April 27th marked an important milestone in the Youth Banking sector of the FinTech market, with Greenlight, Current, and Step raising an aggregate of $580 million on a single day, while similtaneously introducing venture capital heavy weights onto their cap tables. Andreessen Horowitz led the Series D financing rounds for both Greenlight ($260 million) and Current ($220 million) while General Catalyst led the Series C financing round for Step ($100M). For those that are unfamiliar with Marc Andreessen and Ben Horowitz, the founders of VC Firm Andreessen Horowitz, the pair have invested in countless famed tech start-ups, including: NetScape, eBay, Skype, Facebook, and Twitter to name just a few.
VC activity within the Youth Banking sector is nothing new, with deal activity steadily increasing each year during the past half-decade; however, in the last 12-months the sector has exploded with growth. Greenlight has added 3 million users since last April, Current has added two million users from last summer, and Step has tallied up an additional million users since its last financing round in December 2020. The nascent growth in users has understandably translated into some lofty valuations. Based upon these latest funding rounds, Greenlight is now worth $2.3 billion, up 100% from its last financing round in September, and Current is worth $2.2 billion, up 200% from its last financing round 5 months ago. Valuation metrics on Step have yet to be released, but one would expect similar appraisal growth from its $290.0 million valuation in December 2020.
Greenlight, Current, and Step all aim to empower teens and young adults to take control of their financial future through access to the necessary banking services and investment education. In addition to providing FDIC insured bank accounts to teens, each of the three companies with financing rounds last tuesday offer smart debit cards, which not only allows parents to control how and where their children spend money, but also teaches young adults the importance of concepts such as budgeting, saving, and investing.
Perhaps more valuable than any immediate revenue generated by the smart debit cards is the customer relationships and brand loyalty Youth Banking start-ups are poised to benefit from over the long-run. The long-term vision of each of these firms is to become an all-in-one money management platform for minors; but it would be foolish to believe the strategy will have a cutoff for 18-year-olds in the future.
As challenger banks and online brokerages continue to disrupt the status quo for Wall Street titans, it’s of little surprise that financial service offerings have made their way to the younger demographic. Although minors tend to have fairly little capital to manage, and thereby will have minimal impact to any FinTech’s immediate bottom-line, the lifetime value of acquiring a customer is highest in their youth. With prominent start-ups such as Greenlight, Current, and Step establishing relationships with teenagers in the financial services space, FinTech CEO’s would do well to note the trend of targeting consumers while they are young, before the next generation of investors come into their own right and are already spoken for.
