All along fintech and financial services have been talking about financial inclusion… we extol at length about the virtues of reaching out to the unbanked, unserved, and underserved. We engage in boardroom brag and PR tom-tom on how we are forever widening the inclusion net.

Hang on, something is missing here. There is one segment, mostly unbanked and rarely served, yet efforts to include them are like a drop in the ocean. As you are reading this article, and assuming you are working from home, the segment may be staring at you or craving attention (not your spouse, thankfully).

The truth is, a vertical as evolved as fintech, and the 200-year old banking industry, are still scratching the surface of… Children Banking. Considering the massive size of the target group, and the fact that every child is a future customer, cursory attention is contradictory (children and teenagers constitute roughly 29.3% of the total world population). 

Catch them young, but not at the Branch!

Of course, we have a product, I can hear most bankers saying. Of course you do, but has it kept pace with your digital transformation? If you are proud of names like Star Saver, Little Big Account, or Junior, and the account holder is still holding a multi-color passbook as proof and needs to visit the branch to open an account, deposit, or withdraw, then you are just the bank we want to talk to (make that chide).

Digital banking needs to grow up if children must be included in its ambit. The irony is children are punching in a higher weight class already – the average age of the Youtuber and the social media account holder is 12 and this is reducing every quarter. Children are more familiar with mobile phone features than their parents (in the Western world they get their first smartphones at age 10). World over, with the pandemic keeping children mostly indoors, they have adapted to the internet faster for lack of other outlets to dissipate their energy.

Laying the foundation for prudent decisions

If you are a neo bank or a forward-thinking legacy institution, and have missed the children banking bus, here is a brief on what a true blue, new age Children Banking account should deliver:

digital-acc

Enable parents to open a digital account in the child’s name in a seamless online session. This may hurt but asking parents to fill a form online with the automated response “our representative will get in touch” is not online banking.

reward

Help set savings goals and incentivize family chores to earn reward points.

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As the child continues to use the application, the embedded savings and spending features must help the child become financially responsible by laying the foundation for prudent decisions and a secure financial future.

Here’s a caveat: While children’s banking in 2022 necessarily needs to be app- based, it is important for the bank not to get carried away with technology and treat the child as an adult. Permit us to explain: We know children are more tech- savvy than most adults, yet we must appreciate their understanding of finance can never be on par, hence the app has to find a way to ease them into usage, which could be through an animated or automated demo at the time of account opening.

Research has shown that children cannot comprehend the meaning or value of money at a nascent age. One child apparently said she knows of a cupboard in the house, and all that daddy has to do is open it when money is required.

Checklist for Children Banking

Gives parents the power to control the nature of transactions, transfer amounts, purchase permissions, and spending limits.

Parent and child should be able to mutually decide savings goals and set recurring transfers from the parent’s account.

The account holder should have the facility to make a card-based or cardless withdrawal from an ATM, based on a preset Limit.

Individual modules for transaction limits, rewards, and loyalty, funds transfer, and notifications must enable the parent to monitor the child’s account.

Can have a value-added feature such as the facility to send a Work List to the child, and on completion of a task, reward the child with cash transfer or loyalty points.

With children taking to gaming like a duck to water, the app could have an in-built interactive game that teaches basic money management and financial life skills to children.

The bank can partner with an ed tech company to develop a module for financial education and children can be encouraged to attend the sessions using the app.

Partner with companies that create interactive learning tools for children (combination of audio and picture book) and ask them to present stories (drawn from myths, fables, and folklore) that convey the risk of financial loss due to rash or irresponsible behavior, or emphasize the need for savings.

As for on-ground, oops, on-cloud requirements, digital onboarding of the little one is a must. Pandemic is one reason, and the key point is the physical verification of documents and the account holder defeats the purpose of digital banking. ATM cards and a hard copy of How to Operate the Account can of course be sent by courier (can add a gift that I spoke about earlier, such as an illustrated picture book or any other reading material as per the age of the account holder)

Remember the school field trip?

While we just said no to a physical visit to the Bank, and while we advocate online opening and transacting, parents could think of taking their child to their Bank for a first-hand experience of the brick-and-mortar infrastructure (please follow safety protocols).

Point out the Tellers, counters for loan application, the security guard at the entrance, various Forms for processing Drafts or Transfer, and if possible, introduce the proud account holders to the Manager (as a parent reading this, you may recall the child’s school organising a ‘field trip’ – visit to the Post Office and other such edifices integral to our societal ecosystem).

Children Banking – not a child’s play!

The challenge and potential of children banking are best summed up in a white paper by Oracle: “While every business focuses its energies on being future proof, they need to pay attention to one key demographic who will ultimately consume all of these services in the future. This demographic is very unique, unpredictable, and has a strong tendency to demand the unimagined.”