Protocol | Fintech

These startups want your kids’ allowance

Challenger banks are going younger in search of future customers.

A person pulls cash out of a wallet.

Two-thirds of American kids get an allowance averaging $30 a week, a CPA trade group found.

Photo: Unsplash/Allef Vinicius

Millennials and Gen Z are already prized markets for challenger banks. But competition is heating up in an increasingly crowded arena, so fintechs and investors are looking for even younger customers — including children who just started getting an allowance.

"There's this big fight for top-of-wallet, but we've also forgotten about the kids who have no wallet," Taylor Burton, co-founder of Till, a new challenger bank geared to children, told Protocol. "We're not just trying to put a kid's face on a debit card similar to putting a name on the back of a backpack. We're focusing on respecting these young people as the financial actors they are."

There are roughly 60 million kids under the age of 15 in the U.S., according to United Nations estimates. The American Institute of CPAs reported in 2019 that two-thirds of kids get an allowance averaging $30 a week. That's mostly spent, not saved.

Investors are backing this search for kids' cash. Till just raised $5 million. Greenlight, which launched in 2017, raised $260 million in an April round from investors led by Andreessen Horowitz, almost doubling its valuation from $1.2 billion to $2.3 billion. The same day Greenlight announced its fundraising, a new player, Step, which just launched its site in October, said it secured $100 million. The company, which has 1.5 million users, also named NBA star Steph Curry as one of its new investors.

"We're just at this point in the cycle where there's so much liquidity and people have gone after the same customer segment that it's just not profitable," Charlie Javice, founder and CEO of Frank, a student financial education company, told Protocol. "Students and young people are sexy and it's in vogue. ... [But] you have to go younger."

Companies like Greenlight, Step and Till are "even targeting those allowance-based [kids], which is definitely very early," she said.

Going early is a smart strategy given that "one of the greatest forces in financial services is inertia," and consumers tend to stick with the bank or financial institution they signed up with initially, said Tim Ranzetta, co-founder of Next Gen Personal Finance, a nonprofit that seeks to expand personal finance education among middle- and high-school students in the U.S. These startups believe that "if we can capture them early, we can grow with them," he said.

Step CEO CJ MacDonald opened his first bank account with Wells Fargo when he was 14 years old. "That is still my main account today," he told Protocol, noting that a typical bank account in the U.S. remains in use for about 17 years.

Joanna Drake, managing partner at Magnify Ventures, another Till investor, said these startups are targeting an enormous market that "obviously gets refreshed every year," she told Protocol. Burton estimated that the market covers roughly 50 million young people in the U.S., representing $400 billion in spending power.

Follow the money

Most of the startups offer digital banking accounts tied to debit cards. Parents open the accounts with their kids and use apps to disburse allowances as well as track and even set limits on the way their children are spending the money.

"You could say, 'Here's $20 for Dave and Busters,' or 'Here's $10 for Starbucks,'" Tim Sheehan, CEO of Greenlight, said. Greenlight also has a tool that even allows parents to reward kids for doing their chores and for children to monitor their savings.

Ranzetta of Next Gen Personal Finance said the startups are helping fill an important need in the U.S., where young people typically lack basic forms of personal finance education. Roughly 80% of the 15 million high school graduates each year never had a chance to take formal personal finance courses, he said.

Sheehan started Greenlight because he wanted an easier way to give his kids cash for field trips instead of doing last-minute runs to an ATM or having them borrow from friends. He said giving children an early taste of what it's like to save, spend and even invest is helping them become more financially literate. "When the kids are young, you want to teach them that money doesn't grow on trees," Sheehan told Protocol.

Investors see the opportunity in that journey. Peggy Mangot, a Till investor, said there has also been a "greater appetite" in the venture capital community for business models "that start with low dollar value and grow over time." That strategy is gaining traction at a time when it's also becoming harder to find and win new banking customers.

"The cost of acquisition for traditional customers is just so insane today," Javice said. "It all comes down to unit economics, how cheaply you can acquire a customer. Because at the end of the day, the products are not differentiated. A bank account is a bank account. A feature is a feature."

Step, Greenlight and Till declined to disclose their cost of acquiring customers, which Javice said typically ranges from $50 to $400 per customer in banking, with $200 as the average in retail banking. But Burton, the Till co-founder, said his startup's cost is closer to the low end of that range.

Greenlight, which has 3 million users, is considered one of the trailblazers in this market. But investors were initially skeptical of Greenlight because the startup charges families a monthly fee of $4.99, said Adam Shapiro, partner and co-founder of investment firm Klaros Group. Investors "didn't believe that people would pay fees," he told Protocol.

But parents were willing to pay, driving Greenlight's growth and turning the spotlight on digital banking for children. "The fact that people were willing to pay for that sort of has spurred a lot of growth in the sector," Shapiro said.

Now, new players, including Step and Till, are trying a different strategy by doing away with membership fees and relying mainly on interchange fees from debit cards.

"Good luck with that," said Shapiro, who doubts the strategy would work. Teens don't spend enough to generate enough interchange, the fee paid by merchants every time the debit card is used. The fee, which is roughly 21 cents plus 0.5% of the transaction value, is split between the card-issuing bank and the fintech startup.

MacDonald of Step disagrees, arguing that teens "spend billions of dollars a year." Since launching six months ago, Step has been adding up to 10,000 accounts a day and now has a million and half users, the company said, also noting that nearly 90% of its teen users say Step is their first bank account.

Javice of Frank said the startups that offer no-fee banking accounts are clearly hoping to eventually "upsell credit products or different fee-based products." Till's game plan is to eventually "introduce" a young client "to an adult institution" offering other products such as student and auto loans, Burton said: "We'll make an origination fee on that interaction."

