In the digital era where teenagers might keep their bank accounts for the next 80 years, it's important to offer services that encourage kids to sign up for a bank account. There are some cool ideas around financial education, money management, and gamification which we explored in our Online Banking Report earlier this year (note 3).  

But what's the one issue that really drives parents' behavior towards their kids? Fear. Fear for their physical safety on the way to school, fear of bad influences at school, and fear of the idiots kids will encounter online. The list goes on and on. 

You may not be able to protect kids from Facebook bullies, but you can help on the money side. Financial institutions can offer services that help protect children from online scams, ID thieves, and so on. You can offer prepaid cards with controlled access. You can keep parents apprised of their child's spending so they can recognize early-warning signs of dangerous behavior.

It's win-win product development. Parents will pay for it through fees and/or loyalty. You'll lock in more youth accounts, and everyone will get a bit more peace of mind.

Bottom line: While family financial security is a promising area, it's no small project. Most banks will need partners to provide at least some of the services (credit-reporting specialists, account-aggregation providers, data analytics, and so on). But once the data feeds are available, they can be bundled together into different packages for various segments. 

And mobile delivery will be crucial. For inspiration, look at Life360, a fast-growing mobile service whose core offering is GPS tracking for family members (see screenshot below, note 2). Life360 is free, but offers an optional identity-theft protection family-plan at $14.95/$19.95 per month. Since going free, the company has mushroomed to 6 million families.

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Life360 is a fast-growing startup offering "mobile family safety" (13 Dec 2011)

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Notes:
1. Graphic: From the FTC-sponsored one-day seminar on childhood identity theft this summer (link).
2. For more info on Life360, read the series of Techcrunch posts on the company.
3. For more on family/youth banking, see our recent Online Banking Report (subscription).

Just last month we published a report (here) about the large, and mostly unmet, opportunity to bank tweens/teens AND their parents.

Evidently ING Direct didn't need our report. The direct bank, soon to be part of Capital One, is launching an aggressive $10 million advertising campaign for its new MONEY account (note 1). There's no official mention of the program at ING Direct, except for a wall post on its main Facebook page (see last screenshot).

However, several online elements have been released:

• Microsite <ingdirectmoney.com> (see first screenshot below)
• Facebook page <facebook.com/ThatsMoney> with 129 likes as of 2:00 PM Pacific, Aug. 29 (see screenshot 2)
• Facebook app (screenshot 3-5)

Product: There's only a few sentences describing the product, but it sounds like a standard checking account with debit card access. It will have no fees and no minimums and can be managed online (duh) and through a smartphone app.

Campaign: The $10 million campaign (note 2) is primarily fulfilled via Facebook (see screenshots below) and includes:

• Advertising on Facebook and online
• Supporting sweeps has (10) $1,000 prizes, (10) MacBooks, (20) iPod Touches
• Those submitting pictures of themselves, may get it projected on a Times Square Jumbotron for 15 seconds (begins Sept. 15)

Our take: With 1% rates killing its traditional value proposition, it makes perfect sense for ING Direct to build for the future by positioning itself as a place that caters to the banking needs of the entire family. Well played.

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1. ING Direct's teen-banking microsite at ingdirectmoney.com (30 Aug. 2011)
Note: In the lower right is a "pre-registration form" where the bank collects the name and email address of interested parties

2. Parents are encouraged to send a message to their children to let them know about the sweeps
Note: The lower right contains a place for parents to send email messages to their children

3. Facebook page at <facebook.com/ThatsMoney>

3. Facebook page info page (Facebook app)

4. Facebook page sign-up form

5. Thank-you page after pre-registering

6. Wall post this afternoon on main ING Direct Facebook page (link, 30 Aug. 2011)

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Notes:
1. New agency Berlin Cameron is spearheading the effort according to today's Adweek article.
2. That's about 40% of ING Direct's projected $25 million media spend for 2011.
3. Hat tip: MyBankTracker
4. For more on teen banking, see our recent Online Banking Report.

We 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): 

• 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

______________________________________________________________

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

---------------------------------

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

If you want to attract customers between the ages of 12 to 21+, you could not have a better name than BillMyParents. But living up to that promise, not to mention appealing to parents, is a little trickier.

San Diego-based BillMyParents is a public company (OTCBB: BMPI) currently valued at $40 million. When we first looked at the company (March 2009), it was building an alternative payment mark similar to PayPal or BillMeLater. But the company appears to have pivoted into a more achievable prepaid card product.

