Digital banks race to capture the younger generation

Digital banks race to capture the younger generation
Gen Z, the generation currently between the ages of 8 and 23, is estimated to represent around $150 billion in spending power in the US. (Shutterstock)
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Updated 19 November 2020

Digital banks race to capture the younger generation

Digital banks race to capture the younger generation
  • Companies hope to use slick apps to win over tech-savvy kids and teenagers

LONDON: When John Hibbs’ daughter Xanthe received her first bank card in the mail, the six-year-old spent the next week Googling how to buy a horse.

Hibbs and his wife Kate had got Xanthe a newly launched children’s debit card from UK digital bank Starling, one of a number of new offerings from fintechs aimed at children and teenagers.

“The earlier we can start the learning process of using a card, the earlier she can learn that you can’t just go out and buy a horse,” said Hibbs, who runs a charity.

While traditional banks have long offered basic savings accounts to children, fintechs say they have spotted an opportunity to offer better, slicker apps to tech-savvy kids and teenagers, who they say have been under-served.

Starling’s Kite card allows parents to transfer money to their children’s account, set spending limits and receive notifications of their purchases. It rivals similar products from gohenry and Monzo in Britain while in the US fintechs Greenlight, Step and Copper are trying to capture the youth market.

JPMorgan Chase also recently entered the space, introducing a children’s account in partnership with Greenlight.

The companies say they aim to give children a taste of financial freedom and education, while letting parents track and block spending. They hope to capitalize on the digital payment and ecommerce boom, and hold on to new customers into adulthood.

“It’s a play on profitability to get lifelong customers,” said Kavita Kamdar, who heads JPMorgan’s children’s venture Chase First Banking.

JPMorgan’s partner Greenlight has grown from 500,000 to 2 million parent and children customers in a year.

“I think the startups are in a position to take junior accounts away from the high street banks,” said Sarah Kocianski, head of research at fintech consultancy 11:FS. “But they have to strike a balance between being appealing to kids and appealing to parents and goodness knows how you do that.” 




The earlier they can start the learning process of using a card, the earlier the children can learn that you can’t just go out and buy a horse. (Shutterstock)

Companies must also be careful in keeping data secure and ensure children and parents understand what they are giving consent to, Kocianski said.

Atlanta-based Greenlight, which costs $4.99 a month including debit cards for up to five kids, allows parents to create in-app chore lists for children and tie the work to perks. It also lets parents set and pay interest on their children’s savings.

“A couple of big macro trends drove the adoption of Greenlight,” Timothy Sheehan, the company’s chief executive said. “The decline in use in cash and the adoption of the smartphone, not only among adults but among children.”

US digital payment apps such as PayPal Holdings’s Venmo and Square’s Cash App, which have become a common way for consumers to send money to each other, do not allow users under the age of 18. This boosts the appeal of new apps targeted at those too young for popular apps but old enough to spend money.

“This is a demographic that doesn’t have a bank account, they still have money underneath their bed and we are providing them access to the digital economy,” said Eddie Behringer, chief executive of Seattle-based teen banking app Copper.

Analysts and investors question whether the youth market is getting overcrowded, given youngsters are not cash-rich.

“A lot of money is going to these firms, but do they make money?” said Ian Kar, the founder and chief executive of consultancy Fintech Today. “Teen banking is not very profitable yet.”

UK-based gohenry, which was founded 8 years ago, offers accounts for children charging parents £2.99 ($4) per month.

Alex Zivoder, gohenry’s chief executive, said the company is on track to make a profit within a few years, despite its pretax loss jumping by three quarters to £5.8 million last year as it invested in expansion including in the US.

Zivoder said the company made an underlying profit in the second and third quarters of 2020.

Rivals do not worry him. “The market is huge,” he said.

“If you think of how many parents there are in the US and UK, will they be happy with one solution, one product?“

For neobanks like Starling, where children and teen accounts are an added product line, analysts see the service as a way to generate additional revenue. Apps solely focused on the younger demographic may find it tougher.

