Pocket money in a cashless society

Not many people carry much cash these days. So giving pocket money to kids isn't the straightforward thing that it used to be. Which is a shame, because there are life lessons to be learnt from managing pocket money. Start-up Otly is therefore launching a platform where kids can learn to manage digital money. Co-founder Lior Bornshtain talks to us all about the app and the support that Otly got from SIDN Fund.

How did Otly come about?

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"I've got three kids, and when pocket money day came around, I kept finding that I'd got no cash. So I'd promise to give them their money the next day. And then I'd forget. After a time, I didn't have a clue how much I owed them. And, when the kids wanted to buy things with their money, it was often something they'd seen on line. So I'd have to pay and then try to sort it out with the pocket money later. So I started looking round for a solution. But the things I found were all horrid Excel clones or apps that only worked with credit cards. That led me to think that there had to be a better way. I've got twenty years' experience in the FinTech sector, so a colleague and I developed an app together. When we launched, the response from other parents was so positive that we decided to give up our jobs to concentrate on taking Otly to the next level."

How does Otly work?

"The Otly platform has two apps: Otly! Mobile for parents and Otly! Jr. for kids. Parents can use the app to automatically give pocket money. The kids can then see how much they've got and can create savings pots for this and that. You can use Otly in Family Mode or Bank Mode. In Family Mode, the app works like a cash book. The parents guarantee the virtual money given with the Otly app. So they need to have the real money available if their kids want to spend some of their Otly money. In Bank Mode, the parent links their bank account to Otly. That's done using the bank's API or the new Open Banking platform with PSD2 end points. When the kid wants to buy something on line, they pay straight from the app using Otly!Pay. It works with trustworthy on-line and off-line stores, including the AppStore, PlayStore, PSN Network and toy shops. The parent just needs to approve the purchase. It'll soon be possible to create a web address that friends, family and others can use to pay money into an Otly account even if they aren't Otly users. Another feature we're working on will enable kids to give money to good causes. I use the app myself, as a way of encouraging my son to save. I've told him that for every euro he puts in his digital savings pot, I'll give him an extra 20 cents. I can set up Otly to give him the extra money automatically. That kind of incentive is completely lacking in the real world; no bank pays that much interest. I can even attach different rewards to different savings pots. So, if he's got one savings pot for a PlayStation game and another for a skateboard, I can reward him more for putting money in the one pot than the other. In other words, Otly lets parents guide their children's saving habits."

Otly's been going for two years now. How was the start-up phase?

"I gave up a good job to launch Otly, and as a start-up money was tight. There were certainly times when we felt tempted to sell Otly to a bank. But we had a long-term vision and decided to stick with it. Otly can only really take off if it works with all banks. That's why similar apps developed by ING and Rabobank fizzled out. After a while, we were lucky enough to get office space at Rockstart, a start-up accelerator. At Rockstart, we learnt to look beyond the product: first create a stable business, because that's more durable. All things considered, I think we've made pretty rapid progress. Two years ago I wasn't sure whether I'd be able to pay myself a salary at the end of the month; two weeks ago I was speaking at the European Banking Summit. I was up there with the movers and shakers from corporates such as Microsoft and Mastercard, as well as MEPs and European Commissioners."

How's Otly doing now?

"At the moment fifteen thousand children are using Otly, mainly in the Netherlands. We've built up that user base with virtually no marketing. We reach parents via Facebook and I try to go to as many meetings, fairs and events as possible. It's very time-consuming, but it gets us exposure. We've already won the Dutch FinTech Award, the World Summit Award and the UberPITCH. We're pretty well known in the FinTech sector now. For a small business, we're making solid progress."

SIDN Fund

Connecting people and organisations in a secure digital world: that is SIDN's mission. We pursue it with the help of SIDN Fund – a foundation set up on our initiative in 2014. SIDN Fund is committed to helping build a strong internet for everyone by sponsoring projects that add to the internet's resilience, empower users or promote innovative use. Through SIDN Fund, we contribute to the prosperity and welfare of the community.

How did you hook up with SIDN Fund?

"Rockstart pointed us to SIDN Fund. Applying for a grant was easy enough, and towards the end of 2016 we heard that we'd been approved. It was excellent timing for us. We'd just started trying to get investors, but no one wants to be the first or the only backer. The capital injection by SIDN Fund helped us to get other investors over the line. But the support we've been given hasn't only been financial. We've also benefited from networking through SIDN Fund. I've been to various meetings and made lots of useful contacts, and the people at the Fund are regularly in touch. We've found all of that so helpful that I'm convinced SIDN Fund should build up that side of things even more."

Do you actually earn anything with Otly?

"We believe it's vital that Otly is free to use. After all, our mission is to tackle financial illiteracy. So Otly doesn't currently generate a cash flow. However, we'll soon be introducing Otly!Pay. That's an extension that lets kids use their Otly credit to buy things on line. And on-line purchases are central to our earnings model, because they bring in affiliation payments from banks. We already work with bunq and we're in advanced talks with two other banks. Once they see that Otly!Pay really works, other banks will soon follow. We also get commission from partner companies, such as Sony, Nintendo and Google."

How do you see Otly's future?

"The immediate future is all about introducing Otly!Pay and Otly!Give. The second of those extensions will let kids give money to good causes. After that we'll be looking to develop other new features, such as a way of saving as a little group. So a number of kids might save up together to get something really nice for grandad's birthday, for example. We want to increase our development capacity, attract more investors and really take the app to the next level. Part of that will hopefully be extending our reach outside the Netherlands. Every country has an organisation like Nibud, and we believe it's important to forge ties with them, because payment cultures differ. In the end, I want parents all over the world to know about Otly. And for Otly to be synonymous with paying pocket money everywhere."

Hear Lior Bornshtain's story at SIDN Connect

On 30 November, we're hosting SIDN Connect for our business partners. Lior Bornshtain will be one of the speakers at the event. Check out the full programme or register now.

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