Tech has a youth obsession
Tech is obsessed with the young, and fintech is no exception. Ask any fintech startup who their target audience is and you’ll likely hit some or all of the following buzzwords: “young, urban, cosmopolitan, trendy, ambitious.” In tech, it is usual to ignore other parts of society in favour of young urbanites. Families are one such segment who have been sidelined by the tech sector. For our purposes, families are defined as households with dependent children. According to ONS data, there are 8 million such households in the UK. For the business that can capture this audience, this is a considerable prize.
Families present a unique set of opportunities for fintechs
For fintechs, families present an interesting opportunity. Adults are typically older, with higher income than their young, single counterparts. As well as having to manage their own money, family adults are more likely to combine bank accounts with a partner. They will also manage the money of a child (or children) through pocket money or similar.
There are rewards for the fintech that involve themselves in family life. Rather than an individual customer, they become part of a network of interlinked finances. There is also the benefit of acquiring customers while they’re young, and the potential loyalty that entails: a fifth of people with bank accounts are still with the first bank they joined as a child.
We ran a series of interviews with parents about their lifestyle and money habit
To discover how to build products for families, we set out to find out about how families approached money. We ran 20 interviews with parents and children about money habits, finance and pocket money. Here are some of the recurring themes we heard:
More than young people, parents struggle with balancing work, life and family. Parents often feel guilty when they take time away from their families - to work, or spend time on themselves. However, parents acknowledge that work is a necessity to give their families the best life experiences.
'It's rare that I get the balance right, it's only really possibly on weekends, or when we’re on holiday.'
Parents want to educate kids about money, particularly savings. ‘Saving up’ is used as a way to teach children about trade offs, and delayed gratification. Saving is seen as the cornerstone of good financial education.
'I want them to know when they can’t afford it. The older one is trying to bring his total back up after the Lego set.'
Parents want a good degree of control over their children’s spending, something which can be difficult to maintain as spending moves online. The degree of control parents want depends on age and maturity.
'They need to be able to do things without their parents. But at the same time, I need to know they're safe'
Parents put a strong focus on putting money away for the future - particularly for their children. This might be done through savings and investments, or through products such as life insurance, which is often linked to a mortgage.
'We’ve been diligent with savings, so come uni age if the kids want to go to uni the money is there. Over the past 10 years we’ve stopped borrowing money and started saving money.'
Perhaps a universal theme in finance, many of the people we spoke to had anxiety around money. Many felt that, despite their planning, they could better organise their finances for the future, particularly around goals for their children, such as helping them save for uni or a home deposit.
'I’m seeing an IFA next week to go through my finances. I’m worried I don’t have enough life insurance cover, and I’m not saving the right way.'
We came up with a set of guidelines for creating financial services for families
Looking through our themes, we drew up a set of guidelines when approaching family finance products.
Make it educational for kids
Parents want their children to learn good money habits that set them up for life- particularly saving.
For example... A pocket money app that allows children to import a wished-for item from Amazon and save towards it, thus teaching them savings goals.
Put parents in control
Parents want oversight over children’s spending and financial activities. The level of oversight they want tapers with age and maturity.
For example… A linked parent- child debit card that sends parents a notification when their child spends money, or even asks for parent approval before their child spends money.
Help parents plan for the future.
Future planning - in the form of saving for kids or taking out life insurance - is a key concern for parents.
For example… A robo investor that mixes a custom set of financial products - such as stocks, bonds and insurance - after a parent has filled in a questionnaire about their financial goals.
At one time it might have been difficult to address more niche customer segments. However regulatory and technology changes (such as Open Banking and the emerging ecosystem of fintech providers) have meant that it's easier than ever to rapidly innovate and create nuanced propositions for specific audiences. Parents and children are just one of the audiences that financial service providers should feel empowered to create great products for.