Starling’s Kite account, which costs £2 a month, has been “flying off the shelves,” said Helen Bierton, the startup’s chief banking officer. She declined to disclose figures, noting products such as Kite are part of its strategy to reach profitability by the end of 2020.

Teenagers and children may not have much disposable income, but startups are banking on their growing spending power. Gen Z, the generation currently between the ages of 8 and 23, represents around $150 billion in spending power in the US, according to McKinsey.

San Francisco-based Step, which hopes to build a bank for the next generation, plans to initially make money through card interchange and then offer more financial products as customers grow older.

“Every brand wants to reach this new generation,” said Step founder and chief executive CJ MacDonald. “They are not rich, but they still spend billions of dollars a year.”

Ben Galbraith, a Palo Alto-based father of eight, has used Step with his five older kids for 10 months. He used to keep track of allowances, spending and frequently lost cards with a spreadsheet.

“Moving it into an easy-to-use app gets rid of all that stuff,” Galbraith said.

His oldest daughter Jackie, an 18-year old New York University student doesn’t mind her parents being able to see her spending. She can also use Step to ask her siblings to pay her back any money they owe. But access to digital banking can’t solve everything.

“They ignore my requests, so I have to badger them,” she  said. “Three of them have not responded.”


Egypt aims to double funding for green projects

Egypt aims to double funding for green projects
Updated 56 sec ago

Egypt aims to double funding for green projects

Egypt aims to double funding for green projects

CAIRO: Egypt is planning to double the state’s funding for green projects to 30 percent of its overall investment plan during the fiscal year 2021/2022 and to raise it to 50 percent by 2024/2025.

Sherif Daoud, deputy head of the Sustainable Development Unit at the Egyptian Ministry of Planning and Economic Development, said green projects currently represent 15 percent of the state’s investment plan during the current fiscal year 2020/2021.

Daoud said green projects focus on the transport, housing, and electricity sectors. 

He said the government is preparing a package of incentives to encourage the private sector to participate more in the green economy. He said the first national report on financing sustainable development projects is also being prepared. 


AlUla awards $14m housing complex contract

AlUla awards $14m housing complex contract
Updated 16 June 2021

AlUla awards $14m housing complex contract

AlUla awards $14m housing complex contract
  • The project, which consists of 150 modular, high-quality and furnished units, is scheduled to be completed in three months

RIYADH: Red Sea International Co. said it won a SR52.9 million ($14.1 million) contract to design and build a housing complex in AlUla, northwest Saudi Arabia.

The contract for 150 “modular, high-quality and fully furnished accommodation units” was awarded by the Royal Commission for AlUla (RCU) and is expected to be complete in three months, Red Sea International said in a filing to the Tadawul stock exchange on Wednesday.

AlUla is home to the archeological site of Dadan, which is being developed into a cultural tourist destination.

Dadan, a civilization that dates back more than 2,700 years and pre-dates the Nabataean civilization as well as the Roman presence in the Arabian Peninsula, was once the capital for the Dadan and Lihyan Kingdoms and is considered to be one of the most developed 1st-millennium BCE cities of the Arabian Peninsula.

In April, Amr AlMadani, CEO of the RCU, the entity set up by the Saudi Ministry of Finance in July 2017 to manage the development of the site, told Arab News the commission has invested $2 billion in initial seed funding for the initial development of the historical development area. A further $3.2 billion, which will come from public-private partnerships, has also been earmarked for spending on priority infrastructure ahead of the completion of phase one of the project in 2023.

“We are well into executing phase one. This includes the upgrade of the airport, which has been completed. We will start our low-carbon tram development infrastructure as well. And, so far, our visitor experience centers in the heritage and nature site are being upgraded,” AlMadani said.

The “Journey Through Time Masterplan” was recently announced by Crown Prince Mohammed bin Salman. Upon completion in 2035, the development project aims to create 38,000 new jobs, attract 2 million visitors a year, expand the population of the area to 130,000, and contribute $32 billion to the Kingdom’s economy.


