Over the past 30 years, the way in which consumers pay for goods has radically transformed. From Pizza Hut being one of the first companies to delve into e-commerce, allowing customers to order online in 1994, to the UK spending close to £488 billion in e-commerce sales in 2016 (according to market and consumer data provider Statista), online and smart payments offer people greater ease and flexibility.
These changes in banking technology are now filtering down to how parents control their children’s spending. Generations of children are swapping piggy banks for prepaid chip and pin debit cards, and more recently, smart payment services.
Smart payment technology gives parents control over their children’s spending and aims to teach them valuable lessons in how to manage money. The companies providing this service include Go Henry, Osper, Monzo, Starling, Greenlight and Apple Pay who offer prepaid debit cards and mobile apps to track spending.
With every new advance in financial technology there are always concerns and questions about how the service could be taken advantage of or run into difficulties. How easy it is for children to spend money through prepaid cards and smart pay apps, and how could this, in turn, prevent them from learning good financial behaviour?
However, the advantages provide sceptics with some persuasive reasons to trial a smart pay facility with their children. For example, many of the technologies allow parents to monitor their child’s spending, enforce weekly or daily limits and restrict where cards can be used. It provides real time financial monitoring for parents; Monzo even allows kids to “request” to go above their budget which their parents must approve.
Children are growing up in a world pervaded by technology and will undoubtedly use digital functions to manage their finances as they enter adulthood. It is therefore useful to develop related skills from a young age by using smart pay facilities, with an increased awareness of privacy and security issues.
There are some clear legal implications to these technologies. Smart payment service providers will store and process large quantities of personal data relating to child users, from identity and payment data to transaction data. The introduction of the General Data Protection Regulation (GDPR) and Data Protection Act 2018 (DPA) means that data protection law is now up-to-date with the rapid technological advances we are experiencing.
Accountability, transparency and the scale of detail in the data are now key, providing parents with the comfort of knowing precisely how their child’s data is being processed. Data collection mustn’t be seen as a negative in itself provided individuals are empowered and in control of how their data is used which is now facilitated by GDPR and DPA.
There is also increased scope for criminal activity such as fraud and cyber-security attacks, to which children will be especially vulnerable. This brings increased pressure for consumer protection to be at the heart of future smart pay developments. Although fintech is well regulated within the UK, which ensures that service providers are prioritising compliance, we can expect further regulatory and consumer issues to come to light as smart pay technology advances further.
By Suzie Miles, Senior associate, commercial team, national law firm Ashfords LLP
Miles specialises in IT and technology