Neobanks have made a name for themselves by successfully winning the business of newly minted adults, opening their first checking, savings and investment accounts and uninterested in doing business with clunky, expensive legacy banks. Now a new wave of startups and services has been getting a jump on that model with an even earlier target: under-18s, including kids as young as 6, and in the latest development, U.K. fintech GoHenry is announcing $55 million in funding to double down on the opportunity.
The equity funding is coming from previous backers Edison Partners and Revaia (formerly Gaia), with a strategic investment from Italian payments company Nexi, a new backer.
The company is not disclosing its valuation but I understand it’s more than $250 million and less than $500 million. It brings the total raised by GoHenry (named, the company says, after its first child-customer) to $125 million, including a $40 million round led by Edison in 2020 and a $15 million angel round. Early on, it also raised $15 million in crowdfunding in 2016 and 2018. GoHenry likes to say that it has 5,000 shareholders as a result of those campaigns, and half of them are users.
That is just a small percentage overall of the kids (and parents) that GoHenry has amassed over the years. It now has 2 million customers — all between 6 and 18 years of age — across the U.K., the U.S., and more recently France and Spain after acquiring French rival Pixpay this summer. Today, they use two main services from the company, a prepaid debit card (topped up by parents typically) and a “financial education” app that links to that card (and an app that parents can use to help monitor and manage the account).
COVID-19 broke open the bank when it came to the usage of fintech: consumer “digital transformation” played out in a couple of ways, with people socially distancing driven to using apps and sites to manage their finances, underscored by a shift in commerce also going online, and people equally and more directly just shifting their attention to considering how they interfaced with finance and experimenting with new services as a result.
This also played out, interestingly, among young people, GoHenry said, with the company seeing a surge of new users during the pandemic and an increased rate of activity among existing customers. Its research found that kids in the U.K., GoHenry’s main market, earned £148 million in 2021, up 9% over 2020.
“We start at 6 because parents want a rite of passage, to give a card for a child’s 6th or 7th birthday,” CEO Alex Zivoder said. “That surprised us, since it was earlier than we expected. This shows to us that this is the best time for kids to start understanding the concept of money.” And that concept is linked to earning it, he added. “It’s all about allowance and chores, or a mix.” He notes that younger children do not spend much (nor have places to do so) but that takes off in the teen years, as teens do more spending and have more peer-to-peer transactions and more wages paid in from jobs or apprenticeships. “It’s the beginning of independence,” he said.
GoHenry itself is not yet profitable, but those trends point to its growth. It posted $42 million in revenue in 2021 (the last complete year that it’s reported), which was double what it made in 2020. (New users get 30 days of usage free, but after that it’s £2.99 per month, and Zivoder said that 99% of people who try it out become customers.)
Now the plan will be to expand those products with a new ISA product for savings accounts and the launch of a new gamified educational experience called Money Missions; to expand geographically in Europe (leveraging the Nexi relationship); and to start considering where there might be opportunities to do more for those aging out of the core service.
GoHenry is not the only fintech that is sharpening its sights on the segment. Earlier this week, kids banking app Step announced that it had taken out a $300 million credit line to build out a crypto trading product for young users (yes, crypto trading for under-18s…). Greenlight meanwhile added a new raft of family-focused safety features. Others like Revolut and Acorns, not originally built for younger users, have expanded into that age bracket.
“It’s the emergence of a new sector,” Zivoder said. “In the next 2 to 3 years we’ll have hopefully created a successful new segment called youth banking. The funding and debt raises are the next step in the story. For all of us, it’s getting us to the point to become household names in this segment.”
“When we first partnered with GoHenry in 2020, we knew the company was poised to make a global impact by making money approachable and fun for the younger generation and their families,” said Chris Sugden, managing partner, Edison Partners, in a statement. “Our initial investment powered the business’ acceleration in the U.K. and expansion to the U.S. We are excited to fuel GoHenry’s rapid growth into continental Europe and to teach young people financial literacy with practical tools like how to manage a budget.”