October 1, 2020 | technology | No Comments
- Step is a no-fee digital bank for teenagers, offering secured credit cards and an app.
- It’s working with influencers like TikTok megastar Charli d’Amelio to spread the word, and banking on referrals between users to grow its platform.
- Fintechs like Current and Greenlight, too, offer debit cards and savings accounts for kids.
- Step will also have a brand ambassador called the Step Squad.
- Visit Business Insider’s homepage for more stories.
Banking isn’t typically top of mind for teens, and teens aren’t typically top of mind for banks. But as Gen Z comes of age, fintechs are starting to pay attention to the digitally-savvy segment.
Step, a digital-only bank for teens, just launched, and it’s using influencers like TikTok superstar Charli D’Amelio to spread the word.
D’Amelio, 16, is the most-followed individual on the app, with nearly 90 million followers.
When Step founder and CEO CJ MacDonald first met D’Amelio and her family, he says her parents were drawn to the product given their own challenges helping their daughters manage their finances.
“It was interesting to hear their journey trying to set up bank accounts and financial literacy for their daughters. Her mom’s exact words were, ‘I didn’t even know where to start,'” MacDonald told Business Insider.
Read more: A JPMorgan-backed personal finance app catering to children has doubled users this year. Now it’s eyeing ways to let kids play the stock market.
Step’s platform is free, and it comes with a Visa-powered secured credit card that users can spend with, via both the card and mobile wallets.
Step isn’t the only fintech targeting younger customers. Players like Current and Greenlight, for example, offer debit cards for kids that parents can monitor. They both charge families a monthly fee for the service.
To be sure, Greenlight is further along in its journey, offering debit cards and savings accounts. It’s also developing an investing product, Business Insider reported in August.
D’Amelio is also no stranger to corporate partnerships, having announced a deal with Dunkin’ in September that included the launch of new drink option “The Charli.”
Anyone over the age of 13 is able to sign up and create an account on Step, but in order to actually open an FDIC-insured account, users have to be at least 18 or have a parent or guardian set up the account on their behalf.
Step has raised nearly $30 million to date from investors including rapper Nas, Will Smith, and payments fintech Stripe, who led its Series A last year.
Step wants to teach teens how to manage their money
As any founder of a personal-finance startup would say, young consumers are often under-educated when it comes to managing their finances. And Step’s problem statement is no different.
“It’s always bugged me that schools don’t teach kids about money and families don’t talk about money,” MacDonald said.
Read more: Finance startups are launching new products designed for influencers including an app that lets YouTubers get paid early
And while financial literacy might not be top of mind for the average teenager, it’s a compelling offering for parents.
“The value proposition to a parent is much different than the value proposition to the teen. The parent obviously is really sensitive to security and financial literacy,” MacDonald said. “The teen is not going to care as much about those things. They’re just super excited to have a card and have access to money on their phone.”
But starting the financial journey early can ultimately influence the way teenagers manage their money as they grow up. Designing the product so teens feel a sense of ownership and responsibility was key, MacDonald said.
Step is banking on influencers and brand ambassadors to acquire users
Step’s marketing strategy is rooted in influencers and network effects.
Beyond D’Amelio, Step has a brand ambassador program called Step Squad, which will work with middle and high school students to grow brand awareness. And in the app, users can send referral codes to friends and earn cash for each referral.
See more: Inside UTA’s deal with TikTok star Charli D’Amelio and how the talent agency plans to expand her influencer business
MacDonald says that keeps customer acquisition costs low, a key concern of consumer-facing startups, and is part of the reason it’s able to offer the service for free. Another reason is that processing fees (known as interchange) on a credit card, secured or otherwise, is typically higher than a debit card, MacDonald said.
Step has a waitlist of over 50,000 users interested in joining the Step Squad, and amassed over 500,000 consumers on its waitlist ahead of its launch.
“A lot of fintechs have referral programs, but I think the unique thing with ours is it would take a lot for you to post something on social media about your bank,” MacDonald said.
Fintech startup Karat has launched a new charge card designed for YouTube, Instagram, and TikTok stars that looks at social-media engagement rather than credit history
A JPMorgan-backed personal finance app catering to children has doubled users this year. Now it’s eyeing ways to let kids play the stock market.