Digital banks compete for children and teenagers

Five years after becoming popular among young people in search of less bureaucracy and more modernity, digital banks are starting to turn their gaze to another group: children and teenagers.

​Several recent releases began to emerge with a focus on minors in Brazil.

Only in 2020, Yours Bank, Yellow (belonging to C6 Bank), NextJoy (from Next bank) and Conta Kids, from Banco Inter, appeared on the market. Shortly before, in 2019, Z1 was launched, a digital account for teenagers that makes reference to Generation Z (born between 1995 and 2010).

The service repeats the appeal of its adult versions. They are practical: you can open an account just by accessing the application and with your CPF in hand — in some cases, even a birth certificate is enough. In general, no fee is charged: the profit from the operation comes from the bank’s negotiations with customers’ money. And all add the same attribute to their brands: financial education.

The training proposal is one of the traits of Brazilian fintechs, which were born putting themselves as a friendly tool for those who want to learn how to handle money and invest. The arrival of the under-18s market thickens this broth.

“We are much more of a financial education platform with banking services than a banking platform with financial education services,” says NextJoy digital bank director Jeferson Honorato referring to the NextJoy children’s and teens account.

The product is the result of a partnership with Disney, and the iconic characters are an option to make the interface more palatable for children, who access “robust financial education content”, according to Honorato.

Behind the platform there is a savings account that only operates with the money in the account. Withdrawals and subscription to services such as Netflix, Uber or Spotify are allowed. In December, the bank starts releasing operations via Pix.

In addition to the limitation of available services —loans, for example, are blocked— accounts are more playful. In the case of C6 Bank’s recently launched Yellow, the child’s name on the card can be personalized with nicknames, abbreviations and even character names.

To provide security for parents, all the services that the report talked to offer some kind of connection to the guardians’ account, ranging from monthly reports to notifications for each transaction.

“If it were an account that the father simply opened and gave to the teenager, there could be a relationship of concern. As everything is mirrored, this has brought great comfort,” says Honorato, from Next.

He explains that at the end of November, 18% of customers were between 0 and 5 years old—many parents open the account as soon as their child is born, to save money. The main age group on the platform is those between 13 and 16 years old: 31%.

Yours Bank, launched in March this year, is a solution that doesn’t come from a digital bank. Therefore, it operates through an API with Bradesco, an interface between the account and the institution.

fintech offers cell phone recharge and enables functions for parents such as sending allowances and setting goals (buying a bike, for example). To access the full version of the app, a fee is required.

Three types of users are considered for content delivery. The most interested, called heavy user, goes through three tracks: how to save, how to earn more and how to invest.

For the last item, there are simulations based on savings, fixed income and variable income, the latter based on the Ibovespa, the main index of the Brazilian Stock Exchange. When winning or losing money, the corresponding amount is debited or credited to the responsible person’s account.

“There are fathers who do not want to simulate investment because they think that the Stock Exchange is market speculation. Okay, we don’t offer that to that client. Our intention is to be just a tool”, exemplifies fintech founder Felipe Diesel. He says the intention is for the app to be as malleable as possible for each type of family.

There is content for those responsible for the child as well. The platform indicates, for example, not composing the allowance just for leisure.

More than 80% of the application’s users are from class C and D. “Sometimes it’s the first digital bank in the family”, says Diesel. He says the fee was a nice surprise.

“The value proposition makes more sense,” he says. “The children have been taking home discussions about finances. What is credit, debit, how does a card work, how is the family budget, whether or not they are indebted.”

The recently launched Yellow, arm of C6 Bank, is still delivering cards to customers’ homes. The idea, however, is more than a year old.

During this period, the company interviewed more than a thousand parents and around 1,500 children and teenagers. “We saw that the more parents are disciplined in investing, the more they understand the importance of financial education”, says Maxnaun Gutierrez, a partner at the digital bank.

Despite the proposal for financial education, there is another reason for digital banks to invest in children and teenagers: loyalty. “When we are serving the family, we have a greater bond with these customers,” says Gutierrez.

By studying the behavior and habits of customers, NextJoy’s anthropologists and sociologists noticed an interesting piece of information about the customer’s relationship with the bank where he started his financial life.

“On average, 70% to 80% of people do not close the account of their first financial institution in their lifetime. There is a sentimental issue involved there. He even opens the account elsewhere, but that account he doesn’t close,” he says the bank’s director, Jeferson Honorato. If the financial education offered by the product is successful, the bank will have a more aware customer.

The application is active in the process of entering it: on the day the teenager turns 18, he automatically receives a Next account.

The law establishes some rules for this market. It is not allowed, for example, to deny a child’s account — not even symbolically, just in the app.

“Banks can provide an interface that seems super independent, but from a legal point of view, you cannot escape this responsibility that parents have in the case of minors”, says João Fernando Nascimento, member of the Banking Law Commission of the OAB-SP ( São Paulo Section of the Brazilian Bar Association).

This is because under the Civil Code, minors under the age of 16 are considered incapable — therefore, any acts of them in civil life are null and void. Adolescents between 16 and 18 years old, in turn, are relatively incapable and, therefore, need to be assisted by their representatives.

Thus, under the law, even though the child’s CPF is also included in the services offered by fintechs, whoever opens the account affectively and is considered in the legal relationship are responsible.​

Parents must follow the child closely, says psychoanalyst

The most comprehensive advice that psychoanalyst Helena Castello would have for parents who want to use the tool is to try to build with the child the use they will make of the application.

“If parents can’t keep up, they shouldn’t allow access,” he says. “It’s no problem to give the child freedom to explore the world, but parents have to be curious about it. Sit down to talk at dinner, enter the app together to find out what the child understands about it, share it with the school and see if she can teach some lessons.”

Like any new tool, she says, it is only possible to know possible consequences in the future. Demonizing the app is not the way.

“In an extreme hypothesis, we will think that we are creating children addicted to money. But our society is already expert in creating people who only think about money, and the banks will take advantage of that. So if the use of the account is made with monitoring , the child has the opportunity not to be a joker in this story”, he says.