15-year-olds are reshaping banking and credit

The Bank of Mom and Dad (BOMD) isn’t just a sitcom line. An analysis found that parents lent their children $47 billion in 2019, mostly in the form of down payments on first homes.

What if these first-time buyers had become financial ninjas at 15? They might not have needed that humiliating BOMD loan. They could be part of a financial groundswell that makes today’s teens unlike any other generation of teens before. This is the adolescence of digital banking.

As Copper Banking co-founder and CEO Eddie Behringer told Karen Webster of PYMNTS, today’s newcomers include Generation Z, born between 1997 and 2012, and teenagers referred to as “Generation Alpha”. ” by some, born around 2010 in the wake of the real estate crash.

With a nod to the record of student loans and credit card debt, Behringer said “it’s really the first generation that’s been hyper-sensitive to the missteps of past generations when it comes to these things.” . Unlike the young people of old, today’s teenagers think “It’s cool to be smart with money”.

Long considered a difficult age, 15 is now a magic number. He told Webster, “you’d think 10 to 19 [years old] is a fairly narrow segment. What we found is that every 15 year old in America is looking for a product. They are looking for their first primary bank account.

By saying that this personal banking inflection point is now happening two to three years earlier than ever, Copper is built on the idea that 15 is the perfect age to learn financial literacy – with parental guidance and immersion serious about financial literacy.

“We want teens to make mistakes in a safe space,” he said. “When you’re on a debit product before you go to college and have the potential to get your first big credit limit and fall into that vicious cycle, we want you to make those mistakes early,” before harming the nascent scores.

But the demand is undeniable. Behringer pointed to “hyper attention within end-talk influencers, really social media that draws that attention towards personal finance. I think it’s a time in history where you have this massive consumer shift that has a lot of tailwinds from the pandemic.

“You have way more options than we ever have. It’s just that massive attention that being smart with your money is cool. That’s really why [teen] generation.”

See also: Gen Z consumers love their debit cards…for now

Fighting financial illiteracy

With approximately 800,000 account holders and $29 million in Series A funding, Copper is going back to school with its message and its platform, yes literally.

The Credit Card Accountability and Disclosure Act of 2009 prohibited lenders from marketing card products on college campuses. So Cooper is taking its financial literacy efforts directly to high schools, partnering with parents and schools throughout the process.

In his previous startup Snap! Raise, a fundraising tool for schools, Behringer and its co-founder have seen home economics still taught, but not basic personal finance in the age of apps.

He said: “It made us realize how high the bar has been set for banks before 18. The invisible learning approach is the biggest shortcoming in terms of results. You just can’t have a website that talks about financial literacy or inclusion that doesn’t drive engagement and think that’s the answer.

He recalled a fateful meeting with a JP Morgan executive who called financial literacy the “last real white space there is” in finance. “It’s been transformative for us from the start, really thinking of it as the last unbanked generation that’s out there. They don’t bank anywhere.

But they interact with the financial system – and even borrow.

“There’s definitely a difference between good credit and bad credit, and credit isn’t bad,” he said. “The popularity of buy now, pay later, especially with the younger generation, is just all the data and evidence you need there.”

Noting trends such as meme stocks and casino capitalism, he said: “The interesting part about this is that teenagers are trying to take control of their financial future. They are trying to get access to a bank account. They’re trying to get access at a much earlier age than they ever have in the past.

See also: Copper Banking Raises $9M in Seed Funding

high school sweetheart

Joking that if he had offered this app to his own mother at age 15 he would have received a slap in the face because historically parents controlled all household finances, Behringer said times have changed.

He told Webster the change is happening because “Gen Z is very powerful in household decision-making, whether it’s what Mom buys at the grocery store or what technology consumes. What we have seen is that they can actually help introduce a financial product, which has never been the case. It’s a big part of what has spurred a lot of our growth.

After high school, do you switch from Copper to an adult app? That’s not the plan, as he put it: “There’s a huge market for us to go after. That said, you keep your first primary bank account for 14 years.

“We think we can be that primary supplier for you during the years when you leave home and go to college. It is one of our priorities. We see all these main features that this is your first main banking relationship. That’s kind of how we think about it today. »

Are the big banks worried that this intruder has cracked the code on the next generation of account and cardholders? For one thing, as a neobank, Copper has no physical branches to service. Additionally, “you’re also seeing a shift in how teenagers think about credit,” he said.

“The vast majority of our teenagers aren’t enthusiastic about getting a credit card.”

This would mark a vast shift from generations past, but not entirely surprising given the financial extinction-level events the United States has endured since 9/11. Perceptions about what banks are, what they do and who they serve are up for grabs.

It looks like the next wave of retail banking is more financially adept than any previous generation, and that will ripple through finance for years to come.

“If at a high level you’re using the neobanking orientation and concept, 100% of teenagers on Copper, their parents can bank at Big 5 institutions, but have made the decision to open the their teen’s first main account with us,” Behringer said.

To say that the bank for the legal drinking age crowd is trivialized to the max, he added, “that was part of our strategy, that’s how do we make it be that first relationship and hope see that stickiness that we’ve historically seen there as well” but with a neobank they joined as teenagers.

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