I had no idea that sea shanties were all the rage again. It all started with one guy, Nathan Evans.

The gift of TikTok is that the video doesn’t just go viral – other users can add their own touches. Which is how Nathan Evans kicked off the sea shanty trend worldwide. If you spend 15 minutes on TikTok or YouTube, you’ll find out that there are many kinds of sea shanties. You can quickly go down the sea shanty rabbit hole:

      • There were long and short-haul shanties for long and short rope pulling.
      • There were windlass shanties for pumping out water, and capstan shanties for raising and lowering the anchor.
      • There was also a fifth kind of ‘shanty’, which was more of a sea song, as they were not used for work. Foc’sle, forecastle or forebitters were songs sung after work was over for the day and it was time to relax.

Like sea shanties on TikTok, challenger banks for teens are also suddenly all the rage. Teenagers – hooked on their smartphones, so savvy about apps & digital trends, heads bent into games and watching sea shanties on Tiktok – look like the ultimate ‘get” for banks looking to win the youngest customers to a brand new challenger digital bank.

This is a big mistake.

The Siren Call of the Teenage Consumer Segment

Like the sea shanty, the allure of teenager customers for banks is strong. Teen tastes are luxurious. They use their money to purchase luxury goods. According to Piper Sandler 2020, Louis Vuitton became the top preferred handbag for teenagers. They spend a ton of time on their iPhones watching Netflix or creating TikTok videos. Teenagers (and younger tweens and children) have money to spend. For example, in 2018 in the UK, children and teenagers aged 6-18 collectively earned £4.5 billion from pocket money, ad-hoc gifts and payments for undertaking household chores, such as tidying their room or washing the dishes. On an individual basis, this equates to an average of £9, or £39 per month, depending on age and where they live. Source: Gohenry Youth Economy Report 

So, it’s not surprising that teenagers, like any prospective customers adept with digital technology who have money, are attractive to banks. This allure holds even if, according to the Piper Sandler survey, teenagers have less money to spend. And, so both digital banking vendors and challenger banks are targeting teenagers. 

No doubt others are creating “teen banking features” as you read this. There are plenty of other examples. I’m sure I’ve missed many of them. (Feel free to contact me if you’re a founder or know of others.)

Why Your Bank or Provider Should Resist the Siren Call

Doesn’t all this point the way to challenger digital banks that can attract & profit from these teenagers?

There are 4 significant reasons that banks must resist the urge to create banks specifically for teenagers:

    1. Traditional demographic. The pursuit of the same old demographics in a digital world will yield neither disruptive products nor the results – customer acquisition – the bank seeks.
    2. Financial supply chain for teenagers – Acquiring teenagers is different than acquiring adult customers. Regulations may require parents or guardians to open an account. Teenagers are often dependent on those parents for at least some of their money. 
    3. Teenage brains. Teenagers are not yet adults; their brains are still developing and respond differently than adults to bank sales & marketing offers and risks.
    4. Teenagers grow up.

In this post, I will discuss the first reason. I will address 2-4 in later posts.

Teenagers are a Traditional Demographic 

While teens have been a recognized demographic, banks have not specifically and openly targeted them before. Banks of all kinds – and digital banking vendors – that want to disrupt markets must avoid traditional demographics like teenagers. Why should banks avoid traditional demographics, no matter how compelling? In his book Running Against the Devil Rick Wilson provided a framework for U.S. Democrats to adapt to the 2020 political environment. This framework also works for both traditional banks working in an unfamiliar, illogical, and chaotic environment and challenger banks seeking to disrupt them can use. The framework forces banks to change how they’ve always approached every aspect of customer acquisition and experience cycle. Similarly, digital banks (and the vendors providing software for them) that seek to differentiate themselves must also take a radical new approach.

The key to this framework – to differentiating the bank amongst other banks in a chaotic environment – is to discover hidden tribes.

What are Hidden Tribes?

Though it is a concept that comes out of political science, “hidden tribes” also serves as a useful framework for banks to identify new & disruptive target markets. Rick Wilson refers to The Hidden Tribes of America project to reveal the multiple segmentations (or “hidden tribes”) of voters that challenge traditional assumptions. This project revealed that within the traditional parties, Democratic and Republican parties, there were hidden tribes of voters who had little if anything in common with other hidden tribes within the same party. These hidden tribes could not be found by re-jiggering the same old voter segmentations.

