Early Fall 2021
September 22, 2021
Fintech for Kids: Part of the Solution or a Danger to Our Children?
Everybody loves a great app. Apps can help us learn a language, communicate with friends and family, entertain and inform ourselves, and do a million other fun things.
There are lots of money apps: banking apps, credit cards apps, payment apps, investing apps, and more. Most of these are designed for adults, but a growing number target young people and even minor children. Money apps are paired with personal finance instruction and then promoted as tools for teaching financial literacy. These apps market themselves as training wheels for raising financially smart kids while creating an avenue to connect with customers early. We read "Debit Card Apps for Kids Are Collecting a Shocking Amount of Personal Data" (Feathers, 2021) and “Apps Try Putting Financial Literacy at Kids’ Fingertips” (Carrns, 2021) with great interest and some alarm.
Carrns’ New York Times article raises some important issues about money apps that target teens and children. While much of the article highlights how engaging and fun these apps can be, it doesn’t include any evidence that these apps improve children's financial literacy. It leaves us to wonder, are these products teaching their young users to be financially savvy or are they teaching them to be brand loyal? One money app frames their product as providing "training wheels," but we never get a clear picture of what users are being trained to do. Carrns writes that the apps have “caught the attention of researchers and financial advisers who say the tools may help engage and enlighten young users, even as they worry that the apps, without close parental involvement, may encourage bad financial behavior.” While we never learn about the “bad financial behavior” the apps might encourage, one source in the article cautions against apps that emphasize buying individual stocks and skimp on information about long-term investing in index funds and tax-advantaged accounts. The source says, “That sends the wrong message. You have to invest for retirement; you can’t save enough.” This article makes us more skeptical about fintech apps and leaves us with several questions. What messages are these apps promoting? What behaviors are they encouraging? Are parents aware of the potential downsides? It seems that a deeper probe into how fintech companies are filling the “gap in the market” is needed.
Feathers’ Vice article takes a more critical lens to these apps, particularly about the “shocking amount of personal data” about children they collect. As university researchers, we are also shocked—in part because we have been trained to be very, very careful about how we collect, use, and protect data gathered from children. That's not how these app companies are working. Feathers reports, for example, that “Greenlight reserves the right to share that personal information—including names, birth dates, email addresses, GPS location history, purchase history, and behavioral profiles—with ‘ad and marketing vendors,’ ‘insurance companies,’ ‘collection agencies,’ and the catch-all category of ‘other service providers,’ according to its privacy policy.” Feathers goes on to describe other companies’ data policies (not much better than Greenlight’s); incredibly lax standards for what constitutes informed consent; and overly complicated procedures for opting out of behavioral profiling, targeted advertising, and the sale of children’s data. Altogether, a very worrisome landscape.
There’s no doubt many fintech apps for kids can be convenient and engaging. Yet, these articles raise questions about fintech apps that need further investigating. Why are these for-profit companies building these apps? What do they stand to gain? What are they doing with the data? What might be the effects of investing apps on teenagers who may seek thrills or chase "lottery stocks"? And, most of all, Should the financial education of our children be a public good or a profit center? Let’s hope others start to closely examine these tools to find answers.