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New Online Banking Report Published on Youth Banking: Attracting Tween, Teens, & Under-25 via Online/Mobile

By Jim Bruene on July 18, 2011 1:05 PM | Comments (2)

clip_image002We were still in the Web 1.0 world when my kids (teenagers now) started their first savings accounts. So there were few youth banking services available to facilitate online savings and spending.

Fast forward 10 years. We have Facebook, we have Twitter, we have mobile weather info. But we still have virtually no youth banking tools at the major U.S. banks (Wells Fargo is furthest along, see screenshot below).

And that makes no sense.

There are 100 million people under age 25 in the U.S., and obviously, 15 to 25 years from now, a good portion of your profits will come from this group. However, in the next five years, this cohort will generate exactly zero percent of profits.

In the branch-based past, it made business sense to wait another five years to start selling to this group. After all, high-school graduates closed their bank accounts when they moved to college. College graduates closed theirs when they moved to their first job. And first-time job holders switched accounts when they landed a better job, and so on.

But that was a different time. In today's remote-banking world, THERE IS NO REASON TO EVER CLOSE YOUR ACCOUNT. You just send in a change of address and keep logging in to the same place.

A 12 year-old girl today is expected to live another 70 years (boys, only 65 more). So if those kids won't ever need to close their accounts, it stands to reason that getting them hooked to their parents' online banking becomes pretty important.

That's why we are seeing interesting startup activity in this area including (from recent Finovates):  image

  • Bobber Interactive
  • Kiboo
  • MatchFund
  • MoneyIsland (from BancVue)
  • Thwakk
  • Tile Financial 

And there is a rush to social media, such as the brilliant Young & Free campaigns invented by Canada's Currency Marketing.

Finally, the report includes articles from two industry experts:

  • Justin Hosie of Chambliss, Bahner, & Stophel PC on the importance of bank compliance with the Children's Online Privacy Protection Act (COPPA)
  • Matt Cullina, CEO of Identity Theft 911, writes about the importance of protecting your kids against identity theft

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About the report
______________________________________________________________

Family Banking: Online/Mobile Services for Tweens, Teens & their Parents (link)
In a remote banking world, your most-promising prospects aren't even driving yet!

Published: July 15, 2011

Author: Jim Bruene, Editor & Founder, Online Banking Report

Length: 52 pages (10,000 words), 52 Figures, 7 Tables

Cost: No extra charge for OBR subscribers, $495 for everyone else (here)

Abstract here

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Wells Fargo offers up solutions for four age groups (18 July 2011; link)

Wells Fargo's offers up solutions for four age groups (18 July 2011)

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You are 100% correct in that the cohort of under 25 will generate NO profits for a bank in the next 5 years. Unfortunately, the reality is worse than that. Banks will LOSE money on this cohort for a period much longer than 5 years - when accounting for acquisition costs and ongoing operating / support costs.

It is true that Bank relationships can be maintained forever given the advancement of online and (soon) mobile banking. However, the average tenure of a banking relationship is only 3 - 7 years thus the expectation of life long relationship with a customer is not so realistic.

This demographic is ideally suited for the mega-banks, and really for the likes of BankSimple and MoveNBank - at least for now. Most Community Banks, smaller Regional Banks and all but a handful of Credit Unions will be unable to keep up with WOW factor required to maintain these relationships (think technology and brand implications).

Although this is probably not the direction of the research paper, we believe that this cohort is not a good growth strategy for 98%+ of banks / credit unions. All but the largest and "youth-focused" Banks will have an opportunity to win this demographic once they become established and their banking needs grow more robust.

Thanks Serge

Great points.

We are suggesting that banks/CUs tightly integrate kids' accounts with those of their parents. That way, they can be serviced cost effectively, there are virtually no acquisition costs, and the younger generation has no reason to open accounts at other banks.

Any FI can do this without breaking the bank, assuming their online banking vendors are building these features. --Jim

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