Today, its core offering is a $3.95/mo prepaid MasterCard debit card (see full fee schedule below) that offers mobile alerts and basic parental controls (lock, unlock, reload). 

Fresh off a $7 million infusion of new funding (Nov. 2010, note 1), the company has ramped up its advertising with its first national TV commercial (on ESPN; link) and a mention in MTV's Rob Dyrdek's Fantasy Factory (which apparently has something to do with skateboarding). It is also working with Street League Skateboarding.

Evidently, those efforts are bearing fruit as website traffic is up 20-fold since December, to 600,000 unique visitors in May according to Compete estimates (see below). More importantly, traffic to the secure site (e.g., account holders) is up to 17,000 visitors in May compared to 7,000 in December (note 2).

Relevance for Netbankers: Teens want to spend. Parents want transparency and control. And banks want to attract teens and tweens that could be customers for the next 80 years. And if that's not enough, in the United States, prepaid looks to be favored in the post-Durbin world (previous post).

So expect prepaid cards to be a hotbed of activity from both banks and non-banks (note 3). 

---------------------------------------

BillMyParents.com unique monthly visitors

Source: Compete, 28 June 2011

Parent section of BillMyParent's website (28 June 2011)

Fee schedule

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Notes:
1. Source:http://www.marketwire.com/press-release/socialwise-changes-corporate-name-to-billmyparents-inc-otcqb-sclw-1525359.htm
2. Source: http://siteanalytics.compete.com/account.billmyparents.com/
3. For example, BankSimple http://www.netbanker.com/bank_simple/

In doing some initial research for a report we are planning for Q1 on "family bank accounts," I started where I usually do, on Google. The only financial institution advertising specifically on the term "teen banking" was USAA (see note 1).

The top-of-the-page ad led to a well-designed landing page devoted to Teen Checking (see screenshots below) with a clever call to action: 

We won't take any of your teen's allowance.
Teen checking without hidden fees.

USAA even has a dedicated site with its own URL to support its youth-banking efforts: https://my.usaa.com

Relevance for NetBankers: Teenagers may be one of the most lucrative segments to attract to your financial institution. They not only spend billions themselves, but also could literally stick with you for a lifetime.

The thinking goes something like this:

1. Attracting the children of your customers helps you retain the parents
2. Retaining the parents helps you retain the kids as they become young adults
3. Young adults become parents
4. Repeat

This didn't work so well in the old branch-based world because one of the first things the kids did when they moved away was open a checking account at the closest branch to their new apartment or dorm room. In an online/mobile-centric world, that no longer has to happen. 

Google search for "teen banking" (see note 1; search conducted at 5:00 PM on 11 Jan. 2011 from Seattle IP address)

USAA's "Teen Checking" landing page

Notes:
1. First-page organic results included (note, search was limited to items posted in past month) 
-- Fremont FCU
-- North Shore Bank
-- Coast Hills FCU
-- U.S. Bank (Visa Buxx)
-- S.T.A.R Community Credit Union
-- American Riviera Bank (my new favorite bank name)
2. If anyone wants to point out great examples of teen/youth/family banking efforts, please drop me an email jim@netbanker.com or leave it in the comments. Thanks.

We first opened an account at ING Direct back in 2001, not long after it opened for business in the United States. Almost since the beginning, my wife and I used it to store money and handle allowance bookkeeping for our kids. To keep things simple, we  created sub-accounts from our main savings account.

That made for a super-easy setup since it takes about 20 seconds (I've timed it) at ING Direct to create a new sub-account. The sub-accounts are nicknamed for each child and automatic transfers drop their allowance in so we no longer had to remember that every week. It's a great system. 

However, the above approach doesn't officially put the money into the child's name, which could have tax and other advantages. And if you want to provide your kids with online account access, you have to turn over your own username/password. And if you do that, there's nothing to keep enterprising youngsters from making an extra transfer or two into their own accounts. While I'm sure that wouldn't happen in our house (right, boys?), it's not an ideal setup.

ING Direct solved those limitations in October when it launched special kids savings accounts, which are joint accounts with an adult. But the child gets his own login-info separate from the adult. Kids can log in to check their balance, but only the adult can make transfers.

