One of the main goals of the PS2D EU directive which enabled open banking was to create a more competitive landscape in the financial services sector. By developing an environment where traditional banks can securely share data with third parties, the scene was set for startups in all areas of the banking value chain to flourish. Fintech startups and challenger banks are now offering much more streamlined services, as well as innovative products that are changing the way people manage their finances. One big change is the increase in accounts and cards specifically for children and teenagers.
Traditionally banks have offered basic savings accounts for this demographic, but now a whole range of services are available from lots of different providers. By engaging the next generation, banks hope to secure them as future clients and at the same time to educate these individuals on money management at a younger age than has been the norm. As well as having a positive social impact, improving the financial knowhow of this generation means they are more likely to use a wide range of products and services from their bank in the future. For example, traditional bank customers don’t normally have an investment portfolio, something that used to require expertise and significant capital. Open banking has changed this by making investments more accessible to average consumers. The next generation will understand these products even more and be a good target market for them.
In the UK, Starlight, Gohenry and Monzo have launched debit cards specifically for children. These are designed so that parents can transfer money to the cards, set limits on spending and monitor purchases, at the same time as educating their children on financial management. There is some debate as to whether banks and fintechs should invest in a demographic that won’t give them returns until many years in the future, but it looks to be a promising strategy. US-based Greenlight goes even further with a feature where parents can list chores linked to pocket money for their children within the app. It also gives parents the option to pay interest on their children’s savings. It will be interesting to see further innovation in this area and also to see how these companies approach the educational aspect, something that will need collaboration with parents.