Y Combinator Challenge #21 – Finance Software for Individuals and Small Businesses

For more information about the Y Combinator Challenge, check out this post first

21. Finance software for individuals and small businesses. Intuit seems ripe for picking off. The difficulty is that they’ve got data connections with all the banks. That’s hard for a small startup to match. But if you can start in a neighboring area and gradually expand into their territory, you could displace them.

My Idea – iAllowance

When I was growing up, I used to love getting my allowance.  After a long day out in the hog pen, pa would flip me a nickel and Laura, Mary, and I would skip down past Plum Creek to the Five & Dime and fill our pockets with penny whistles and gobstoppers.  Not really – but I’ve been dying to throw in a Little House on the Prairie reference ever since starting this blog.  One more item checked off the bucket list.

Where was I going with that?  Oh yeah – kids today have so many different ways to spend money, including lots of stuff online.  Between iTunes credits, XBox 360/Playstation accounts, monthly memberships to virtual worlds like Runescape or Club Penguin, plus pre-paid Visa cards, cell phone minutes, and good old fashion savings accounts, it’s just not that easy to hand kids a few bucks and call it a day.  WSJ has a good article about this problem, and while there are a few startups that are in this space, I think there’s room to come in and become the default financial option for a generation of teens, and add options to the service to provide them college plans, early adult plans, retirement plans, etc..  See where I’m going with this?

Here are a few features that might set this apart:

  • Parents would set up the child’s account and add weekly funds, and the child would be able to easily add money to online accounts (iTunes, XBox, Visa Buxx, etc..).  The parents could choose the services that the child would be able to spend the money on, which would prevent them from getting caught in phishing attacks or spending money on sites where they weren’t supposed to.
  • To help teach kids the value of saving, parents would initially deposit the money into the “savings account” section on the site.  Kids could move funds from the savings section to their “spending” accounts, but there would be a $1 fee for doing so.  While part of the collected fees would be used for “site maintenance and hosting” expenses, these fees could also be used to bump the savings account percentage returns above what kids/parents could earn at a standard bank.
  • I wouldn’t normally say this, but I think that selling iAllowance gift cards in grocery stores would be a good way to kick-start the site.  Along with the advertising and network effect (“Oh, this would be a great gift for little Suzie!”), it would add some legitimacy to the service and overcomes the difficult trust issue of just giving financial control to a newly minted site.

What do you guys think about this one?  Besides PayJr, do you know of any good services like this already out there for kids?

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