We call them America’s hidden tribes. They are hidden because what they have in common is a shared set of beliefs, values, and identities that shape the way they see the world, rather than visible external traits such as age, race or gender. We describe them as tribes because their behavior is often governed by a strong sense of shared identity and a collective adherence to core group principles. (Hidden Tribes report, page 18)

Wilson points out that voter segmentation that once worked in the past, in a traditional political environment will fail in the disrupted, digital political environment. So, too, for bankers seeking to find new customers for their products.

Data Key to Discovering Hidden Tribes 

The discovery of hidden tribes is driven and revealed by data. The Hidden Tribe project found that the data that identifies tribe segmentations is based on data identifying what motivates specific types of voters beyond the traditional “Democrat,” “Republican” or “Independent” labels.

Likewise, for banks, even challenger banks, it’s not enough to want new customers. Bankers need to help to identify them. They cannot rely on the segmentation that worked in the past – even if the bank did not market specifically to a portion of that segment.

Thus, a challenger bank that targets “teens” seems disruptive because there hasn’t been a bank specifically for teenagers. But in fact, the challenger bank for teens recycles a traditional customer segmentation. And many of them provide the same old capabilities – payments, funds transfer, cash withdrawal.

This point hits at the heart of the challenges banks face: Holding on to assumptions about customers based on traditional (that is, pre-digital) broad segmentation like Millennials, Baby Boomers, Gen X, High Net Worth, Young Marrieds, Small Businesses – is dangerous. Why dangerous? By hanging on to these assumptions banks – and the digital banking solutions driving them – are vulnerable to disintermediation by challengers who do understand data and how to use it to identify hidden customer tribes.

Challenger Banks for Teenagers Will Leave Opportunities on the Table

Challenger banks (or any bank) offering financial services for teenagers must look beyond the “teen” label to identify hidden tribes. Simply creating a challenger bank or services for teens is not enough. The same traditional services with better customer experience, faster account opening, better design, and low or no fees will not be truly disruptive.

Worse, the bank will leave many opportunities still unmet – opportunities waiting for the challenger or traditional bank willing to identify hidden teen tribes to mine.

How do these assumptions and unmet opportunities play out in a bank for teens? For example, does a White teen still in secondary school living with her parents in rural Iowa on a family farm have the same financial needs as a Black teenager in Atlanta, whose parents work both for successful fintechs? Both teens are probably using their iPhones to access banking, rather than going to a branch. Both teens are probably well versed in using P2P apps and have a favorite that they use most frequently. But one teen may need a used car as soon as she learns to drive while the other teen may be well versed in using Uber or MARTA to get around her city. The Iowa teen may be aiming for community college before she moves on to a 4-year college, while the Atlanta teen has her sights set on Stanford to study computer science. A bank for teens that does not understand all the other needs that flow from each of these very different circumstances leaves those needs unmet.

Takeaways:

Creating a challenger bank for teenagers bandwagon is tempting. But think before you leap. Creating a new bank for teenagers that copies traditional banking and payment services with some added “digital” services and offers them all teenagers is just another challenger bank. If you want to disrupt the market, you have to do uncover hidden tribes.

Challenger banks for teenagers – Can the bank identify and support all the different hidden teenage tribes? How is identifying and uncovering hidden teenage tribes any different from the work any bank must do to create new and innovative services for existing and prospective customers? Are you able to adapt products and services to meet a diversity of needs you may not understand yet? If you cannot identify and support hidden teenage tribes, how will you disrupt this market?

Traditional banks – You may not need to create a new bank to service teenagers. If you are moving to or already have a digital banking platform, use it to uncover teenage hidden tribes – and other hidden tribes that you currently don’t service well. If your digital banking platform doesn’t help you create new services to meet any hidden tribe, whether they are teenagers or SMBs, then creating a challenger bank may provide a way for you to migrate to a platform that does. I

Digital banking vendors – If you can help your bank customers identify one hidden tribe, you can identify more. You can use the use case of a teenage challenger banks to show how you do this. Demonstrating scale – the bank can do this for multiple hidden tribes – and data access – beyond traditional demographic data sources – will be key to differentiation.

Tiktok is just the modern delivery vehicle for sea shanties. Tiktok has tools that let anyone add on whatever music or beats they want to personalize or enhance the sea shanty just a little and pass it along to their friends and followers. But the sea shanty is still a sea shanty. So, too, challenger banks for teenagers are just a modern delivery vehicle for banking and payment services. It might look different but it’s still offering the same services — unless the bank is willing to create a new type of song altogether.