GoHenry, fintech for under-18s, raises $55 million after passing 2 million users • TechCrunch

Neobanks has made a name for itself by 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 have jumped on that model with an even earlier target: under 18s, including children as young as 6, and in the latest development UK fintech GoHenry is announcing $55 million in funding to double down to the possibility.

Equity funding comes from previous backers Edison Partners and Revaia (formerly Gaia), with a strategic investment from Italian payments company Nexi, a new backer.

The company does not disclose its valuation, but I understand it is more than $250 million and less than $500 million. That 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. (Including the recent acquisition of Pixpay’s fundraising, it has raised $136 million.) Early on, GoHenry also raised $15 million in crowdfunding in 2016 and 2018, and it likes to say it has 5,000 shareholders as a result of those campaigns, with half of them also users.

That’s just a small percentage of the kids (and parents) that GoHenry has collected over the years. It now has 2 million customers – all between the ages of 6 and 18 – across the UK, US 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 (usually topped up by parents) and a “financial education” app that links to that card (and an app parents can use to monitor and manage the account).

COVID-19 broke the bank on the use of fintech: “digital transformation” for consumers played out in a couple of ways, with people social distancing driven to use apps and websites to manage their finances, underscored by a shift in commerce as well to go online, with the increased usage also leading them to try new financial services alongside it.

This also played out interestingly among young people, GoHenry said, with the company seeing a wave of new users during the pandemic and increased activity among existing customers. The research found that children in the UK, GoHenry’s main market, earned £148m in 2021, a 9% increase on 2020.

“We start at 6 because parents want a rite of passage, to give a card for a child’s 6th or 7th birthday,” said executive director Alex Zivoder. “It surprised us, as it was earlier than we expected. This shows us that this is the best time for children to start understanding the concept of money.” And that concept is tied to earning it,” he added. “It’s about allowance and chores, or a mix.” He notes that younger kids don’t spend much (nor have places to do it), but it’s taking off in their teens, as teens spend more 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 these trends point to its growth. It had $42 million in revenue in 2021 (the most recent full year it’s reported), which was double what it earned in 2020. (New users get 30 days free, but after that it’s £2.99 per month, and Zivoder said 99% of people who try it become customers.)

Now the plan will be to expand its existing 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 (exploit the Nexi relationship); and to begin to consider where there might be opportunities to do more for those who are getting older outside the core service.

GoHenry is not the only fintech to focus on the segment. Earlier this week, kids banking app Step announced that it had taken out a $300 million line of credit to build out a crypto trading product for young users (yes, crypto trading for under 18s…). Greenlight, meanwhile, added a new series of family-focused safety features. Others such as Revolut and Acorns, which were not originally built for younger users, have expanded to that age group.

“It’s the emergence of a new sector,” Zivoder said. “Within the next 2 to 3 years, we will hopefully have created a successful new segment called youth banking. The financing and the increase in debt is the next step in the story. For all of us, it brings us to the point of becoming 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 accessible and fun for the younger generation and their families,” said Chris Sugden, managing partner, Edison Partners, in a statement. “Our initial investment fueled the business’ acceleration in the UK and expansion into the US. We are excited to drive GoHenry’s rapid growth into continental Europe and to teach young people financial literacy with practical tools such as how to manage a budget.”