For many of today’s kids, their smartphone is at the centre of their life. But without a payment card, it can be hard to make the most of the new digital world.
London-based start-up company, Osper, has created a mobile-only banking service for children aged 8-18. By combining a prepaid debit card and a smartphone app, it caters to both young people and parents alike, by giving children the freedom and experience of managing their money, while parents can monitor and control their children’s spending.
The recent financial crisis has helped shape both parents’ and children’s attitudes towards money. Many children will have seen their parents struggle with their finances, giving them a better appreciation for the importance of sound money management. Mintel’s Generation Next consumer trend shows that across the Western world, this generation of youths are drinking less, are less likely to take drugs and most notably, are reacting against the reckless spending and borrowing that played such an important factor in triggering the financial crisis.
Meanwhile, parents want to educate their children about the importance of managing their pocket money wisely. Mintel’s Saving and Investing for Children UK 2014 report, reveals some 42% of parent savers encourage their children to save their pocket money or gift money. However, many parents also have a strong desire to keep control over their children’s savings and investments. Nearly one third (31%) of parents would only consider opening a savings account that they or another parent/guardian could access and manage.
Osper offers an innovative answer for both the children and their parents. Young people can use the distinctive orange Osper card in much the same way as a normal debit card; in stores, to withdraw cash, and for online purchases. At the same time, the card’s safety features also prevent it from being used to purchase adult items such as alcohol, tobacco and online gambling. In this way, parents can allow their children a degree of responsibility over their finances, while not having to worry about how and what they are spending their money on.
The Osper card also features a dual app system, which allows the children to check their balance and payments, while simultaneously enabling their parents to monitor any activity as well as load money onto the card, through a separate login. This shared visibility allows for more open conversations between the parents and the children about handling money, which in turn facilitates the learning process. Either party can lock the account via the app in the event of the card being lost or stolen, helping alleviate any security concerns that parents might have.
Most UK banks make children wait until at least 11 years old to get a debit card, while some, including Barclays and Nationwide, only give cards to those 16 and over. In this respect, Osper has great potential as it can reach a market underserved by the banking industry.
However, Osper is not the first prepaid card aimed at kids and their parents. GoHenry, which is also aimed at 8-18-year-old’s, is a prepaid Visa card and follows the same principle, but users can also set saving goals and let GoHenry automatically save towards them. It also allows parents to set tasks so children can earn a little more and also invite relatives to contribute to the children’s savings.
While GoHenry was created by a small group of friends and parents, Osper was formed by former maths teacher and ex-Spotify executive Alick Varma. Neither company is a bank, and both offer something that is not currently available on the high street market. So far, they have first-mover advantage, but it would not be surprising if established banks and building societies are watching the pair intently to see whether this is a market worth learning about and investing in.
Their lack of scale however makes these start-ups vulnerable to the banking giants. Given their dominance of the current account market, and their insight into customers’ spending patterns, big high street banks would have a huge advantage when it comes to the marketing of this kind of card to parents. Not only would it enable banks to strengthen their relationship with their existing customer base, but it would also be a valuable way of reaching new customers at an early age, thereby building trust and the foundations of a long-lasting banking relationship.
In the 1980’s, banks attempted to capture the loyalty of a generation of kids with free piggy banks, sports bags and other giveaways. It makes perfect sense to use a digital approach to attempt to reach the digital generation of today.
For more information please see Mintel’s Saving and Investing for Children UK 2014 and Lifestyles of Children and Teens UK 2014 reports.
Chryso Kolakkides writes reports and analyst insights for Mintel’s UK Financial Services team, providing analysis of market trends and developments within the industry. Prior to joining Mintel in 2013, Chryso worked in a number of client-facing roles in the banking industry, both in the UK and abroad. Her experience ranges from retail banking to commercial as well as wholesale banking, managing client relationships with European financial institutions, companies and affluent customers internationally.
