Europe’s Challenger Banks Jostle For Under-18 Market Share

With more and more consumers embracing digital-first banks, the under-18 crowd presents the next generation of customers.

But digital banking products for minors have not all been successful.

In January, Ruuky, a Hamburg-based neobank aimed at teenagers, filed for insolvency, blaming difficult market dynamics and the inability to raise additional funds. In a LinkedIn post announcing the news, the company stated that the commercial failure had happened despite “[amassing] a loyal customer base, and [becoming] the largest neobank on social media in Europe.”

But despite Rukky’s unsuccessful run, there are other neobanks targeted at young customers across the region hoping to succeed where the German FinTech firm failed.

On the one hand, the likes of French challenger bank Vybe have developed mobile apps for teenage users, allowing them to keep track of their spending and make peer-to-peer transfers.

Then there are others like Osper in the U.K. or Kard in France, which function more as plastic money pocket money for children than as a fully-fledged bank account and have developed their platforms with parental controls and built-in oversight features.

The latter group essentially issues children with a prepaid card that their parent or guardian can top off from their own app, with parents able to issue multiple cards if they have more than one child.

Parent-facing apps also allow people to control what their children spend their money on by blocking online transactions, for example. Osper even automatically blocks any attempt to use its cards in a bar or casino.

There are also firms like GoHenry looking to cater to the demand for banking products for a younger customer base. The U.K.-based FinTech offers different services for children and teenagers, with app design and features adapted to the specific needs of each age group.

The Many Shades of Under-18s Banking

As with adult digital banking, neobanks for under-18s are pursuing different business models.

Like the now-bankrupt Ruuky, Vybe is free and only charges users for ATM withdrawals if they make more than three per month. Osper, Kard and GoHenry charge a monthly fee of at most $4, typically paid by parents on a per-child basis.

Considering the differences between adult and underage consumers, the subscription model guarantees firms some kind of income in a context in which other popular neobank revenue streams aren’t viable.

On average, one might assume that teens spend significantly less money than adults. As such, whereas some neobanks have managed to build a successful business based largely on interchange fees, this would be much more difficult in the space of child or teen banking. Likewise, earning money from credit products isn’t a possibility either, foreclosing another common revenue stream for banking apps.

Adding further competition to the market, some of the biggest names in European neobanking have launched their own propositions for under-18s in recent years.

For example, Revolut has Revolut <18, Starling has Starling Kite, and in December 2022, Bunq rolled out under-18 accounts in the Netherlands, Germany, Spain, Italy, France and Ireland.

Again, a split can be seen in products aimed at younger children and older teens.

European law dictates that children under 16 need an adult’s permission to open a bank account and the above examples essentially function as sub-accounts created by adults for their children.

But over the age of 16, children can open their own accounts. And neobanks such as Monzo and Starling have extended lightweight versions of their adult accounts to 16- and 17-year-olds. Monzo even bills its offering for older teens as “a Monzo account with (almost) everything you get as an adult.”

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