The ING Direct kids account pays the same rate as the adult version, currently 1.1%. And there are no fees, an ING Direct custom. The only downside, you have to complete a small application process, which took 3.5 minutes, not much, but still a bit of a chore compared to the 15-second, sub-account set-up process.

Once established, the new savings account shows up on the adult's main account menu like any other account.

Bottom line: It's a nice addition to the ING Direct lineup. While relatively bare bones in terms of features and functions, it will be interesting to see what the bank does with it over time such as integrating with Planet Orange, the bank's financial education effort (see screenshot below).

Landing page for more info on Kids Savings Accounts ( link, 23 Nov. 2010)

Kids account application, for adding to an existing adult account
Note (not shown): On the second step, you choose a 6-10 digit unique PIN for the child and on the third step, you fund the account with a minimum opening deposit of $1.

Planet Orange is the bank's financial education resource <orangekids.com> Note: So far, no integration with Kids Savings

Hat tip: DepositAccounts.com

From a financial innovations standpoint, 2010 is off to a great start. Just 35 days into the year and we've already had two launches of services I don't think anyone saw coming: Blippy to automatically stream your purchases to the world (previous post) and now Kwedit (say it out loud if you don't get it).

Kwedit is designed to be the payments engine for the massive virtual goods market, estimated to be $1.6 billion in 2010 according to InsideVirtualGoods.com, up from $1 billion in 2009 (cited by GamesBeat last week).  

Many of the gaming networks, especially the so-called "social gaming" startups such as Zynga's FarmVille, appeal to teenagers and younger kids (note 1) who don't have credit or debit cards available to pay for virtual goods. This has made it difficult for the publishers to monetize the games through direct payments.

How it works:

1. Users of games partnering with Kwedit can purchase in-game virtual goods by promising to pay later through their associated Kwedit account. See the screenshot below to see how Kwedit is positioned in the online game FooPets.

2. Later, users print out a bar-coded coupon from their Kwedit account (see inset right) and take it to a participating 7-11 convenience store and pay via cash, mail payment directly to Kwedit, or "pass the duck" and send the IOU direct to their parents for payment. The site also offers an option to pay directly via credit or debit card.

3. To help drive off deadbeats, the company has created a Kwedit Score that shows which users are paying their IOUs on time (inset left). At FooPets, users will get more virtual goodies as their Kwedit Score increases, creating a game within the game and a way to promote responsible spending. 

Analysis
I'm not a gamer myself, but as a parent, I understand the pull of online games and look forward to the day when I don't have to hand over my credit card for use on some site I barely understand. Some will argue that Kwedit needlessly encourages credit use in the pre-teen set (note 1). But as long as parents stay involved, Kwedit can actually be used to teach kids the importance of paying their bills.

So, if users take this option seriously, by paying down their virtual debt with real money, Kwedit could be huge (in which case, PayPal buys it of course). And it's relatively low risk for the gaming companies because the virtual goods have a zero marginal cost. BillMyParents is another company we've covered in the teen-payments space.

There is no doubt in my mind that online gaming needs a better payment system and that the solution is unlikely to resemble anything us parents have ever seen or imagined. Kwedit fits that bill. 

Kwedit gets star billing on the main screen at FooPets (4 Feb 2010)

Users create a promise to pay using a popup screen served by Kwedit (link)
Note: Users first must log in to their Kwedit account from this popup

Notes:
1. Kwedit users must be 13 or older to sign up for an account.

Sometimes, banks forget the importance of simplicity, especially when it comes to less-than-crucial, ancillary services such as a prepaid teen account. Sure, I'd love to have a reloadable card that my son could stow in his backpack for emergencies. But I'm not going to spend a half-hour looking for one, applying for a new account, and then trying remember where and how to access it (see note 1).

But if the process was painless and integrated with my online banking, I'd buy a half-dozen prepaid cards, one for each child, one to toss in the glove box of each car, and another for my briefcase (note 2). 

It looks like PayPal is the first to step up to this challenge with its new student account (company blog post) which has been in beta testing since last November (beta site; note 3). The account is free of charge (note 4), and signup takes just 51 seconds.

Signup & funding
Current PayPal customers can sign up their kids for an account in under a minute. That includes clicking on the <paypal.com/StudentAccounts> URL, completing the six-field app (see first screenshot), all the way to the approval screen confirmation (screenshot #2). And, half that time was simply logging in to my PayPal account. If I'd already been logged in, the total time to complete the application, process it, and receive approval would be just 23 seconds! That's the fastest financial services application I've ever completed by a factor of 10 (note 5).

