Shop Talk

Back to School with the Walking ATM

Parents — ever feel like a walking ATM? Want to teach your kids about responsible financial management (and get them to stop pestering you for their allowance every week in the bargain?)

Check out PayPal‘s new program for students, launching today, in which a sub-account for your child is linked to your own PayPal account.

The program, Student Account, is designed to balance convenience for parents and their kids with financial responsibility, said Don Fotsch, vice president of customer experience and design at PayPal.      It’s also a push by the fast-growing online payments company, which is eBay Inc’s growth engine, to expand in new directions. The program addresses a “clearly underserved” market of the estimated 17 million students headed to college in the United States this year, Fotsch said.       PayPal currently has about 75 million active account holders across the globe. 

Fotsch said the question asked by the program’s designers was: “How do we deliver for the kids financial independence and optimize financial learnings … and for the parents to support financial responsibility?”       Parents can transfer money to their kids’ accounts in “allowance mode” or “on-demand.” Requests for money from kids can be sent by text on cellphones and transfers are automatic performed once mom or dad approves.                               Students also get a debit MasterCard to use in stores or use to take out cash. According to Fotsch, what parents like best about the program, which has been in test mode for half a year, is the ability to track expenditures since the account details each transaction.

Other online companies are similarly hoping to tap the hot student market. Earlier this year, BillMyParents.com launched a program that allows parents to approve or reject their teens’ online purchases.

“Don’t look at me, I’m just a kid — bill my parents!”

Ah, youth. How free and easy it all seems. Especially after the launch of a new payments system, BillMyParents.

The system geared to teens and tweens — who ideally have good relationships with their hopefully indulgent parents — allows parents to approve purchases coveted by their kids and foot the bill.

The idea of the youth payment system is to capture some of the $40 billion spent by kids who end up shopping at traditional retailers only because without a credit card, they have no way to pay for stuff online, says the company’s chief executive, Jim Collas. Collas is the former chief technology officer for PC maker Gateway.

Whereas consumers have a host of options in online payments systems, including eBay‘s PayPal, Google Checkout and Checkout with Amazon, Collas says his system is the most convenient for parents and teens.      Parents pay 50 cents per total transaction after they approve and pay for their kids’ shopping lists that are automatically sent to them via email or text, and merchants pay a percentage to BillMyParents.      Currently, BillMyParents is powered by Amazon.com with Amazon’s shopping cart integrated into the website. Kids can access the entire inventory of the global online retailer.

BillMyParents, which is owned by Socialwise Inc, plans to have up to a dozen more retailers participating within nine months and the ultimate goal is for the BillMyParents payment button to be integrated into the online retailers’ websites.

Besides the retail angle, Collas sees a huge opportunity in the gaming world, which allows kids to buy virtual goods online — a market estimated at over $1 billion — as they play their favorite video games.      Through partnerships with online gaming sites like Artix Entertainment and social networks, young users will be able to share information, showing off what they’ve ordered and seeing what their friends’ nice parents just bought them. An opt-out is available.      Collas’ goal, he said, is to become “the de facto standard” for youth payment systems. He added: “We do expect to gain momentum very quickly.”

(Photo: BillMyParents)