by Andrea Gnetti and Chiara Resmini, respectively CEO and Senior Consultant in Excellence Payments

Digital payments continue their growth path, as demonstrated by the results of the Milan Polytechnic Observatory which tell us that in 2023 digital payments, made by card or wallet, exceeded 40% of the volume of total consumption. This trend is also supported by the evolution of the needs of increasingly younger consumers: despite the demographic decline, young people under 18 still make up around 17% of the Italian population. Currently, there are approximately 4 million “teens”, children between the ages of 12 and 17, who want and can access payment solutions to manage their first independent purchases.

But why are companies taking an interest in this market? The answer is in the numbers: in 2022, 50% of the population between 14 and 17 years old made at least one online purchase, compared to the 41.9% recorded in 2019 according to ISTAT data. With what funds are these purchases made? Research conducted by N26 and GoStudent reveals that almost 70% of Italian families give their children “pocket money”. 40% of kids receive a weekly tip, which ranges from 10 to 20 euros and increases with age.

However, although the data reveal promising volumes, the true value of this target lies, in addition to the possibility of indirectly attracting parents, in the future: the ability of a Bank or Payment Institution to attract and maintain this audience is equivalent to the acquisition of a customer who will bring more and more value over time.

In this article, we will explore the two main critical moments that companies must face to extract maximum value from the “teen” offer: the acquisition of the customer between the ages of 12 and 17 and their conversion into a loyal customer at the age of 18 years.

A market that still sees the lack of a mainstream offer

Recently Satispay, the Italian unicorn of digital and simple payments, also launched the offer dedicated to the teen segment, 12-17 years old, “Child’s play” for children (and parents). Not only Fintechs like Satispay, but also banks and payment service providers are expanding their offer to include solutions dedicated to younger people.

However, developing a product for this segment presents challenges. First, there is a need to create a value proposition that meets the needs and interests of two distinct generations: guardians and minors.

While guardians seek convenience, security and control, minors seek simplicity, digitalisation, sociability and financial education. Understanding and responding to both needs in a single offering is not easy. Players must therefore be able to think of a functional product that can be communicated through a double value proposition and that can embrace the values ​​of both targets.

Currently, the market presents fragmented solutions, and there is not yet an offer that fully satisfies both perspectives, although there are many interesting solutions.

This materializes in the possibility, for the various market players, to relaunch or develop their own offer, gaining the position of still vacant “mainstream solution”: the opportunity to launch the reference offer which can be the one requested and desired by teenagers and approved and signed by the guardians.

At product level we find prepaid solutions (linked to the guardian’s account), independent current accounts or linked to the guardian’s account in the form of “sub current account” and account cards with independent IBANs. It should be noted that the owner of the relationship is always to all intents and purposes the minor, who certainly plays an “influential” role in selecting the most suitable solution: a central aspect to consider in the design and development of the go to market of the offer. The capacity, through the integration of suitable features and an engaging marketing plan for the teen target, where word of mouth and influencer marketing play a key role, represents the strategy to be pursued to position ourselves as a reference player for the offer in this segment not yet successfully managed.

From the analysis of the value propositions of the players who currently have an offer dedicated to the teen target, it emerges that the players focus mainly on factors such as security, digitalisation of payments and financial education. The solutions presented are often fragmented: among the offers mapped, for example, only 50% offer an online subscription experience; only 33% offer engagement mechanisms (cashback or dedicated reward programs); less than 20% offer P2P payment solutions or creation of spending groups, an essential feature for leveraging word of mouth on the target audience.

To emerge in this market, it is essential to expand and adapt communication and evolve product features, trying to cover the entire spectrum of solutions that can convince the entire audience, i.e. engaging teenagers and convincing parents. Among the features to consider for the development of a reference offer for the sector:

Brace side features:

• Convenience (free fee, top-ups included, …)
• Security (easily customizable limits, management of blocks from the App, …)
• Control (merchant and geo control, alert system for expenses above the limit, …)
• Minor side features:
• Simplicity and digitalisation (wallet, pocket money management, interactive app, …)
• Sociality and sharing (personalization, P2P, gamification, …)
• Financial education (piggy bank, dedicated contents, change rounding, …)

The importance of migrating the teen customer to the standard offer

If acquiring the teen customer represents the first challenge for the players, the acquired customer’s turning 18 becomes the real critical moment to make the most of the investment potential of a teen offer: even more crucial is, in fact, the ability to convert them into loyal, “young-adult” customers with a seamless experience when they turn 18.

This is because retaining young customers through the transition to adulthood not only establishes a relationship of trust with the bank, but also opens the door to a variety of opportunities during the highest-value moments in the customer’s lifecycle. From the crediting of the salary to the first insurances, from the first savings to the mortgage and any investments, the bond established with the bank during the formative years can continue to grow, becoming a reliable point of reference in all the crucial phases of a person’s financial life.

Successful cases include, for example, Intesa Sanpaolo and Revolut: the former with the “XME CONTO UP” account offers teen customers who sign up the possibility, upon turning 18, to convert it into a standard current account while maintaining the same IBAN and also provides a bonus on the average balance as an engagement lever, thus also working on financial education by teaching the value of saving. Second, Revolut, with its “One-way trip to financial independence” allows for completion of 18 years of age, to choose whether to extinguish the account or convert it into an independent current account.

In short, investing in the acquisition and retention of “teen” customers is not just an opportunity, but an essential strategy to be successful in the competitive market by playing before and better than competitors.