CURRENT ISSUE JUNE 26, 2006

After upwardly mobile Indians, banks have made children their target customers. From personalised statements to debit cards, banks are rolling out the red carpet for the little ones. Statistics show why. About 50 per cent of Indians are under 20 years of age, while one third are below 14 years. Banks hope to catch these young guns and initiate them into the colourful world of money. ATMs in school canteens are novelties no more.

One big reason for banks to solicit school-going kids is their tremendous pester power. Says Chanda Kochar, deputy managing director of ICICI Bank: "Children participate in every purchase decision." The accounts operated by children are also used by their parents to save for their future, so the money remains in them, explains Kochar.

YOUNG AND BANKING

HDFC BANK'S KIDS ADVANTAGE ACCOUNT: A savings account for children with a free international debit card for those aged 7 or more. J&K BANK'S CHILDCARE DEPOSIT SCHEME: Comes with an accidental insurance cover for the parent. ICICI BANK'S YOUNG STARS ACCOUNT: Parents can open a recurring deposit for their children. Children get a debit card if parents permit. CITIBANK'S JUNIOR ACCOUNT: Comes with an ATM/debit card for children over 6 years of age. Children get personalised bank statements.

The new age private banks don't have the legacy of public sector banks of relationships built with customers through generations of service, so they are focusing on building brands through segmentation, innovation and marketing. In the past too, banks offered minor accounts which children could operate, but they could not issue cheques. "The idea was to inculcate a habit of saving, but with the launch of debit cards, the shift is towards spending," says M.A. Shah, general manager (western region), Jammu and Kashmir Bank.

Most banks are not putting plastic money in the hands of minors yet. The Union Bank of India, for instance, has several products for students above 18 years of age, including debit and credit cards, but a vanilla self-operated account for minors. It is to keep parents on their side that HDFC Bank and Citibank don't sell their accounts for children to them directly. Citibank has not made its junior account frivolous by topping it with special offers where children could spend. Says Sharad Mohan, marketing director, retail banking, Citibank, "We have resisted from making product specific offers as parents might object to the bank encouraging spending by children."

The banking fraternity is still divided over how much financial freedom children should get and when. Private sector banks like HDFC Bank and ICICI Bank claim that their approach is two-pronged and not just aimed at inducing higher spending. Both offer a customised children's account, which not only helps parents plan investments for their children's future but also introduces the youngsters to modern banking. These accounts come with a debit card, personalised statement, a welcome kit and several exciting deals where children can use their debit cards.

Most bankers admit it's a clear move from saving to managing money, of which spending is a large component. Banks are using all kinds of mechanisms to lure children: ATMs in schools, events in malls and multiplexes, and freebies with every new account. Time to get your child an account too?

Index