Neobank Rolls out a Banking Solution for Children and Young People
Neobank Revolut, which aims to become ‘the world's first real global bank’, is rolling out an independent banking solution for children and young people down to the age of seven next month.
The UK-based neobank Revolution is taking huge strides and will start to generate profits this year, according to CEO and founder Nikolay Storonsky.
"We will be profitable this year," said Storonsky from the stage of the Paris Fintech Forum last week, referring to high growth.
According to Storonsky, Revolut opens approximately 20,000 new customer accounts daily, plans to expand its business from 34 to 58 countries in the coming year and has a long-term target of 100 million customers.
And a portion of the growth will come from children and young people down to the age of seven who will be the object of a targeted action called Revolut Youth - a mobile banking solution for 7 to 18-year-olds, which will be rolled out next month.
"We are motivated by helping children to develop their financial skills. We believe that these skills are acquired gradually, through experience and with the help of your parents," Aurélien Guichard, who is responsible for the development of Revolut Youth from the Fintech Company headquarters in London, told Finansforbundet's newsletter.
He refers to an opinion poll carried out by the credit rating agency Standard & Poor's.
"The S&P Global Financial Literacy Survey shows that 25 per cent of teens struggle with making everyday money decisions - we would like to help in reducing that proportion and prepare children for financial independence when they reach adulthood."
Lack of financial learning
Savings accounts for children are nothing new, and even Danish banks offer Visa cards or Mastercards with balance checks for children down to the age of seven. But Revolut - and other smaller Fintech competitors - trusts that there is a gap in the market, as the current solutions are not sufficiently instructive and interactive.
"We have a product that will be developed to provide access to regular pocket money in order to learn how to manage regular income, 'savings pockets' for planned expenditure, simple analytical tools to understand how money is spent or the option to perform tasks at home to earn a little extra income. All with a parent and child sensitive approach in order to facilitate a constant dialogue in the family," says Guichard.
Pocket money and savings
In concrete terms, the Revolut Youth app will, e.g. allow parents to create tasks that their children can do to earn pocket money - walk the dog, wash the car or mow the lawn. But the children will also be able to create and name 'savings pockets'. A 'saving pocket' is a kind of temporary sub-account to which the children can continuously transfer money in order to save up for bigger things - an expensive toy, new bicycle or trip.
"It is an important and good financial habit. Research shows that children are much better savers than their parents and that children in the UK set around 15 per cent of their earnings aside," points out Guichard, who has no doubt that there is a market for the product.
"There is definitely a need and demand. And similar products have been launched in several key European markets very recently. There are close to nine million children in the age group that we are designing the product for in England alone, and it would be unusual to find a parent who does not want their child to have a mature approach to money when they become financially independent."
Parents will be drawn in
A minor will only be able to open a Revolut Youth account with the permission of his or her parents, who will be able to monitor transactions in the account, transfer money to and from it - and set limits on the child's use of the associated payment card.
In principle, it will be free to open a Revolut Youth account, which will initially roll out in the UK from next month, followed by the rest of Europe in the second quarter. This includes Denmark, where Revolut passed a figure of 50,000 adult customers over the weekend. Is should be noted that not a single penny was spent on marketing, though a Danish advertising campaign is scheduled for later this year.
Primarily, the bank earns money on transaction costs when payments are made by using its card and on monthly subscription charges if customers choose a card with built-in travel insurance and other benefits.
Do you expect that Revolut Youth, which offers a free payment card, can become a profitable business in its own right - without taking account of the possible long-term benefits of children and young people being drawn into the regular Revolut bank as adult customers in the longer term?
"Yes. We do not expect a significant revenue stream from the use of the cards, as our users have access to less money. But we do see indirect revenue here. You can only have a Revolut Youth account if your parent is with Revolut. We therefore expect growing revenue streams from parents through more frequent use and conversion to our payment subscriptions."