An app is set to debut Tuesday for parents who want to give their children allowances but never seem to have the cash on hand and don’t want to unwittingly help their kids buy alcohol (or worse).
Current is the brainchild of Stuart Sopp, a former top trader at Morgan Stanley, Citigroup and Deutsche Bank. It’s backed by the Expa entrepreneurship lab led by Uber co-founder Garrett Camp and Foursquare co-founder Naveen Selvadurai, as well as by David Solomon, Goldman Sachs’ president and co-chief operating officer.
The Current app links to a parent’s bank account and comes with a Visa debit card issued by Metropolitan Commercial Bank in New York. Parents can set up recurring allowance payments — say, $10 a week — and one-time payments from their bank account to the Current account. Parent and child can see the current balance and all transactions in the app, along with geographic data that lets parents check out a retailer with which they’re not familiar.
Through the app, parents can block certain types of merchants, prevent the card from being used at an ATM, and set spending limits. A “pause the card” feature means if the child loses it, all transactions can be blocked.
Sopp said there’s a crying need for a joint account that can be managed with a smartphone app.
“Children now get their first smartphone at the average age of 10.3. Normally it’s a hand-me-down iPhone, and they’re getting regular allowances and having less and less time for extracurricular jobs because they’re studying to get scholarships in college,” he said.
Teenagers in the U.S. don’t have a digital payment solution that’s safe and secure, Sopp said.
“They’re using cash from their parents on an ad hoc basis because the parents have less and less cash on them,” he said. “The kids don’t trust the parents because they say, 'Hey I’ll pay you $10 for mowing the lawn,’ but they don’t have the cash and they forget.”
And the incumbent solution, the prepaid card, is expensive and easily lost, Sopp said.
The Current app gives kids three buckets for their money: spend, save and give. Current has connected to all 2 million U.S. 501c charities, so a child can give $10 to World Wildlife Fund and the parents get the tax deduction.
The account will help young people learn about the value of money and how to use a PIN before they hit 18, Sopp said.
“You get to vote, you’re probably driving, you’re going to college and doing all these other things and you have no idea how cards work and how this system works,” he said.
By establishing a relationship with young people, Current will have a head start on banking them in their college years and beyond.
Within the next year, Sopp said, the company will have products designed for college students and other demographics. He’s already gotten requests for cards for college students as well as for nannies and elderly and infirm parents.
Making money is always a challenge in financial products for children.
“Interchange is a loss on this demographic — they’re small swipes,” Sopp said. “You have to charge some form of monthly fee, either upfront or hidden. We’re all upfront.” Current will charge $36 a year.
Early days
Current’s
“That was successful but it was only a building block,” he said. “We made a conscious decision to focus on retail and consumers rather than the B-to-B play.”
Sopp, who has run trading desks all over the world, said he became aware of the allowance problem at home.
“I have a daughter who’s 8 and I was starting to see problems around this whole thing, so I was inspired by that and thought about how I would want to manage my money with more control in a way that was more automated,” he said.
