2022
Modern Marketing, New banks

Embracing ‘side bank’ status: 5 questions with Aaron Wollner, CMO of Quontic

  • As a community bank turned digital bank, Quontic has its own unique challenges in sticking out of the crowd.
  • In this Q&A, CMO Aaron Wollner talks about what’s new in the digital bank’s campaign work and how it’s been shifting its messaging to fit the current financial climate.
Rivka Abramson | October 19, 2022
New banks, Sponsored

Creating a winning neobank strategy through differentiation

  • There is a notable opportunity for neobanks to fill gaps that currently exist in traditional financial services, especially since they are free of the restraints of dated technology.
  • However, to be effective, they must identify a primary differentiator or central mission and then build the user experience around that north star.
Praxent | October 18, 2022
Member Exclusive, New banks

Banking Briefing: Will WFH become a thing of the past?

  • Banks are pushing to get employees back in the office – but what will that do for their efforts to attract tech talent?
  • Meanwhile, gender inequality is alive and well in the banking industry. Here’s what one bank is doing to try and solve that.
Rivka Abramson | September 12, 2022
More Articles