Can a high-tech piggy bank salvage the youth payments market?

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Companies of all sizes have attempted to serve kids and teens with prepaid cards or digital wallets with parental controls, but there are very few success stories.

GoSave's twist is that it doesn't make a card or an app the focus of its experience. With the advent of internet-connected toys and music speakers, GoSave predicts its internet of things toy line will have a shot at capturing the attention — and spending — of young people.

"We want to replicate the piggy bank for a cashless society. There's an opportunity to build an IoT product in this space," said Andrew Birt, founder and CEO of GoSave, which has offices in Melbourne, Australia and Santa Monica, Calif., and completed a Kickstarter funding campaign and was a winner of a innovation program event at Visa.

Parents pair an app to toy characters that will cost $99 when they go up for sale in October. It's almost a turn to the past—these toys are real piggy banks that have storage for actual money, but the goal is to create a portal for parents to transfer funds to a youth prepaid account that the parent controls.

"Parents never carry cash anymore, but can use this to engage young people up to 18 years old to get them to save regularly and manage their money in a virtual environment," Birt said.

There are pieces of Venmo and Virtual Piggy here. Parents and relatives can make P2P transfers into the account, which the young people can track on a touchscreen built into the toy. This screen also has a social component—parents can communicate chores and send messages that they have "paid" their children, and relatives and others can send messages and payments to the children.

Children cannot buy anything directly from the toy, though they can "withdraw" through the touchscreen to move value to a spending column. This allows them to spend funds from a supervised prepaid card account. Parents set parameters through an app.

The company is offering its devices directly to consumers and also will approach banks with white label products that would include customizing characters for individual banks.

Despite appearances of a compelling market — who would be against promoting financial literacy? — youth-directed financial products have struggled to find an audience.

Virtual Piggy, which later changed its name to Oink, was a major player in the space. It build up partnerships with gaming and retail companies but faded and shut down in 2016. Visa Buxx launched nearly two decades ago, but has lost much of its bank support.

"A lot of these apps start out, gain traction and then drop off," Birt said. "What we've done is add a hardware component. We're not asking people to change behavior. They've always had piggy banks. We're making them digital."

Physical products that are connected digitally have a number of features that engage kids in financial education, said Zil Bareisis, a senior analyst at Celent.

For example, Credit Suisse has recently launched a Viva Kids package that includes Digipipi, a "digital money box," which responds to both physical coin deposits and electronic transactions. Another new entry in the youth payments space is Current, which uses an API to link chores and other tasks to an account to encourage savings and financial literacy.

GoSave's price tag could be another source of friction. The $99 price tag would be steep even for adults; several companies such as Coin, Stratos, Swyp and Plastc offered high-tech payment cards that retailed for $50 to $155, and none of these products survived in the market. Coin sold its assets to Fitbit in 2016, Stratos ceased issuing cards after selling its platform to CardLab Innovation in January 2017, Swyp ran out of funding in December 2017 Plastc sold its assets to Edge Mobile Payments the same month.

GoSave could address its pricing by working more closely with banks.

"The advantage that banks have over pure startups here is that they can afford to subsidise the hardware as part of a broader relationship, while others have to rely on product sales," Bareisis said.

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Prepaid cards Internet of things Mobile wallets