While teens are fond of the virtual world, they still spend far more time offline than on. That simple fact presents a challenge to the half dozen or so financial portals like IcanBuy.com and RocketCash.com that have sprung up recently. Anxious to appeal to teens with discretionary dollars but no credit cards, the sites feature spending schemes that allow members of the so-called "Generation Y" to access and spend funds online. Most involve prepaid shopping cards or online accounts into which teens and/or their parents can deposit funds. But the virtual "money" doesn't spend like the real thing at fast food restaurants, movie theaters and other teen hangouts. San Francisco-based
DoughNet.com tackled the problem by partnering with
USABancShares.com to create an online bank account with an offline perk: an ATM card. Modeled after USABancShare's popular energyONE account, it earns a 5 percent annual percentage yield with no monthly maintenance fees. The only requirements are a parent or guardian's co-signature and an initial $1 deposit. While the account is attractive even without an ATM card, ATM access is a key differentiator for DoughNet, said Ginger Thomson, the company's co founder and CEO. "An online account wasn't going to work if it was only available online. That's only a small part of an individual's life," she said. "But if you can use almost any ATM in your neighborhood, suddenly that account becomes more valuable to you." Perhaps to allay the concerns of nervous parents, the optional, no-fee card comes with a bit of built-in fiscal responsibility: a daily withdrawal limit of $40 a day. ATMs have been nothing more than a secondary delivery channel for most brick-and-mortar banks. But the machines "become much more like a branch" for Internet-based account holders, said USABancShares CEO Ken Tepper. The idea of the ATM as an extension of online banks is gaining momentum in the wake of deals like E*Trade's purchase of Card Capture Services, a Portland, Ore.-based ISO with approximately 8,500 ATM contracts. DoughNet account holders can get cash at Cirrus, Plus, MAC and STAR Systems ATMs. In addition, they can make deposits at some MAC ATMs. Like other Internet banks, DoughNet will reimburse its customers for up to $10 a month to cover service fees levied by ATM owners. USABancShares, which produces a card emblazoned with the face of rock star David Bowie for BowieBanc.com, plans to issue a card imprinted with the DoughNet logo and possibly other cards with images of musicians like the Backstreet Boys. "The days of the boring gray card are over," Tepper said. Because DoughNet is interested in expanding deposit-taking capabilities, as well as offering surcharge-free access to ATMs, Thomson said it's possible the company will partner with one or more brick-and-mortar banks. DoughNet has also introduced a prepaid DoughCard that will allow teens to deposit funds into their account by visiting the company's Web site and entering a code found on the card. The company plans to distribute the cards at retail outlets. "We're trying to solve the (deposit) problem in more ways than one," Thomson said. Both DoughNet and USABancShares are convinced that banking will change to meet the needs of today's teens. Just as Baby Boomers were more willing than their parents to embrace the ATM -- leading to a veritable explosion of the machines -- Internet banking will likely mature right along with Generation Y. "They're not going to bank the way their parents have banked," Thomson said. "The Internet is not fearful to them; they trust it more than adults do." "We share a belief with DoughNet that the younger generations are going to accept the Internet as part of their daily lives," Tepper agreed. "For the other generations, the thought of putting their credit card information or Social Security number over a computer is crazy. It's tough to change their minds." The two companies seem tuned in to the trendy tastes of the younger set. DoughNet links its customers to hip online retailers like J. Crew, Esprit.com, Skechers.com and CDNow. They also can make charitable donations to youth-oriented organizations like Rock the Vote and the Rainforest Alliance. USABancShares, which targets a slightly older demographic on its Web site, offers features like streaming video and online bidding for certificates of deposit. One other financial services company, Gurnee, Ill.-based
PocketCard.com offers a Visa branded prepaid debit card that also functions as an ATM card. Issued by First National Bank of Brookings, S.D., the card is honored by any merchant who accepts Visa products. "It works exactly like any other Visa works," said Shannon Kiernan, PocketCard's product manager of teen markets. Like the DoughNet product, PocketCard's ATM functionality is optional and parents can set daily withdrawal limits. A parent or card sponsor also can opt to receive an email alert every time the card is used, whether it's online, at an offline merchant or at an ATM. Funds can be transferred from a sponsor's bank account onto the card via the phone or Internet.
