College students move a lot. They might live at home in the summer and go to a school in another state. Some will leave school for a summer internship.
Their mobility, coupled with their generational preference for doing everything on their phones, means that they have different banking needs. Taken together, those aspects suggest that they should use a mobile bank account.
No bank has a branch in every state, and the vast majority have a footprint that is limited to no more than two or three states. College students have a choice – disrupt their financial life by using multiple bank accounts or choose an account at a borderless bank. For many, the latter is going to be a good fit.
The student who grew up in Akron, goes to college in Michigan, and gets a summer internship in Kansas City will be better off with one account that he (or she) can use all year. He could use an account at the same institution as the one used by his parents, transact at college with the account that received their student loan disbursement, and then set up direct deposit from one of the banks in Kansas City. However, that is not going to be very easy.
In fact, the student will probably pay extra to have three accounts. The likelihood that one of those accounts will charge them for an inactivity fee, an overdraft fee, or that the student will not be able to maintain a minimum balance is much higher.
First, let me define what I mean by the term “mobile app bank account.” I am not talking about the apps offered by the traditional full-service bank with a network of brick-and-mortar branches, but instead, the ones that are meant to interface only through an app on your smartphone.
These accounts are different from a traditional bank. In fact, they are even more virtual than some of the national online bank accounts that became popular in the last decade (USAA, Capital One 365).
The only way to apply for one of these accounts is to download the app. There is no branch network. While most provide the user with access to a surcharge-free ATM network, the financial institution does not have branches or even ATMs of its own. It is not the case that the institution has just one branch location. A mobile bank account does not have any branches at all.
However, that is probably going to be ok with many of today’s traditional college students.
For the ones who have grown up seeing the smartphone as the primary gateway to discovering the world (not their automobile), their first instinct is to manage their money digitally. An FI that doesn’t offer services via mobile is a business that many young people will ignore. According to Nielsen, 98 percent of mobile subscribers who fall within 18 to 24 years of age have a smartphone.
They use those phones a lot, too. Millenials spend an average of 223 minutes on their phones every day.
I often hear of friends who wish they could go back to a life without a smartphone. They hate what it does to their interactions with other people, and they dread when it pulls them back to work responsibilities. However, young people are much less likely to feel that way. Indeed, 47 percent of 18-29 years old say that they “couldn’t live without” their smartphone. (Pew Research Center, 2016)
Likewise, their financial lives are relatively simple: A college student needs an FDIC-insured account to pay for goods and services. If their parents do not step in, then some will need to borrow to attend school and to buy car insurance. They might want more – like a credit card – but in most cases, they should not need to have other financial products. At this moment in their lives, few meet the characteristics that would make a bank view them as candidates for a “relationship.”
At a recent presentation, I commented that no adult wants to manage their money with twenty different apps. As soon as today’s college students graduate and begin to have more need for financial services, then they are likely to see the virtue of limiting their relationships to only a few FIs. However, that is not the case for a student.
The right mobile account for a student has:
1. Access to a nationwide surcharge-free ATM network such as Allpoint, VISA Plus Alliance, or MoneyPass.
2. No minimum balance requirement as a condition to avoid a fee.
3. No overdraft fees.
4. Outbound ACH to make recurring electronic payments.
5. The ability to use Android Pay, Samsung Pay, or Apple Pay.
6. A linked vehicle for saving money.
7. Push SMS messaging for balance alerts.
8. The ability to turn the account “off” as a precaution for when a student travels overseas, thus negating any risk of receiving an inactivity fee.
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