The fintech partnership helping Sterling Bancorp reach kids

Kids who save money early are likelier to become adults who attend college, own stocks and exhibit other positive financial behaviors.

That’s the philosophy behind Drafted, an initiative by the fintech Goalsetter to sign up 1 million Black and brown children for savings accounts. Several companies and organizations across various sectors, including Sterling Bancorp in Pearl River, N.Y., have joined in by seeding savings accounts and sponsoring subscriptions to the Goalsetter app.

For the $30.6 billion-asset Sterling, this is part of a larger push to flesh out its fintech partnerships and offer banking-as-a-service through third parties. But joining forces with fintechs that connect children with bank accounts and encourage financial literacy can benefit any traditional financial institution trying to appeal to younger demographics. By forming relationships with young savers, banks can convert kids into valuable lifelong customers.

“This is a natural progression of where banking is going,” said Matthew Smith, the head of direct banking and banking-as-a-service at Sterling’s bank unit. “You want to develop holistic household relationships with clients to reinforce the value you bring to their lives. Every bank should be looking to create connections with teens and children.”

The Drafted campaign is the first big step of a partnership between Goalsetter and Sterling Bancorp, says Matthew Smith, head of direct banking and banking-as-a-service at Sterling’s bank unit. There was a 600% increase in downloads of the Goalsetter app from January to February, says Tanya Van Court, the fintech’s CEO.

During February, which was Black History Month, Sterling pledged to kick-start savings efforts for 1,000 students from underserved communities by sponsoring five-year subscriptions to Goalsetter — a digital banking app designed for children and teens — and depositing $40 into the students’ Goalsetter accounts. Goalsetter’s subscription model is “pay what you think is fair,” and the cost for the sponsor varies based on the length of the sponsorship.

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Sterling wants to promote financial literacy and nurture relationships in its communities, which include New York City and Long Island as well as Westchester, Rockland and Orange counties. It worked with the Eagle Academy Foundation, a nonprofit in New York that supports young men in grades six through 12 in at-risk communities, to identify students it would sponsor.

Goalsetter, as its name suggests, lets children set savings goals and automatically save a portion of their deposits, offers “GoalCards” so that relatives can contribute funds and uses pop culture references to teach financial concepts.

Sterling is not the first to partner with a challenger bank geared toward children; JPMorgan Chase, for example, collaborated with Greenlight to launch First Banking in October, a checking account for users as young as 6.

“Savings apps like Goalsetter deliver the functionality, the financial education component, and the ability to save towards specific goals that provide richer engagement for kids and families,” said Hannah Calhoon, vice president of innovation at the Financial Health Network. “A savings app partnering with a traditional financial institution gives both groups access to expertise and tools that can help customers improve their financial health in a way that traditional savings accounts may not.”

This campaign also marks the first step of a broader partnership between Sterling and Goalsetter. Although there are several challenger banks on the market that target Generation Z, including Greenlight, gohenry and Step, Smith said that the educational component and user experience of Goalsetter set it apart. His own kids gravitate toward Goalsetter’s financial quizzes.

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“I didn’t learn about the importance of managing money at home or at school,” said Smith. “Giving people a foundation earlier can create a generation of savvy and smart savers that could help build an educated community around them.”

Mary Dent, a financial services consultant and the former CEO of Green Dot Bank, says that innovations in savings tools for kids are fairly recent, but fill a void.

“Our society has oriented to relatively high levels of consumption and relatively low levels of savings,” she said. “That leaves you fundamentally fragile if you are at the lower end of the economic spectrum.”

The New York-based Goalsetter mirrors competitors such as Greenlight and gohenry by letting parents set parameters on how and where their kids use their debit card and dispensing allowance through the app.

But it also features quizzes peppered with pop-culture memes and GIFs (for instance, answering a question about the singer Kendrick Lamar’s return on investment correctly calls up a GIF of Lamar saluting the audience at an awards show). A Learn Before You Burn function lets parents freeze their child’s debit card on Sunday if the child has not yet taken that week’s quiz while Learn to Earn lets parents pay a small bonus to their child for every quiz question they answer correctly.

Drafted is one example of Sterling’s efforts to collaborate with fintechs as part of its banking-as-a-service division, which it launched in 2020. Sterling also announced at the end of February that it would offer digital accounts through Google Play.

On its part, Goalsetter is working with several financial institutions to sponsor Goalsetter accounts in their communities to fulfill Community Reinvestment Act requirements, at the same time that it is raising its own profile as a challenger bank for kids. Evolve Bank & Trust, a $646.8 million-asset bank in Memphis, Tenn., insures Goalsetter’s direct savings accounts.

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In February, 25,000 kids received sponsored accounts from participants in Drafted, which include National Basketball Association players and UBS. Individuals or corporations “draft” a child by depositing a sum of money in their Goalsetter accounts and sponsoring access to the app for a number of years; they may select students from local schools, find kids through organizations that are important to them, or sponsor those who reside in their hometowns.

Tanya Van Court, the CEO and founder of Goalsetter, said there was a 600% increase in downloads of the app from January to February. She declined to give the total number of Goalsetter customers.

The campaign will continue through next February.

“We believe this goal of a million is partly an access goal and partly an awareness goal,” said Van Court, who previously worked at the television channel Nickelodeon. “A lot of people didn’t know Goalsetter existed because we are a Black- and woman-owned fintech company that received significantly less funding than our white male counterparts.”

Van Court is firm that Goalsetter is meant for children from all socioeconomic and ethnic backgrounds. But her Drafted initiative is focused squarely on children of color.

Statistics show the need to narrow the wealth gap between white families and people of color is dire. A 2017 report by the Institute for Policy Studies and Prosperity Now projected that by 2053, median Black household wealth will hit zero if the racial wealth divide is not addressed. Median Latino wealth will do the same 20 years later.

“We think there is a tremendous opportunity to interrupt or reverse the curse of 2053 and 2073 by reaching kids early and ensuring this next generation is prepared to be financially free,” Van Court said.

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