Magazine article American Banker

Start-Up Wants Banks to Help It Bring E-Commerce to Teenagers

Magazine article American Banker

Start-Up Wants Banks to Help It Bring E-Commerce to Teenagers

Article excerpt

MadCash, a Bloomingdale, Ill.-based start-up, is soliciting banks to help it tap a potentially lucrative market: 40 million teenagers, who spend $1 billion each week and have $100 billion of disposable income but no way to buy goods on the Internet.

MadCash has developed an Internet purchasing card for teenagers that is similar to a debit card except that it is settled through the automated clearing house. It would be backed by funds held in a depository account at a financial institution.

Michael O'Kasick, the 27-year-old chief executive officer of MadCash, said he thinks the cards will drive teenagers to bank branches, which is where the co-branded cards would be distributed. Banks could establish themselves as cutting-edge institutions in the minds of teenagers, Mr. O'Kasick said.

"We view this as teen empowerment so that institutions and branches get bank customers for life," he said. "Banks can get them while they are young instead of vying for their services when they turn 18."

MadCash said it plans to aggregate purchases on behalf of the issuing institutions before settling them through the clearing house. It has enlisted First Annapolis Consulting to write up a business plan and design the settlement system, Mr. O'Kasick said.

The company also said it plans to collect and store information on behalf of banks for cross-selling and marketing purposes.

Mr. O'Kasick said he expects the accounts -- or "cash vaults" -- to have average balances of $50 to $60. Parents can use direct deposit to fund the cash vaults, but teenagers would not be able to withdraw the funds through ATMs.

No banks or merchants have signed up yet, but several banks have expressed interest in the system, he said.

"The cards are distributed by a trusted institution, and are accepted by parents and accepted by teens," Mr. …

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