If you are paying any attention at all to the financial services space you have probably recently come across the terms “youth banking” and “family banking.”
But what exactly do they mean?
I’m glad you asked.
Youth banking focuses on banks and credit unions providing financial tools and education to young people, often in the form of savings and/or checking accounts or debit cards to help them learn about managing their money.
Family banking is a broader concept that can include youth banking, but also encompasses strategies for managing family finances across the life cycle.
So why should banks and credit unions care?
Well, for one, the “great wealth transfer” has already begun, with some sources estimating that $84 trillion in wealth will soon be moving from Baby Boomers to Millennials and Gen Z.
It is likely one of the most significant financial shifts of our time, and Gen Z has already started receiving some of this inheritance.
Tim Scholten, president and founder of the Columbus, Ohio-based consultancy Visible Progress, told Tyfone that in the early stages, fintechs and national banks are winning the majority of these “new to banking” clients.
Scholten said fintechs are grabbing about half of the new primary relationships, which often carry large balances right out of the gate.
“They represent an emerging consumer base and good growth potential,” he said. “While I don’t think this customer base should become [a primary] target, figuring out how to reach and serve it will only enhance FIs’ ability to serve the rest of their customers more effectively.”
So enter companies including Wichita, Kansas-based Incent, which provides youth banking services for U.S. banks and credit unions.
Designed specifically for community financial institutions, Incent’s youth digital banking solution provides tools to teach kids responsible financial habits. The platform engages youth ages 3–18 by combining financial education and gamification with hands-on real-life banking experiences focused on earning, saving, giving, spending and borrowing money.
“Beyond delivering solutions that engage the families and drive financial wellness, Incent’s priority is to empower financial institutions to strengthen relationships with the next generation of account holders,” said Marcell King, Incent’s President and COO.
The company recently announced it was launching a CUSO with Mountain Home, Idaho-based Pioneer Federal Credit Union as one of its early investors.
Through the Incent CUSO, Pioneer and other credit union investors will have a voice in guiding and building leading youth banking solutions for younger consumers, the companies said.
“We need digital tools to meet consumer’s evolving technology needs to build those relationships early in their financial journey,” said Tracey Miller, EVP and VP of Operations at the $712 million-asset Pioneer FCU.
The $4.2 billion-asset Affinity Federal Credit Union in Basking Ridge, New Jersey, has also entered the youth banking space with an account that allows teens to earn 1% cash back on purchases and also enables them to receive their paychecks a couple of days early once they start to work.
The account also gives parents shared access and the ability to turn the debit card off and on and restrict certain transactions.
These accounts also give FIs another tool to try to land members of the elusive younger generations.
According to a recent study by America’s Credit Unions, only 7% of credit union members fall within the 18-24 age range, compared to 18% of the total U.S. population.
In terms of family banking, any FIs entering the space will have to deal with some of the largest banks on the planet, including JPMorgan Chase and Bank of America.
In September, BofA rolled out a family banking product in three states before launching it nationwide in December.
The account is designed for parents with children younger than 16, and offers a debit card and digital banking access for children while enabling parents to supervise their child’s spending.
But not everyone thinks youth or family banking is the hottest thing to hit the banking industry.
In fact, Jim Adkins, Managing Partner at Artisan Advisors, told Tyfone he’s seen this movie before.
“It’s an old concept in a new wrapper,” he said.
Portland, Oregon-based Tyfone is a leading provider of consumer and commercial digital banking services for community financial institutions. At Tyfone, we believe that as banks and credit unions strive to build new products and services to attract a wider customer base, adopting cutting-edge digital banking technologies remains crucial.
