Smart banking products purport to make youth money-smart(er)

Locked cardA pair of headlines grabbed my attention this week. 

The first came courtesy of Finextra, which reports that Greenlight, the “smart” debit card for kids, just acquired an additional $54 million in working capital. This is thanks largely to dollars put up by Drive CapitalJPMorgan Chase, and Wells Fargo during Greenlight’s Series B fundraising round. The B round generally occurs after a company has reached certain mettle-showing milestones, which Greenlight seems to have pulled off. “Since launching in 2017,” reports Finextra, “half a million parents and kids have signed up.” The card is marketed as a tool for creating financially savvy kids.

The second came courtesy of The Financial BrandApparently a good number of Gen Z-ers—for those experiencing difficulty keeping straight which letter goes with whom, that would be people up to about age 24—are “racking up tremendous debt”:

Generation Z has acquired a reputation for being financially conservative, but that’s not the whole picture by any means. This generation began adding on consumer debt as soon as its members became old enough to take out loans and credit lines, and has continued to add more debt ever since, according to research from TransUnion … TransUnion research finds that 14 million Gen Z consumers—44% of this generation—were carrying some type of consumer credit balance as of the second quarter of 2019. That represents an increase of 27% over the second quarter of 2018.

So perhaps smart products aimed at teaching fiscal responsibility to Gen Z and post-Z, aka Generation Alpha, are needful.

Accounts targeting youth are nothing new. But until recently, most were little more than no-fee deposit accounts dressed up in young people’s clothes. More recent iterations, such as Capital One’s Kids Savings Account and others are complemented by an app giving full and limited control, respectively, to parents and kids. Still, most fall short of Greenlight’s functionality. The latter comes rife with parental controls: parents limit stores where the card can be used, link access to chore completion, transfer allowance directly to the card, and receive real-time alerts. 

To wit, the Finextra article noted:

Thomas Richardson, head, strategic partnership investing, Wells Fargo, says: “Greenlight offers parents an opportunity to build that core competency of financial literacy in their child’s formative years, through its innovative, interactive and fully digitized product offering.”

Not that Greenlight is the only “smart” banking product for kids out there. gohenry touts pretty much the same lineup of features, from real-time transfers to alerts and task-linked allowance. So do the likes of FamZoo, TD Bank’s TD Go, and Akimbo. The last, Akimbo, is positioned not just for kids but for any family member—even the family dog—and allows separate cards per budget item. (Quick trivia survey: How many readers know what akimbo means? The product name earns coolness points in my book.)

Digital payment technology has created something of a two-edged sword: with the ability to move funds faster with minimal fuss comes the ability to spend faster than the speed of responsible thought. A rash of products to help consumers better reign in the spending impulse is needful, responsible, and perhaps inevitable.

And, it’s smart marketing. Offering youth accounts is an eminently pragmatic tactic for the financial institution that wants to—pardon my bluntness—survive its oldest customers. And since financial institutions tend to fare better with clients who remain solvent, any account that comes with tools for helping clients better manage finances benefits both sides.

There is no better product category than the one labeled Win-Win.

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