If J.K. Rowling were to write her fantasy novel about the young wizard Harry Potter today, she’d probably make him pay for his wand via an online transaction rather than visit the goblin-run Gringotts Wizarding Bank in London’s Diagon Alley with his giant friend Hagrid. And George Banks, of Mary Poppins’ fame, wouldn’t take his children to his stern bank branch to invest their tuppence, but rather get them to do so via a mobile app.
The combination of an increased penetration of smartphones and mobile broadband with a new generation of tech savvy and impatient millennials, who like to get services at a tap of their smartphones, is disrupting a great number of industries including finance. New mobile payment methods along with person to person lending may make bank branches, as we know them, as obsolete as Olivetti typewriters or public-phone tokens.
“I talk with millennials and they mention that they have never ever set foot in a bank branch,” said Robin Tiegland, a professor of business administration who specializes in Strategic Information Systems at the Stockholm School of Economics in emailed comments. “And I can’t remember either the last time I went to a bank in Sweden. I do everything online.”
VCs invested over $13.8 billion in a variety of fintech companies globally in 2015, more than double the value in 2014, according to a KPMG and CB Insights report published in March. Overall fintech investment in 2015 totaled $19.1 billion compared with $12.2 billion in 2014 and just $2.4 billion in 2011.
This disruption is changing not only the way we bank and pay but also the way we play.
Hasbro Inc. will be launching its Monopoly Ultimate Banking game in August this year, in a new version of the much loved 81-year-old board game that will see cash money replaced with credit cards and a banking unit that will help players track their wealth and buy properties.
“Hasbro continues to update our gaming brands to keep them relevant for kids and families today,” Jodie Neville, vice president of marketing for Hasbro Gaming said in emailed comments. The ultimate banking version, a new take of an electronic banking version launched in 2007, “is inspired by the way people today interact with money electronically,” Neville said.
Companies have an incentive to try and make their games more technologically sophisticated, Matthew Hudak, a toys and games analyst at Euromonitor International said in emailed comments. “With constant competition from other readily available means of entertainment, like smartphones, game makers have been hard pressed to keep the attention of children.”
The increasing consumer trust and comfort with online and mobile financial products and the rapidly growing acceptance of prepaid cards as a handy financial tool have spurred the formation of virtual family banks such as FamZoo, which launched its first prepaid card product in mid-2013. The platform allows parents to teach their kids “good money management habits,” said Bill Dwight, a father of five and founder and CEO of the company which at the moment caters to 1,975 paying families in the United States.
FamZoo allows parents to issue pre-paid cards and create IOU or prepaid accounts in which they can inject funds for their children and supervise and update these amounts as needed.
“Prepaid cards have become the digital equivalent of the cash envelope,” Dwight said in email comments. But a prepaid card is better, because it can “be used as easily online as in stores, it automatically tracks purchases, it can be locked and it comes with protections,” like insurance.
The children sign in separately to access their own accounts and spend and keep track of their money in a safe and parent-monitored environment.
“Insanely busy parents simply do not have the time or the patience to visit a branch to open accounts for their kids. They want to do it all online in just a few minutes,” Dwight said. They also want to be able to move money safely and easily to their kids in arbitrarily small amounts with “zero fees, zero delay and zero risk of debt,” he said. FamZoo’s work in “linking prepaid card accounts together with our custom family software satisfies these needs.”
Dwight is the founder and sole investor in the company and has no plans to raise outside capital at the moment. “The children in FamZoo families range from preschool through college. So our potential reach is all the families in the US with kids in those age ranges,” he said. “We’ve only scratched the surface of what we plan to deliver.”
Similarly, Osper, a banking service for 8-to-18-year olds, allows families to issue pre-paid debit cards and use the Osper App to give their children financial independence in a guarded environment. Via the app children can check their balance and keep an eye on expenses, while the parents can instantly load money onto the cards from the app, set up regular pocket money payments and get notifications on their phone when there are failed transactions or insufficient funds.
Mobile phones and apps are also making it easier for children to access the stock market.
Palo Alto, California-based Stockpile was set up after CEO and co-founder Avi Lele discovered one Christmas that there was no easy and cheap way to give stocks as a gift to his nieces and nephews, after he was stonewalled by bureaucracy such as social security numbers and brokerage accounts and the price of some shares. “It was so hard to do, I just gave up,” he said in an interview with Tradestreaming in November, after the company in October closed a $15 million investment round.
The company has created stock gift cards that can be bought online or at retailers such as Safeway or Kmart, which allow recipients to own $100, $50 or $25 worth of stocks of companies ranging from Apple Inc. to The Coca Cola Company and Facebook Inc. The person who gets the gift enters a code, signs up for a brokerage account in just a few minutes and gets real stock. In a way, these gift cards are a modern version of the savings bonds children used to get once for birthdays or Bar Mitzvahs, Lele said.
Stockpile built a “fractional shares brokerage from scratch to power all of our gift cards and other stock transactions,” Lele said. “Fractional shares allow you to buy any dollar amount of any stock you want, regardless of how much one share costs.”
Lele, who says he is turning stocks into a consumer product, says these gifts give children financial literacy that is fun and is “more meaningful” than the toys they play with for a couple of times and then toss away. Stockpile, which placed 43rd on KPMG’s Leading Global Fintech Innovators 2015, was founded in 2010 and is privately owned. Investors include Sequoia Capital and actor Ashton Kutcher.
These online platforms fit into the fintech ecosystem in that they “are some of the many solutions that are enabling the movement to a cashless society, where significant fintech investment activity is occurring,” Tiegland, of the Stockholm School of Economics, said. Children, who have traditionally used cash because they were too young to get credit cards, are thus among those affected by this transition, she said.
So then, is the future of board games as shaky as that of bank branches, as the role of smartphones and the Internet takes up an ever growing chunk of children’s lives? Perhaps not, said Euromonitor’s Hudak. Nostalgia is the key.
One of the biggest selling points for games like Monopoly or other classic games “is that parents have some level of nostalgia for them because they played them as a kid,” Hudak said. “This encourages them to buy for their children, who themselves may become nostalgic for the brand once they become adults, and buy it for their own kids.”