How neobanks reach out to the younger generation of consumers
Millennials are no longer the youngest bank customers. Even the older generation Z – nicknamed “Zoomers” – are entering the workforce. Most of the financial industry is still aimed at Millennials and is only now targeting older Zoomers. It’s easy to justify this focus as millennials continue to be a very important market.
On the flip side, neobanks, whose clients are usually already younger, quietly feed teens and the generations that follow them – especially Gen Alpha, which includes any child born since 2010 – many of whom are still at years of traditional banking.
How? ‘Or’ What? With unique bank accounts and mobile services.
It is not a dissenting tendency. Some fast-growing fintech players are promoting these unique solutions to young consumers. Revolut and GoHenry are two major accounts, but others that specialize in teen and children’s bank accounts include Copper, Greenlight, Jassby, Osper, RoosterMoney, Current, FamPay, Monzo, and Step.
Executives of financial institutions can be very confident in caring for Gen Z and Millennial customers. But the competition is betting big on the generations still on the horizon.
Some mega-banks have created products similar to those offered by neobanks, most notably Chase – with its Chase First Banking service and high school checking account – Capital One, Wells Fargo and PNC, as well as Axos direct banking.
However, many legacy vendor child account promotions are not as flashy or creative as they are with neobank products. Although there is no data to prove that traditional banks and credit unions are more or less successful with these young audiences, it is essential that they keep an eye on the competition that centers their strategies. for generations to come.
( Read more: Presentation of the world’s first interactive directory of exclusively digital neobanks)
Gamechanger: phones in children’s pockets
Certainly, traditional financial institutions have always allowed adolescents to open checking and savings accounts, usually under the responsibility of their parents. And it worked – that’s how many current customers first discovered the bank.
“Much of what we had seen before regarding customer acquisition – especially younger consumers – was based on where their parents banked,” says Stephen Greer, senior analyst at Celent The financial brand. The bells and whistles of ten years ago weren’t extravagant. These were simple incentives such as free account openings for your child.
But, the game has since changed. And it’s not because teens have more needs or even different needs. This is because they now have a phone in their pocket with a deluge of intriguing apps.
“A teenager doesn’t need a lot of these extra products,” says Greer. “But they might find it really compelling that they can integrate social media into some of them so that they can have something that looks cool that they can use to pay their friends.” This explains why Venmo, with its social media component, is so popular among young people.
No matter where children’s needs lie, Covid-19 has raised financial concerns at all ages. In a GoHenry survey based on data from January to December 2020, nearly three in four children aged 6 to 18 said they were more concerned about money since the start of the pandemic (broken down, this is 78% from 6- to 10 years old, 72% from 11 to 15 years old and 70% from 16 to 18 years old). GoHenry is a mobile application specializing in bank accounts for children and adolescents.
The Challenger Banks have recognized that there is a gap between what kids need and what they want now. Cutting-edge technology helps. While a wad of legacy institutions still run on “decades of core technology,” Greer believes the key is finding the elements of the banking experience that resonate with younger consumers.
Greer goes on to explain that neobanks are betting big, creating a simple experience now for the younger bankers – in the hopes they don’t go to big players, like Wells Fargo, Chase, and Bank of America. Then, once the challengers understand the kids, they can deploy suites of banking products that meet the needs of those consumers to create what Greer calls a “sticky relationship that sticks around.”
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Colorful, interactive and personalized
The proven method of teaching kids is to make it fun. Even Verizon is jumping on the youth banking trend, after announcing the launch of its new “Family Money” program.
( Dig deeper: Verizon infiltrates the banking industry with a neobank-type strategy)
Take a look at the difference between the home page of Chase First Banking and that of Revolut, which offers banking software for children in addition to its full suite of products. What looks more fun?
Or check out the (still in development) website of Copper, a neobank specializing in teen banking. Or on the homepage of Osper, which advertises Nickolodeon-themed debit cards.
And the features aren’t conventional either. Ten years ago, parents paid their children’s chore allowances in cash. Maybe the money was lost or it was sent in a cycle in the washer. It wasn’t until kids realized the value of money in their early teens that the kid and parent went to the bank to open an account.
Now, as more and more kids have cell phones, it makes sense for parents to be able to “send” money to their kids after marking completed chores on a digital to-do list. Easy, fast and don’t worry about dollar bills stuck under the bed anymore.
And there is a lot of money flowing between parents and children. GoHenry found in his report that American children collectively made $ 27.2 billion during 2020. The bulk – $ 25.5 billion – came from allowances.
Neobanks are getting tricky with mobile children’s bank accounts. While kids shop online, parents can monitor and set spending limits to teach them healthy spending and saving habits.
Osper, for its part, has a budgeting wealth management system built into its app so kids can save for what they want over time – and see the best ways to do it. GoHenry has a debit card with parental controls.
That’s not to say that traditional financial institutions aren’t staying one step ahead. Chase First Banking says parents can also set spending limits for certain locations – maybe $ 10 on Amazon, $ 10 in restaurants, and $ 20 everywhere else.
( Read more: Gen Z says they can’t wait to use big tech for banking – but will they? )
There’s still plenty of time… isn’t there?
Banks and credit unions are in no hurry to get rid of their old models. While the toll-free account is the priority for young consumers, Greer says, traditional financial institutions are reluctant to abandon their profitable models.
However, there is a feeling – and an acceptance – “that some sources of income will not be the cash cows they once were,” he adds. “Margins are squeezed everywhere. “
While banks and credit unions want to improve their digital game, it’s easier said than done and expensive. It will most likely start with fintech partnerships, according to Greer, to create an ecosystem that works for the younger generations.