By FintechOS · July 11, 2022
6 minute read

Family finance: do incumbents need their own GoHenry?

Family finance: do incumbents need their own GoHenry?

For those old enough to remember the 1980s, some will recall the NatWest piggy banks advertised on TV, aimed at children to encourage family finance. Kids saved money and received a new piggybank upon reaching certain deposit levels. Ideally, the incentive of a range of porcelain pigs would inspire a generation of children to embark on a life journey with the bank. This is just what financial services providers like GoHenry are aiming to do in the modern day.

Pre-paid cards like GoHenry could be a way to create a similar intergenerational family finance brand affinity in the 21st century. While the NatWest piggy banks were a low-tech savings product, cash-loading cards and apps are effectively a high-tech spending product.

What is GoHenry?

Launched by a group of parents in the UK in 2012, GoHenry is an online family finance app and debit card designed to help children from ages six to 18 manage their pocket money and allowances through smart budgeting tools and responsible spending. Parents load a certain amount of money onto the card, and controls prevent the user from going overdrawn.

The founders wanted to teach their children how to manage their own money without getting into debt. The product has parental controls built-in, allowing parents to monitor the debit card transactions of their children individually.

Parents can also set tasks for their children, which they can mark as complete when finished to get paid. Money Missions is an in-app learning program designed to teach children how to manage their money, and they can earn points and badges for fulfilling missions.

The combination of control, gamification, and learning has been a hit with GoHenrry customers. So far, the product has been well celebrated with more than 2 million members in the UK and US and has doubled its customer base six years in a row. At the time of writing, 78% of GoHenry’s UK TrustPilot reviews rate it either ‘excellent’ or ‘great’ out of more than 6,500 reviews. It has also raised more than GBP 13 million through investors and shareholders.

According to Crowdfund Insider, GoHenry secured more than GBP 5 million from over 2,100 investors just days after publicly launching an equity crowdfunding campaign on Crowdcube in 2018. The company turned profitable in March 2020. And in 2021 it won Best Children’s Financial Provider at the British Bank Awards.

What are the user benefits of family finance?

  • Online and mobile app
  • Regular pocket-money payments
  • Task-setting features
  • Notifications to parent and child
  • Blocking facilities
  • Parents can select which shops the card can be used
  • Saving goals settings
  • Money Missions education
  • Bill splitting
  • Refer a friend benefits
  • Customized debit cards

According to GoHenry’s TrustPilot reviews, young people like the card because it provides them with a degree of independence, they learn about saving money to afford things they want, while the customization of cards provides them a sense of individuality. For the parents, they’re gaining some peace of mind about their family finance and how their children are using the money they give them. They also feel like they are helping their children by providing an element of financial education.

The product is monetized via a subscription model and costs parents GBP 2.99 a month after the free first month. Users get one free load-up of cash onto a parent account, after which users are charged GBP 0.50 a load. For some customers, this would be an expensive way of giving their children pocket money. The other drawbacks are that deposits earn no interest, and there is no Financial Services Compensation Scheme (FSCS) protection of the funds uploaded should the firm collapse.

Alternative family finance pre-payment cards

Of course, as the NatWest piggy banks testify, there have been family finance products for a long time, while many pre-paid card alternatives are already following GoHenry’s footsteps.

Nimbl, Osper, and Starling Kite followed, providing slightly cheaper versions. NatWest Rooster Money is a similar product to GoHenry, with a free pocket-money app. The free Rooster Virtual Tracker allows parents to keep tabs on the money they are giving their children or the money sent to them as gifts. Parents can upgrade the account to add tasks or chores for which children can be paid, but customers need to register for a Rooster Plus account, which is GBP 14.99 a year, or a Rooster Card account, which is GBP 19.99.

How could family finance benefit incumbents?

Outsider and disrupter banking brands have broad appeal among younger generations. Many young people are growing up accessing financial products without encountering the established ‘high-street’ banks.

According to the World Economic Forum, 89% of Gen-Z say planning for their financial future makes them feel more empowered, with 60% owning a bank account, and 32% a credit card. As such, incumbent banks have an opportunity and significant interest in engaging with younger customers with pre-paid cards and learning facilities to build a customer bond.

While GoHenry anticipates robust revenue growth, high fees, and a lack of general awareness about the product are a challenge to the brand. In this regard, established banks have an advantage in this space because pre-paid cards provide an avenue to young people through their parents, who may be existing customers. This is counter to a trend where Millennials introduce disruptor brands to their parents, who had previously been loyal to established banks.

Furthermore, in building relationships with younger people through pre-payment cards, established banks would be better positioned to upsell their products as the cohort ages. With a full range of financial services that some disruptors have yet to expand into, banks can provide for the next stage of a person’s life in a way that more fragmented start-ups cannot.

Critically, family finance firms like GoHenry and Starling Kite are gathering vast amounts of data about Gen-Z’s interests, likes, and spending habits. Regardless of whether they have a product to sell once their customers have graduated from pre-paid cards, they will have a full marketing profile of that generation to leverage.

Established banks need to understand the next generation of consumers, but many are currently doing so from the back foot. Nurturing young customers and providing them with some education on money management – or some meaning beyond providing a basic product – is money in the bank.

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