The account, which shows up as a link at the top of the parent's PayPal account (screenshot #3) includes parental controls for all transaction types and comes with both an online account and a PayPal prepaid MasterCard debit card. Both will come in handy for today's teens, who cannot easily shop online without credit or debit cards of their own.

Transferring funds to the account takes mere seconds, and parents can choose from one-time loads or periodic transfers so the card can be used to accumulate an allowance (screenshot #4). Transfers show up in real time, with green color-coding, after hitting enter (screenshot #5).

Overall grade: I give it an A+ for ease of use and an A+ for value, a winning combination. Nice work. 

1. PayPal teen card application for current PayPal customers (12 Aug 2009)

2. Congratulations screen

3. Student account, and prepaid balance, shows up on the parent's main account overview page 

4. Funds transfer screen 

5. The funds transfer is immediately displayed within the student account area

Notes:
1. The final item is why the Visa Buxx card never worked for me. I bought one but could never remember how to access it or add more money.
2. Verient is doing some very cool things to help in this regard; we'll profile them here soon.
3. Hat tip to Payments News for the link.
4. ING Direct's system for creating a new savings sub-account is similar speedwise, but it's not technically a new account. 
5. The only major fees, besides PayPal merchant fees, are the $1 ATM withdrawal fee and a 2.5% foreign currency fee.
6. For more info on online account opening, refer to the latest issue of Online Banking Report: Improving Online Account Opening ROI.

I've mostly just observed the Twitter phenomenon, following a few people and seeing how banks and credit unions are using it (see my previous post for financial institutions on Twitter). However, I'd not fully embraced Twitter either as a publishing device or research source. The 300 or so RSS feeds, emails and news items that cross my desk each day seemed like plenty of intelligence to sift through.

But now, I'm reconsidering my priorities after learning about an interesting new alt-payment company BillMyParents from Twitter activity (see notes 1, 2).

How it works: BillMyParents is a new service from IdeaEdge's Socialwise (press release). The service is primarily designed for kids to shop online. They select what they want, then at checkout, redirect the bill to their parents via an email alert to PC or mobile phone. Parents login and complete the payment process at their convenience using MasterCard, Visa, Discover Card (no American Express; see third screenshot below). Card info can be stored for one-click future approvals.

The company charges a $0.50 transaction fee for each purchase. But like PayPal, the real money will be made when the company pushes purchase transactions through the ACH system.  

Currently, BillMyParents is selling prepaid gift cards from its site as a proof-of-concept. I tested it yesterday and everything seemed to work as described (see second screenshot below).

The opportunity: The service reminds me of the unmet need that PayPal filled nine years ago. Purchasing at eBay was a major hassle due to the lack of online payment capabilities. Kids have similar problems when trying to buy things online.

The service could also be adapted to other situations where one party does the shopping but wants someone else to authorize payment such as small businesses, nannies, or even spouses. It could also be used for extra security when the shopping is done in a non-secure environment such as public terminal and payment is redirected to a more secure device, such as your mobile phone.

Like any alternative payment, BillMyParents requires the merchant to add the option to its ecommerce platform and consumers to set up accounts. Both of those are time-consuming and face the chicken-and-egg dilemma, i.e., it's hard to attract merchants without a substantial user base while its difficult to add users without merchants.

Bottom line: This is a winning idea. The massive discretionary purchasing power of teens and pre-teens is a tempting target in this difficult retail environment. And financial institutions, or their payment partners (e.g. Visa, MasterCard), looking to differentiate themselves with the youth market, could jumpstart the program. Or more likely, PayPal and/or Amazon will dive in, either acquiring BillMyParents outright, or building their own version(s).  

BillMyParents homepage after setting up an account (26 March 2009)
Note: Split login screen for kids (left) and parents (right)

Proof-of-concept: Gift card purchase (26 March 2009)

Parent's approval screen (26 March 2009)

Notes:
1.  Thanks to Frederic Baud (@fredericbaud) who was the first in my network to Tweet about BillMyParents; and to Glenbrook's Scott Loftesness (@sjl) who's retweet is actually what caught my eye.

2. BillMyParents appears to have grabbed its Twitter page name (@billmyparents), but it's not yet active.