The Newest Neobank is for the 62+ Crowd

The launch of Charlie points to an underserved niche in banking: older adults.

Well, it happened. At last. In mid-May, a digital bank account for the 62+ crowd debuted in the United States. It’s called Charlie, and its appeal is emotional. “You’ve been the everything to everyone. Now it’s your turn” reads the tagline on its website.

At first glance, the account resembles plenty of others – free ATM access at thousands of locations, no monthly fees and no minimum account balances. But it’s not a cut-paste job by the startup. Two things pop: Charlie lets customers receive their Social Security checks up to four weeks early without paying fees or interest, and the startup – which partners with Sutton Bank – offers phone support. In neobank land, that’s compelling. Moreover, it also pays 3% earnings on average monthly balances.

Charlie’s launch reveals a gap in financial services: While financial institutions already claim seniors as customers, the digital banking features offered to retirees need a glam up.

Seniors are not the obvious audience to target. Yes, Chime offers advancements on Social Security payments, but make no mistake: The popular neobank’s target audience is young adults. If Charlie realizes its ambition, its offerings will cater to a variety of retirees’ needs – embedded discounts, transaction monitoring tools that alert loved ones to unusual activity, and home pension plans are all on its vision board.

It’s easy to see what would make Charlie strike out. For neobanks, funding is plummeting and the path to profitability is about as formidable as crossing the 101 Highway in Los Angeles by foot. Mix in the added drama of regulators condemning the banking-as-a-service model, and there’s added risk. Bonus complication: Any brand would struggle to win over the trust of an audience that may have used the same account for decades. And time, well, it’s pressing – in 2022, the average U.S. life expectancy was 76.1 years.

And yet, if there’s a good time to go against the odds, it might be now. Older adults have long been ignored in all kinds of markets, but evidence of bold change is even emerging in entertainment. Consider 81-year-old Martha Stewart landing the cover of the 2023 Sports Illustrated swimsuit issue, or night clubs for older adults popping up or even Hollywood producing movies like “80 for Brady.” It’s only a matter of time for retirees to get a rewrite of digital banking. The need is there.

As the researchers at the Financial Health Network in a 2020 report put it: “As our aging population grows and financial challenges continually evolve, so too will the need for inclusive fintech solutions. It’s more important than ever that financial health innovators actively seek to understand and design for this segment of prospective fintech users.”

Already, older generations are using mobile banking and it’s on the rise. According to AARP research, 56% of adults 50 and older made financial transactions on their smartphones in 2022. In 2019, pre pandemic, only 37% said the same thing.

Financial institutions, or their fintech partners, ought to consider weaving in benefits that appeal to what’s been a misunderstood niche: revisit the health savings account or launch a new product. In pursuit of retirees, here are a few features to consider:

• Debit cards automatically offer discounts, especially on prescriptions and groceries. This is a population often living on meager Social Security checks. The average payment is around $1,800. That’s not much for someone who might not have savings but pays, for instance, rent and medical bills.
  
  In several news articles, Charlie mentioned it wants to embed discounts into the debit cards in time. That way, seniors wouldn’t have to find coupons or feel embarrassed to flash their AARP cards (albeit people in their 20s are using AARP cards). The discounts would just apply at checkout.
  
  
• Early Social Security payments. Yes, there’s a debate: The perk is only providing a one-time favor. Yet, Chime discovered early payday enticed people to use the challenger bank, and Charlie may find the feature inspires an audience up against complicated cash flow challenges.
  
  Big disclaimer: Accessing cash early doesn’t solve liquidity issues if more is spent before, say, rent is paid. As my colleague, Terence Roche, told me: “It’s a one-time favor.”
  
  
• Elder abuse is a pressing issue. Here, there are existing fintech tools developed for older adults. EverSafe, for example, is built for age-related financial issues. An account designed for retirees would benefit from including customized fraud tools that help adult children or a trusted individual manage the account as needed.
• Access to humans: It’s a smart move by Charlie to make phone support available at launch with real humans. Sure, it’s expensive but it helps build trust with an audience who grew up doing branch banking.

In the same Financial Health Network report, the researchers wrote: “Some older adults perceive fintech as lacking support, which can trigger concerns about what to do when something goes wrong. Whereas brick and mortar storefronts provide immediate, in-person customer assistance, users often worry that fintech won’t provide that safety net.”

So what?

Yes, GonzoBanker friends: retirement banking is next-gen banking. But it’s not the only segment in need of attention for its different banking needs. There are still many untapped niches that would benefit from accounts developed for them. Find one. It’s a deposit boost.

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Mary Wisniewski is an editor-at-large at Cornerstone Advisors. Tune in to her Money Isn’t Everything podcast and follow her on LinkedIn.