Step, which builds mobile-based banking services for teenagers, is today announcing a round of $22.5 million led by Stripe.
“We want to be their first bank accounts with spending cards, but we also want to teach financial literacy and responsibility. Banks don’t tailor to this, and we want to be a solution for teaching the next generation of adults to be more responsible with money in the cashless era. It was easy with cash to go to the mall but now everyone is using their phone for Uber and more.” Step’s first market will be the US, where it’s estimated that there are just under 50 million teenagers in the population.
MacDonald said the aim with the funding will be to use it to bring Step’s first product – banking accounts with payment cards attached – to market, in partnership with Mastercard and Evolve.
Step is not wading into unchartered territory by building a banking service targeting teens.
Nor will Step be the last: there have also been rumors that Amazon has been working on its own service offering bank accounts to teens.
MacDonald said there are differences between what Step and these others are offering.
Another key difference will be the business model around which Step is built.
As with any company that provides card services, Step gets a cut from card transactions, but unlike others in this space, Step is launching with a no-fee model for the basic account.
“We will start offering products when they go to college, for example lending money to get books or computers.” Stripe’s investment, for now, appears to be mainly a financial one in terms of the services that will be coming in the first wave of Step’s rollout this year.
Step’s service will be very dependent on building out and using, robust APIs to let parents and companies pay into their accounts, and for people to be able to use their Step accounts to pay for things, and part of that will involve using and implementing card issuing APIs.
“Step has taken a thoughtful approach to develop an offering for teens and families that provides that first step in educating and acclimating today’s youth to help them gain confidence and awareness around their finances.”