Dubai-based Luxury Closet raises $14m for thrifty lovers of luxury

Dubai-based Luxury Closet raises $14m for thrifty lovers of luxury
Updated 16 June 2021

Dubai-based Luxury Closet raises $14m for thrifty lovers of luxury

Dubai-based Luxury Closet raises $14m for thrifty lovers of luxury

RIYADH: The Luxury Closet, an online platform for buying and selling used high-end goods, secured fresh financing worth $14 million to bankroll the company’s expansion outside the UAE, Bloomberg reported.
The Dubai-based startup is raising funds for international expansion by marrying luxury with thrift.
The financing is led by GMP Capital, alongside international and local investors including Huda Beauty Investment.
“Re-sale is the future of shopping,” said Kunal Kapoor, chief executive and founder of The Luxury Closet. 
“We expect one in six transactions to be pre-owned by the end of the decade,” he added.
Gulf spending on the resale market was among the highest before the pandemic,according to Bain & Co.
But spending on the local luxury market fell by 17 percent afterward.


Egypt, UK discuss cooperation in electricity sector

Egypt, UK discuss cooperation in electricity sector
Updated 16 June 2021

Egypt, UK discuss cooperation in electricity sector

Egypt, UK discuss cooperation in electricity sector
  • Trevelyan is on her first visit to Egypt since assuming her post
  • During their meeting, Shaker praised cooperation between his ministry and British firms

CAIRO: Egypt’s Minister of Electricity and Renewable Energy Mohamed Shaker met with Anne-Marie Trevelyan, British minister of state for business, energy and clean growth.
They discussed how the two countries can enhance cooperation in the electricity and renewable energy sector.
Trevelyan, who is also UK representative for the 2021 UN Climate Change Conference, is on her first visit to Egypt since assuming her post. She will discuss preparations for the conference, set to be held in Glasgow in November.
During their meeting, Shaker praised cooperation between his ministry and British firms, saying they are trusted partners who play a huge role in the electricity sector and in helping achieve the goals of the Egyptian Energy Strategy 2035.


Saudi Arabia co-chairs meeting on restructuring Chad’s debts

Saudi Arabia co-chairs meeting on restructuring Chad’s debts
Updated 16 June 2021

Saudi Arabia co-chairs meeting on restructuring Chad’s debts

Saudi Arabia co-chairs meeting on restructuring Chad’s debts
  • Chad is the first country to request the restructuring under the new Common Framework for Debt Treatments beyond the Debt Service Suspension Initiative

RIYADH: Saudi Arabia has co-chaired the fourth creditor committee meeting to help Chad restructure its debts under a new G20 framework.

The African state requested the restructuring in January as it struggled with a high debt burden exacerbated by the coronavirus disease (COVID-19) pandemic.

Chad is the first country to request the restructuring under the new Common Framework for Debt Treatments beyond the Debt Service Suspension Initiative. The framework was agreed in November by the G20 under Saudi Arabia’s presidency and the committee held its first meeting in April this year.

Saudi Arabia co-chaired the June 10 virtual meeting with France. The other committee members also included China and India, while representatives from the International Monetary Fund (IMF) were also present as observers.

“The creditor committee supports Chad’s envisaged IMF upper credit tranche program and its swift adoption by the IMF Executive Board to address Chad’s urgent financing needs. The creditor committee encourages Multilateral Development Banks to maximize their support for Chad to meet its long-term financial needs,” the committee said in a press statement.

The statement added that committee members “are committed” to negotiate with Chad to restructure its debts.

The committee highlighted that it was important that private sector creditors be offered “debt treatments on terms at least as favorable as those being considered by the creditor committee, in line with the comparability of treatment principle.”

The IMF in January completed initial talks with Chad on a new medium-term financing program worth about $560 million. According to the IMF, Chad’s total debt amounted to $2.8 billion, or 25.6 percent of gross domestic product (GDP), at the end of 2019. China is its largest official bilateral creditor, according to a report by Reuters.