Greenlight Financial, which just raised $54 million in Series B funding, is acquiring customers by pitching itself as a personal finance and banking hub for kids.
Greenlight is a digital-only banking startup that is designed to teach kids how to manage their finances as they grow into adulthood. The Greenlight platform, which operates on a subscription model and charges a $4.99 monthly fee, allows parents to send money to kids for allowances and chores; set spending limits; and monitor a child’s spending habits. Funds are disbursed through a debit card.
According to Tim Sheehan, CEO and co-founder of Greenlight, the Atlanta-based company is filling a need by going beyond custodial accounts and offering a platform where kids can take active steps to manage their finances with the safety net of parental oversight. “There’s been a lot of attempts to teach kids to be smart about money, but they usually are articles that we want kids to read, or maybe a video,” he said. “It was all this passive stuff. What’s different with Greenlight is it’s active; they are learning by doing.”
Through the Greenlight Financial app, parents can send their children money instantly and can set up recurring payments for weekly chores or allowances. The funds are kept in an account held by Community Federal Savings Bank, and the account includes a prepaid Mastercard for the child. Parents can contribute interest payments at a rate of their choice to show their children how savings accounts work, as well as block payments to certain types of merchants and set other discretionary controls.
Money in the account can be split into categories like savings, spending and charitable donations. The app offers personal finance tools, through which children can monitor their spending and track chore lists. Similar to savings envelopes offered by N26 and Monzo, kids can create sub-accounts that correspond to savings categories.
Greenlight Financial markets its products through paid social media and search engine keywords. Sheehan said there are more than 500,000 parents and children using the platform.
The $54 million in Series B funding round, which was confirmed this week, was led by Drive Capital, with participation from JPMorgan Chase, Wells Fargo, TTV Capital, Live Oak Bank and Relay Ventures. With the Series B funding, Greenlight said it will add new educational and investing tools, including a feature that will function like a custodial brokerage account. The five-year-old company also will hire employees to grow its product and engineering teams and will use some of the funds on marketing.
Greenlight joins a group of digital-only banks launched in recent years to serve Generation Z customers. Current, for example, also offers debit cards for kids with spending parameters set by parents through its app, while Kard, which is based in France, lets kids manage their money in different categories like savings and charitable donations.
That said, the inclusion of major banks among Greenlight’s investors is evidence of their confidence in its model, its financial education focus and its inroads among a population typically out of reach of traditional banks.
Despite the appeal of its approach, customer acquisition likely will be an ongoing hurdle for Greenlight, according to Alyson Clarke, principal analyst at Forrester Research. “I’d argue that if and when the larger banks wake up to this market and develop shared finance solutions — like these offerings for parents and teens — disruptors will struggle,” she said.
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