At some Banks, you can open a new bank account and send the first money within 5 minutes as we wrote in the previous article with FinTech Insights by Scientia. This gives banks a big advantage to smoothly onboard a lot of clients. However, the disadvantage is that they can leave as easily as they came. Thus, banks are looking for new ways to keep them.
A lot of challenger banks are using strategies that can be seen in many other industries. Focus on kids to bring and keep the parents. McDonald’s and their happy meal with toys, gardens with climbing frames, or balloons for kids. The trick is that with kids usually come parents as well. Challenger banks realized that and started to provide banking services for teenagers.
Once again we joined forces with the Scientia team and their FinTech Insights, the digital banking research platform, to compare several challenger banks’ junior accounts from parent’s and kid’s perspectives.
Why account for kids?
Before we jump into the detailed data comparison, let’s elaborate on why those accounts are so potentially beneficial for the companies. It is obvious that the child is not going to receive salary on the account (some pocket money at best) and it is also not going to take any loans. Therefore spending precious effort and not less precious finances on a “kid account option” development and maintenance may seem like a waste of potential to some.
The thing about kid accounts is that they provide all the benefits in the long run. Most customers stick to their first bank for life, meaning “getting them first” has a huge appeal in the long-term view.
It is also seriously more expensive to get customers to switch banks than to get them banked from their early teens.
Aurelien Guichard, product owner, Revolut Junior, says: “Conversations about money typically start at home and we believe these skills are gained little by little, through experience and with help of parents and guardians. Revolut Junior ‘grows’ with kids until they are eligible for a standard 18+ account so that once they are independent, they have the financial skills and literacy to avoid potentially costly mistakes.”
Incumbent banks and challengers tend to increase customer engagement as they provide more (digital) products. The result is that through the use of multiple products the banks become all the more central and useful in the customer’s daily financial lives. They become attached and used to using their digital banking services.
The marketing aspect of providing an account of children works very well for the company’s image. The digital banks point out how important it is to teach children financial literacy and make them more aware of financial skills. And they are not wrong.
Also, the kid account provides a safe space for parents and kids to know where the money is being spent and how. This offers parents a means to be in full view of kids’ spending and protect them against all kinds of potential fraud.
“We developed the Teen account to help young adults continue to learn good money management skills at a period when they are seeking more independence in all areas of life,” said Louise Hill, co-founder and COO of gohenry.
Anne Boden, CEO and Founder of Starling Bank, said: “Understanding the value of money and learning skills such as budgeting and saving from a young age, can help people lay the foundations for them to achieve better financial wellbeing later on in life. We want Starling Kite to encourage families to talk about money together and not see it as a taboo subject.”
Starling’s Kite cardholders will be invited to open a Starling Teen account after reaching the age of 16. This account automatically changes to a Starling personal account after their 18th birthday.
Now let’s take a closer look at four of the children accounts that are currently available in Europe: 1. Revolut 2. Starling Bank 3. BlackCatCard 4. GoHenry
What is the functionality distribution for each one?
Take a look at the features breakdown offered for each one of these junior accounts. This will show you how each feature works. Revolut, Starling Bank and gohenry offer both applications and therefore have digital features for parents and kids. Blackcatcard offers an application for parents only through which they can give their kids a debit card.
Which one stands out and why?
After the comparison, Revolut stands out as a digital bank that offers Junior accounts due to its higher number of features offered both for parents and kids. With Revolut’s financial super app, parents can use their own accounts within Revolut to seamlessly fund their kid’s account so they are able to manage and oversee the Junior account.
While gohenry offers the most features for kid customers, the parent needs to link a debit card of another bank account outside of the application or set up a recurring funding transaction to their account. This still means that parents are able to manage and oversee the kid’s account. However, in order to transfer any money from their version of the app to the kids, they also need to have another bank account linked to it (e.g. link their HSBC debit card to withdraw money or set up a standing order to gohenry account).
This image shows the total number of features offered by the gohenry, Revolut Junior and Starling Kite apps which are the apps that kids use (the kid’s version of the app).
Steps of KYC process (performed from the parent)
What is the future of the “kids account” phenomena?
This is a huge opportunity for all the banks to educate kids and make their parents’ lives easier and safer. We believe that this trend just started and we have seen only the very first approaches. Many incumbent banks will introduce kid and family apps, in order to embrace and serve family banking needs.
Let’s also not forget that this is a banking service offered for many years by traditional banks and credit unions around the world, but only through legacy channels (branches) and with old-fashioned banking products (i.e. family accounts, kids custody accounts, etc.).
We also believe that many challengers will be born, focusing only to serve kids and their specific needs, which will be far away from banking as we know it.
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