Because they are targeting children, these startups must navigate regulations meant to protect minors, especially the rules under the Children's Online Privacy Protection Act. State laws on deposit accounts for minors vary considerably. How these startups evolve their business models will likely also draw scrutiny.

Ranzetta said regulators and advocates are likely to focus on "dark patterns," and whether these startups are "encouraging the right behaviors."

Javice said there will likely be a focus on how they add new products or change the way they make money. "I don't think no-fee bank accounts can go wrong, but if they sneakily start adding in features that have fees or subscriptions that are auto-renew or charge interest rates that are kind of hidden, that's when things go wrong."

"You just have to have a heightened level of awareness that this is not a nonprofit," she said. "They will make money off of you at some point."

Protocol | Policy

New report shows kids see COVID-19 misinfo on TikTok in minutes

A new report finds that kids as young as 9 are being fed COVID-19 misinformation on TikTok, whether they engage with the videos or not.

NewsGuard researchers asked nine kids to create new TikTok accounts and record their experiences on the app.

Photo: Andrew Harrer/Bloomberg via Getty Images

TikTok is pushing COVID-19 misinformation to children and teens within minutes of creating a new account, whether they actively engage with videos on the platform or not, a new report has found.

The report, published Wednesday by the media rating firm NewsGuard, raises questions not only about how effectively TikTok is enforcing its medical misinformation policies, but also about how its own recommendation algorithms are actively undermining those policies.

Keep Reading Show less
Issie Lapowsky

Issie Lapowsky ( @issielapowsky) is Protocol's chief correspondent, covering the intersection of technology, politics, and national affairs. She also oversees Protocol's fellowship program. Previously, she was a senior writer at Wired, where she covered the 2016 election and the Facebook beat in its aftermath. Prior to that, Issie worked as a staff writer for Inc. magazine, writing about small business and entrepreneurship. She has also worked as an on-air contributor for CBS News and taught a graduate-level course at New York University's Center for Publishing on how tech giants have affected publishing.

Keep Reading Show less
A technology company reimagining global capital markets and economies.
Protocol | China

Beijing meets an unstoppable force: Chinese parents and their children

Live-in tutors disguised as nannies, weekday online tutoring classes and adult gaming accounts for rent. Here's how citizens are finding ways to skirt Beijing's diktats.

Citizens in China are experienced at cooking up countermeasures when Beijing or governments come down with rigid policies.

Photo: Liu Ying/Xinhua via Getty Images

During the summer break, Beijing handed down a parade of new regulations designed to intervene in youth education and entertainment, including a strike against private tutoring, a campaign to "cleanse" the internet and a strict limit on online game playing time for children. But so far, these seemingly iron-clad rules have met their match, with students and their parents quickly finding workarounds.

Grassroots citizens in China are experienced at cooking up countermeasures when Beijing or governments come down with rigid policies. Authorities then have to play defense, amending holes in their initial rules.

Keep Reading Show less
Shen Lu

Shen Lu is a reporter with Protocol | China. Her writing has appeared in Foreign Policy, The New York Times and POLITICO, among other publications. She can be reached at

Protocol | Policy

Google and Microsoft are at it again, now over government software

The on-again, off-again battle between the two companies flared up again when Google commissioned a study on how much the U.S. government relies on Microsoft software.

Google and Microsoft are in a long-running feud that has once again flared up in recent months.

Photo: Jens Tandler/EyeEm/Getty Images

According to a new report commissioned by Google, Microsoft has an overwhelming "share in the U.S. government office productivity software market," potentially leading to security risks for local, state and federal governments.

The five-page document, released Tuesday by a trade group that counts Google as a member, represents the latest escalation between the two companies in a long-running feud that has once again flared up in recent months.

Keep Reading Show less
Ben Brody

Ben Brody (@ BenBrodyDC) is a senior reporter at Protocol focusing on how Congress, courts and agencies affect the online world we live in. He formerly covered tech policy and lobbying (including antitrust, Section 230 and privacy) at Bloomberg News, where he previously reported on the influence industry, government ethics and the 2016 presidential election. Before that, Ben covered business news at CNNMoney and AdAge, and all manner of stories in and around New York. He still loves appearing on the New York news radio he grew up with.


Facebook wants to kill the family iPad

Facebook has built the first portable smart display, and is introducing a new household mode that makes it easier to separate work from play.

Facebook's new Portal Go device will go on sale for $199 in October.

Photo: Facebook

Facebook is coming for the coffee table tablet: The company on Tuesday introduced a new portable version of its smart display called Portal Go, which promises to be a better communal device for video calls, media consumption and many of the other things families use iPads for.

Facebook also announced a revamped version of its Portal Pro device Tuesday, and introduced a new household mode to Portals that will make it easier to share these devices with everyone in a home without having to compromise on working-from-home habits. Taken together, these announcements show that there may be an opening for consumer electronics companies to meet this late-pandemic moment with new device categories.

Keep Reading Show less
Janko Roettgers

Janko Roettgers (@jank0) is a senior reporter at Protocol, reporting on the shifting power dynamics between tech, media, and entertainment, including the impact of new technologies. Previously, Janko was Variety's first-ever technology writer in San Francisco, where he covered big tech and emerging technologies. He has reported for Gigaom, Frankfurter Rundschau, Berliner Zeitung, and ORF, among others. He has written three books on consumer cord-cutting and online music and co-edited an anthology on internet subcultures. He lives with his family in Oakland.

Latest Stories