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What a Teen Wants
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Alloy.com works with most online teen payment programs. But Alloy’s Vice President of E-commerce and Sponsorship Samantha Skey says PocketCard fits with Alloy.com’s payment preferences. “We don’t want to market to parents ourselves,” Skey says. “But this product allows teens and parents to communicate about spending when they shop on our site.”
The average purchase by 10,000 PocketCard users is $22.38, contradicting some (probably parental) fears that teens would spend on big ticket items if they had their own means. The average Internet transaction overall is $28. Parents are loading funds onto the PocketCard, via phone or Internet, every 1.02 months, suggesting teens get a monthly allowance. The average unspent balance is $21. And while 84% of parents allow their teens ATM access, teens on average withdraw money only once every two months, suggesting they like using the card for payment.
Trusting those over 30
Despite being the brand mark on two other teen cards, Visa U.S.A. introduced its own payment option for the teen market, this one to be launched by major card issuers, including Bank of America, Capital One, U.S. Bank and National City Bank. The Visa Buxx card, which can be used online and offline, is definitely targeting a different audience-the parents. “We are positioning the card as tool to teach financial responsibility,” says Erica Cover, vice president of deposit access products at Visa. “According to our research, there was a need for a safer, more responsible program for teens.” Visa will market the card only to the parents, opting out of teen publications, she says.
To entice parents to sign their teens up for the card, the Visa Buxx program boasts stringent parental controls. For instance, parents can limit the amount spent and monitor spending in real-time, a process for which PocketCard has a patent pending. Although other products have similar choices for parents, Visa plans to hit the parental control message home. To get the card, parents have to do the sign up and must agree that their teens will take a financial skills assessment test.
Competitors say this strategy of parents over teens will be fatal to Visa’s teen-market aspirations. Market observers warn of the delicate balance programs must meet to not turn teens off. Northbrook, Ill.-based Teen Research Unlimited says “teens are aspirational-they want to be seen as mature, young adults. In many cases, they tell researchers they want to have the same products and services as adults.”
Cool or uncool, Visa defends its strategy. “We’re very confident that the approach of targeting the parents is the right one,” Cover says. While the Visa Buxx program is a bit heavy on the credit education, IDC’s Waryas says the association/bank track is a good one for targeting teens because the card-issuing banks will benefit in the long run from having teens use financial products early. Other teen online cards could be tossed aside as easily as a driver’s permit once teens turn 18 and enter the college card marketing sector.
MasterCard International, Visa’s most immediate rival, says a prepaid card with parental control is only a few months away.
Despite the debate about their appeal to teens, MasterCard- and Visa-branded cards will have at least one advantage over their competitors: Merchants need do nothing to be able to accept them.
The veteran Icanbuy.com believes it fits with the retailer plan better because it knows how to target its market, while banks traditionally are slow in identifying new markets. “From the retailer perspective, we’re a lot more innovative than a bank because we’re more in line with the risk/reward profile. Banks are riskless,” Herman says.
Even with pure-plays and card associations vying for shoppers, other players are attracted to the teen market lure. Credit-card transaction processor Total System Services Inc. working with New York City-based financial solution provider M2Card Inc. launched a Visa-branded teen online/offline stored value card in October. “We’re going to use both online and offline channels because teens still like to shop at the mall with their friends,” says Junehee Cho, CEO of M2Card.
Unlike Icanbuy and RocketCash, M2Card allows teens to shop anywhere on the Internet, except sites barred by parental controls, because the card is Visa-branded. “Teens have varying tastes and don’t always want to shop in a closed merchant network,” Cho says.
M2Card’s marketing will try to reach teens in their own environment. Cho says the M2Card will promote its product in teen magazines, online and on the radio. The card also will be featured in “Making High School Count” programs that work in schools to teach students about finances.
Catering to the teen penchant for wireless technology, the M2Card will allow teens to check card balances via cell phone and two-way pager. The company also plans to have a live chat customer service email option. “We want to do things in accordance with the lifestyle of the teenager,” Cho says.
Another product hitting the teen market is PocketPass, a phone card that can be used for purchases. The card’s appeal will be that teens can put value into the card at local retailers who sell cards, says founder and Chairman Lewis Perdue. The card launched as a beta test in Silicon Valley in late July with about 100 retailers selling it. The company has a deal with the 8,000-member Independent Agents Network to sell the card to more than 350,000 phone card sales outlets in the U.S.
PocketPass is targeting online merchants who sell content under $10. PocketPass will charge merchants 12.5% of each transaction, 6.25 cents on a 50-cent download, for example.
Right now, PocketPass is working on a branding and payment deal with Safesearching.com, a site that sells premium content and chat options on such Generation Y stars as Allissa Milano and Catherine Zeta Jones. Another deal involves cobranding the PocketPass with Allaccess.com, a company that owns the phone card rights to such teen musical acts as Christina Aguilera, whose hit “What a Girl Wants” topped the charts this past summer, and the Back Street Boys. Perdue expects the two deals to put 6 million PocketPass cards in the teen market within 12 months.