Globally, fintech firms and neo-banks have been looking at the teen banking space as a lucrative growth opportunity. From Europe to the Middle East, many players have entered the market with prepaid payment instrument tools to serve the growing demand for digital payments among the under-18 consumer demographic. The trend is also expected to catch up with increasing momentum in the Indian market, where the digital banking and contactless payments market has recorded exponential growth over the last five years.
A number of different factors are expected to drive the growth of the prepaid card ecosystem in the teen banking space in India in 2023. One of the factors is the growing desire among teens to learn about digital payments and to get themselves equipped with financial literacy. Another factor that will aid the growth of the prepaid card ecosystem is the availability of 350 million teenagers and young adults in the Indian market.
Most of these teenagers are expected to turn to fintech firms and neo-banks to access financial products, as opening an account through conventional banking channels is a tedious process in India. Currently, a number of fintech firms are offering their services in the teen banking space.
Funngro, which was founded in 2021, provides teenagers with a virtual and physical prepaid card in partnership with Fino payments bank. Alongside digital banking products, Funngro also aims to boost financial literacy among youths across the country. Since its inception, the business model has evolved significantly for Funngro. In addition to its digital banking products, the firm has also added features to its platform, which enables teenagers to make money by working with companies.
FamPay, the neo-bank which was founded in 2019, is also seeking to capitalize on the growing teen banking space in India. In partnership with IDFC First Bank, FamPay provides teens with a prepaid card, which teenagers can use for making UPI and P2P payments. Furthermore, the prepaid payment instrument can also be used for offline payments. Since its inception, the firm had amassed a strong user base of 10 million across the country.
In 2023, PayNXT360 expects more and more players to provide young users with banking products, including prepaid payment instruments. With teens getting access to UPI, the adoption of teen-focused prepaid cards is also expected to grow significantly over the next 12 months in India.
Furthermore, this is the user segment, which likes to be incentivized and appreciated. Consequently, PayNXT360 expects retail brands to partner with fintech firms and neo-banks to offer teens curated discounts and rewards. Such collaborations will also drive the adoption of digital banking and prepaid payment instruments among young-generation Indians in 2023. While the teen banking space is still in its early stages of development in India, fintech firms and neo-banks focusing on this consumer segment are well-placed to grab market share in 2023.
As the teen banking space continues to grow and offer lucrative growth opportunities, PayNXT360 also expects big names in the Indian prepaid card industry to enter the under-18 business vertical. In Europe, similar trends have been emerging in the growing teen banking space. Starling Bank launched Starling Kite aimed towards 6- to 16-year-olds. Bunq, in December 2022, rolled out under-18 accounts in various European markets, including Netherlands, Spain, Germany, Italy, France, and Ireland. Revolut is another prepaid card giant that has launched a service targeted toward the teen banking space.
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