Tweenagers and Teenagers: The New Target Group Of India's Fintechs Many fintech startups today offer offline and virtual cards for kids to make safe payments while allowing parents to monitor the spending and savings

India is one of the fastest-growing fintech markets in the world. Fintech startups are looking to tap chunks of customers across geographies and social and economic classes. An untapped demography that is being explored by many startups recently is children and young adults. These startups include Birdfin, YPay, Junio, Pencilton, Walrus, Yodaa and FamPay, among others.

"We all witnessed the surge of ATM machines, credit cards, etc., but I was a little disappointed to see that kids were not made a part of that revolution. I have seen kids carrying cash and not having controlled financial freedom even in this digital era. As I grew up in a small town, I understood the power financial freedom can give you and the sooner you start it the better.," said Navneet Gupta, founder and CEO of YPAY. The Delhi NCR-based startup was launched this year and has more than 65,000 users.

Most of these startups offer sleek and suave cards that children carry safely in their wallets for offline payments. Apart from that, they also offer virtual cards on their apps that can be used for online payments. They also offer features such as rewards, cashback and referrals. Overall, the offerings are a win-win for parents and children. For kids, they solve the problem of not having to go to parents for cash or their debit/credit card which would require an OTP. For parents, it ensures safety, allows them to transfer money to their kids' account anytime, track spendings and savings and get AI-driven insights on overall spending habits.

"Our smart card ensures that kids are never out of money during an emergency, or when parents are somewhere else. Junio is a prepaid debit card and so, children can only spend the amount loaded on the card. Parents can also assign tasks for your child. Once they complete them, they can earn digital pocket money," Ankit Gera, co-founder, Junio.

Moreover, these offerings also teach the children the value of money as they are in control of their spending, claim these startups, who also have communities where teens discuss the latest trends and other topics.

Children, an Untapped Market

With children under the age of 18 constituting nearly 41 per cent of the country's total population, this is a largely untapped market. Additionally, there are 15-20 million kids in the age group of 11-18 years who have access to smartphones and receive pocket money, says Ankur Bansal, co-founder and director, BlackSoil.

"Indian pocket money market is currently sized at INR 27,000 crore and is expected to grow to INR 75,000 crore by 2025. While the market size for fintechs catering to children and young adults is still in the developing phase and it's yet to gain that traction but the fintech market, overall, is projected to grow to $85 billion by 2025, from around $30 billion in 2021, at a CAGR of 22.7 per cent. Financial technology firms that focus on the adults of tomorrow are poised to take a big slice of the pie," he said.

While initially most of these startups focused on targeting schools and coaching institutes, with COVID-19 and lockdowns the focus shifted to online payments. "Though a lot of use cases got cut with the pandemic like kids were not going out for movies or coffee or using Olas and Ubers the other use cases like online shopping, food ordering and household buying being done by teenagers witnessed a boom," said Sambhav Jain, co-founder, FamPay. The Bengaluru-based startup was launched in July 2020 and has over 2.5 million users and has received total funding of $42.7 million.

These startups believe that students do not know how to handle their finances, nor they are being given a chance to learn how. "That is why I decided to come up with a solution that will change the state of financial education of this generation while keeping the parents in the loop," said YPay's Gupta.

FamPay's Jain agrees. "We realized that children, especially in the age group of 12-18, need to be taught about financial literacy early. However, we did not know how to start, as the world of finance is a massive and complex sector, and takes years to comprehend. We started doing research at malls and other shopping locations, and asked parents how they provide money to their children. We realized that 80-90 per cent were giving cash to their children. It was then that we realized that it is an interesting problem to solve, and this gave birth to FamPay," he said.

While these fintech startups are helping kids to make their own financial decisions, they are also enabling parents to monitor the financial activities of their kids, thus providing passive control to parents, which is key to tap into this particular segment. "Fintechs focusing on kids have also created their platforms customized to kids so that it has an easy-to-use interface, engaging such that the platform not only acts as a wallet but induce financial education," said BlackSoil's Bansal.

Did Banks Fail To Tap In?

In the past, banks also acknowledged the untapped market of serving the kids and introduced products such as junior accounts. However, the banking processes for this segment continued to remain more or less the same and parents had to manage all the banking operations for their kids. "Banks were unable to provide so much customization specific to the needs of different customer segments and that's how fintechs are creating a niche by developing products catering to the needs of one segment of customer," said Bansal.

Though products like these have been built earlier, the experience was not really customized for the kids. So the children were not excited about these and did not influence their parents to get them the services. Whereas the focus of new-age startups in the space is on the child and not the parent.

Bansal believes that customers' banking and financial needs have been changing and the fintechs are using technology to serve those changing needs. "Fintechs are acting as an extended arm of banks to serve the customers better and customize products as per their needs. Similar is the case with financial inclusion of minors/kids, which has not been a focus segment for banks so far," he added.

Further Scope

Today's generation is growing up in a digital world and a branchless banking experience will be the norm, provided it is tapped into in a sensitive, safe and fun way. "I think the environment is more favorable today since kids have their own phones. As payments have gone digital, why wouldn't the pocket money of kids also go online? Moreover, since kids are tech as well as deals savvy, their parents would be relying on them to make e-commerce and other transactions," said Aditya Damani, an angel investor and founder of Credit Fair.

"With rapid digitization, online shopping, travel, and food ordering have become much more prevalent. Also with kids being more tech-savvy than their parents, they are often asked by them to order household items and groceries online," added FamPay's Jain.

Experts believe that engaging or reaching out to more children via social media or webinars, providing money management skills in a subtle manner, incorporating gamification platforms to keep children hooked, offering an easy interface and ensuring they are not over-burdened with financial literacy or jargon will go a long way in further tapping this huge market.