Next Generation Banking
From payments to foreign exchange and credit to personal savings and investments, the past few years have seen an explosion of new business models that are reshaping every aspect of traditional banking and empowering the customer. Yet, there’s one major area that has, so far, been neglected. In Britain alone, there are 7 million 8-18 year olds who are largely overlooked by incumbents and innovators alike, despite this demographic being their most important and, potentially, most valuable customers.
Today, even acquiring a debit card for young people is a laborious process, the services on offer are few and inflexible and financial illiteracy is still very much the norm. Yet with the rise of the internet, access to expenditure for children is only increasing. Recent research by YouGov found that 58% of children bought something online, or had something bought for them online, before they were 12, and that 68% of 8-15 year olds have access to a tablet/iPad. What’s more, due to a lack of alternatives, by the age of 10, it’s estimated that a third of children will have used their parents’ credit card to make an online purchase – often without permission, if the popular press is to be believed.
Plainly that isn’t a good thing. The absence of tools and guidance available to our nation’s youth, mean that many are fast inheriting our generation’s bad habits; already 18-29 year olds have the highest debt-to-income ratio in Britain. Meanwhile, of those who take out a student loan, usually the second largest loan of their life, few have ever really learned how to manage their finances.
It is startling that in the wake of the financial crisis, and despite the lessons we’ve (supposedly) learned about the critical importance of money management, we’re still failing to better prepare and educate the next generation. While the inclusion from September of Financial Education within the National Curriculum in England is both timely and welcome, 90%+ of young people say they pick up their money habits primarily at home, where much more needs to be done to assist in the conversation between parents and their children.
Osper, a new service designed to empower young people to manage money responsibly, aims soon to change all this, which is why we’re excited to announce our investment in this young financial services start-up.
From the first day we met Osper’s CEO and founder, Alick Varma, when he originally pitched us on an idea for a digital piggy bank, we were impressed by the way that he wasn’t simply focussed on building a new and improved service for young people, but was instead addressing its wider educational implications – namely, encouraging financial literacy.
Alick’s vision is ambitious – he wants to redefine the way young people think about and manage money by giving them the tools with which to learn. Clearly, his original idea has evolved a great deal since that first meeting, but the principles upon which Osper was built, like its founder’s goals, have not.
From Alick’s perspective, if the Osper app was to be about empowering young people, then there were only two things that mattered: a product that teaches children the basics of money management in a way that would keep them engaged, while simultaneously providing the appropriate level of monitoring and visibility to parents.
‘Start with the customer’
As Steve Jobs once famously said: “You’ve got to start with the customer experience and work back toward technology – not the other way around.” Alick followed that instruction to the letter. From the outset, whether it was teenagers on work experience, children’s focus groups or constant conversations with parents of children in the target age range, Alick asked his future customers to tell him exactly how they manage their – or their children’s -- pocket money, spending and saving habits. He then designed the entire experience accordingly.
The app is straightforward to use – money comes in, goes out or can be saved. Osper enables parents to set up an allowance digitally, while encouraging children to think about budgeting and saving, on top of expenditure. By transferring day-to-day responsibility for their own spending to children, thereby fostering a sense of empowerment, the service ends the need for handing over cash at the last minute (often a pocket-money ‘top-up’ anyway) or lending them a credit card with the risks that entails – all while retaining parental peace of mind.
To that end, Osper has worked with and has the support of some of the world’s leading financial institutions, including MasterCard®, to bring their prepaid debit card and app to market. All transactions can be monitored in real-time through the app, limits are built-in and ATM withdrawals and cards can be locked instantaneously.
At Index, we like entrepreneurs with big, bold, potentially industry-transforming visions and Alick’s is exactly that. Osper wants to be a part of young people’s financial education, from their earliest days of pocket money to the time when they’re deciding about university loans and beyond. We’re honoured to be partnering with the Osper team on their journey, and to be able to join parents around the globe in their mission to ensure our children don’t repeat the bad habits of our generation, and avoid the resulting damage too.
Read Osper's launch announcement 'Osper reinvents banking for young people.'