Children and young adults: fintechs find a new and thriving customer base
In today’s increasingly competitive world adults are no longer the only ones thinking about making and increasing their money. These days, children are joining in the race of growing their wealth!
New-age neo-banks and fintech apps, specifically targeting children below the age of 18 years, are not only helping kids track their pocket money and expenditures, but are also teaching them important financial skills, such as saving and compound interest rates.
With children under the age of 18 constituting nearly 41 percent of the country’s total population, this new and large market contains untapped potential, and is fast becoming a critical focus area for the ecosystem.
Startups such as Birdfin, a fintech app that teaches children money management through gamification; FamPay, India’s first neobank for teenagers that lets parents track spending and savings; Finin, a neobank that provides AI-driven insights on expenditure and tracks savings; and Walrus, a payments app for teens, are creating big waves in the fintech for children and young adults category with their creative offerings.
Most of these apps have some common features like:
● Pocket money transfers from parents’ accounts to the kids’
● Parents being able to track their children’s expenditure
● Goal-setting where the user can set up “goals” and save money consistently until they have enough to buy what they were saving for
● Earning money for chores set out by the parents
● AI-led insights into the user’s spending and saving habits accessible by the parents and children
These days, startups with specialised offerings are integrating with specific aspects of the children’s lives — from apps that allow students to pre-book their canteen meals, pay for special after-school classes to ones that even help plan funds for higher education — driving value for not just children, but also their parents.
For instance, EduFund helps children and parents save money for higher education. The child inputs their college preferences and the country they want to study in and the app shows various investment recommendations based on the time remaining for the said course and how much funding they need.
EduFund encourages children to save up their allowances and contribute towards their higher education, in conjunction with their parents.
“Our children are the future, and we should do everything in our power to enable and accelerate them. For parents, nothing should be more important than thinking about their child’s tomorrow, today,” Eela Dubey, Co-founder of EduFund, tells YourStory.
Catch ‘em young
Children having access to financial apps not only helps them gain discipline when it comes to money, but also introduces them to financial knowledge parents might lack. Fintech apps geared towards young users tend to offer several learning opportunities, along with basic features, so that financial jargons and instruments aren’t an alien concept to them.
In India, over the last two years alone, nearly 10 startups offering financial services to children have been launched. Many have tied up with companies like Visa, Mastercard, and banks such as DBS and ICICI to offer a wide range of services, or have been launched as a unit of a neo bank that specifically caters to young adults and children.
Behavioural researches conducted showed that for Gen Z, digital banking is how they are likely to carry out financial transactions. A Forrester Research survey said that only 38 percent of Gen Z preferred, or would prefer, to communicate with their banks over the phone, versus 49 percent for Gen Y.
Fintechs have also recognised several long-term positives of catering to this impressionable age group.
Getting children used to digital wealth makes it easier for them to become more involved with financial tools — such as online banking, investments, and insurance — early on in life.
For the ecosystem, more users mean more regulatory oversight and compliances, which ultimately creates a stronger online ecosystem where there are several layers of protection against cybersecurity violations such as data theft, and fraudulent apps and services that scam people.
More users also mean more innovation at competitive prices as startups strive to attract as many users as possible.
“Fintech companies that cater to children help them become financial savvy by teaching them the importance of investing and inculcating a habit of saving. GenZ is very comfortable using internet and in this digital age, parents can take the maximum advantage of teaching their children about importance of savings and investing,” says Saumya Shah, Founder of Tarrakki, a mutual fund investment app.
“The goal of fintech companies that cater to children is to make them financially stable as they become older,” he adds.
While the market size for fintechs catering to children and young adults is not immediately discernable since it’s still in its infancy, the fintech market, overall, is projected to grow to $85 billion by 2025, from $26.3 billion in 2019, at a CAGR of 22.7 percent according to ResearchAndMarkets.com — and financial technology firms that focus on the adults of tomorrow are poised to take a big slice of the pie.
Edited by Saheli Sen Gupta