Why do banks need children and do parents need it?
Kid‑tech 一 is technological solutions and services for children. Banks were among the first to develop this area, seeing not only a market need, but also a way to retain existing clients, save more funds in their accounts, and also build long-term relationships with children as new clients.
Children's banking has quickly become a specialized area in which the rules and requirements for the product are still being formed on the fly. Let's figure out what needs to be taken into account when developing a banking product so that both children and parents can trust it.
A 2013 University of Michigan study, “Children as Potential Future Investors,” analyzed a group of 1,003 adults ages 17–23. The study found that young people who had a savings account as children were twice as likely to have their own savings accounts later in life, twice as likely to use credit cards and four times as likely to own stocks.
Another study confirms higher bank profits as a result of long-term cooperation with clients. An analysis of MasterCard data in Europe shows that the average annual profit per client depends on his age and the number of services provided by the bank. The segment of clients aged 50–55 years is considered the most profitable. Thus, by retaining a client in the long term, his “value” increases. However, another important factor is the cost of acquiring one customer, which increases with age.
Children's banking has quickly become a specialized area in which the rules and requirements for the product are still being formed on the fly. Let's figure out what needs to be taken into account when developing a banking product so that both children and parents can trust it.
Features of children's banking products
Fundamental principles such as accessibility, transparency, control, security and legality remain relevant for children's banking products. But there is still a difference: children’s banking is practically not regulated, which means how these principles will be implemented becomes the responsibility of each bank.
Legislative regulation in Russia, on which banks rely on the topic of children's banking, consists of only a few articles: Articles 26 and 28 of the Civil Code of the Russian Federation on the legal capacity of minors aged fourteen to eighteen years and young children, respectively.
Thus, paragraph 2 of Article 28 contains a rule on the right of children from 6 to 14 years of age to make transactions to dispose of funds provided by a legal representative or with the consent of the latter by a third party for a specific purpose or for free disposal. According to Article 26, children from the age of 14 have the opportunity to independently enter into a banking service agreement. At the same time, the Central Bank of Russia separately explainsthat parents can access the child's banking secrets.
Functionality, risk control and training
Functionality
The traditional minimum for children's banking products: the ability to pay for purchases, open a savings account, receive cashback and interest on the balance, use online services and a mobile application.
Expanded functionality includes forms of payment using a key fob or bracelet, the ability to independently set limits, plan a budget, and analyze expenses. The educational function, in which children can complete tasks, receive bonuses and exchange them for real rewards, also motivates parents to connect children's banking products.
Adult supervision
The most requested features that parents would like to control are the ability to quickly replenish, track transactions in real time, manage spending categories and set limits. Additional features: disabling options at the request of parents, as well as using various channels for informing about events and generating reports.
Ensuring information security
Personal data of clients under the age of majority may be more desirable prey for scammers. Children and teenagers are most vulnerable when criminals offer to receive significant gifts for free, and the deception scheme usually involves entering bank card information.
Another dangerous type of cybercrime involves social engineering. Attackers can impersonate officials or relatives, create a stressful situation to obtain data or money, and use artificial intelligence to fake the voices of adults.
Enhanced security measures, such as mandatory biometrics or remote account locking, will be an added benefit.
Risk control
An important factor for children's banking remains risk management, for example, in case of unauthorized expenses by children, transfer of funds or personal data to third parties, or when children are involved in fraudulent schemes.
An important factor remains the ban on any types of transactions related to overdraft operations. These include issuing loans and short-term loans.
Financial literacy
In 2023, R‑Style Softlab was held study on the topic of children's banking with a survey of parents from 36 cities of Russia. 67% of respondents believe that a banking app for children should include courses, tests, and other educational materials on financial literacy. 48% noted the need for a separate banking application with lessons and videos on financial literacy.
A survey by the American banking holding company CapitalOne among high school students showed that 87% of respondents consider their parents to be the main source of knowledge about finance. However, only 22% often discuss financial management issues with parents, while 44% said such conversations happen occasionally. 37% of high school students receive financial support, of which 54% sometimes discuss money management with their parents, while 34% report that such conversations have never happened in their family.
Thus, the presence of educational elements even in traditional banking products will help spread knowledge to a child audience. And the opportunity to instill good financial habits through a children's banking application becomes an important factor in the decision to open a child account.
Gamification also plays a special role in learning. Amy Jo Kim, a games scholar and best-selling author, describes gamification as the practice of using game elements to make a given task more interesting, engaging, and fun. This same sentiment is shared by Gabe Zicherman, one of the world's leading experts on engagement strategy development. According to him, gamification is the process of using game thinking and mechanics outside of the game context to attract people, change their behavior and solve problems.
Researcher Imma Marin, who studies the use of game elements in education, approaches this concept in more detail. According to her, gamification is the ability to understand and use the elements that make games attractive to us, and use this to motivate learning and create meaningful experiences.
For example, games can be used to test cybersecurity compliance scenarios and cover other important financial literacy topics. The variety of training formats is another plus. These could be quizzes, puzzles, interactive lessons.
The next level is to personalize offers for multiple family members using gamification. These could be competitions for bonuses, savings games, and other formats that create close interaction with the brand. The use of the application by both children and parents has a positive effect on the formation of financial habits of children, who learn to handle money responsibly and see the real results of their savings decisions. The application also creates a unified information environment and common views on finances in the family.
Statistics and experience of Russian banks
According to Russian newspaper as of May 2023, the demand for children's bank cards is growing steadily, the number of issued cards increases monthly by 10–15% and reaches 20% by the beginning of the school year.
Most banking products offer interest on your balance, cashback, special offers from partners, savings programs and educational materials. As additional advantages, banks use the opportunity to create an individual card design, cards with free design and service, and special payment form factors, such as bracelets or keychains.
Implementation ready-made children's banking module 一 a convenient option for banks that does not require long-term development, involvement of a team of employees and significant investments. The advantages of a ready-made solution also include pre-configured integrations and the ability to customize the product.
