t's hard to know exactly where to look when you're standing on the brink of the brave new hooked-up world: outward to the shiningly bright online horizon, or downward into an abyss that swallows marketing and personal information from users.

That's how many parents view the newest Internet trend—online shopping sites where teens can purchase merchandise using parent-controlled digital cash allowances. While this offers a convenient, fun way for kids to hone their shopping skills, it also lets them make transactions in ways and at places their parents often don't understand and fear they can't fully control.
    See the sites

    The bad news
    is that teens
    are less interested     than adults
    in comparison shopping
    and customer service.

icanbuy provides
training wheels
so you can learn
by doing.
Life cycle
Brick-and-mortar retailers long have understood the powerful combination of teens and money. Now e-tailers (electronic retailers) are scrambling to get their share of the market. Consider these statistics from eMarketer, a research firm in New York City:
  • There are 19.3 million teenagers (ages 13-17) today.

  • Currently 11.1 million teens actively use the Web (at least once or twice a week for one hour or more).

  • Jupiter Communications, New York City, predicts that the number of teens online (ages 12-18) will grow from 8.4 million in 1998 to more than 16 million by 2002.

  • Teens (ages 13-17) spent $105 billion on products and services in 1998. By 2002, teen spending will have risen to $122 billion.

  • eMarketer estimates that 3.9 million, or 35% of teenage net users will make at least one purchase in 1999. By the year 2002, 10.3 million, or 57% of teen net users will have made a purchase online.

What are digital allowances?
It seems inevitable that a generation of kids who grew up with mouses in their hands would be keenly interested in shopping online. Interestingly enough, eMarketer reports that "while teens as a group have significantly greater access to the Web than their adult counterparts, they are currently less likely than adults to actually make purchases online. In 1999, 58% of overall net users will buy online, as compared to 35% of net-using teens."

While this is attributed to teens' lack of credit cards, eMarketer predicts that "the continued development and proliferation of 'e-wallets' and other forms of parent-controlled digital cash accounts will remove this obstacle over time." They define e-wallets as "packets of personal information (identification, credit card number, address) that are stored on the Web and automatically accessed at the time of a transaction."

From a consumer protection viewpoint, the very bad news is that teens are less interested than adults in comparison shopping and customer service, and appear to have zero interest in security.

New teen-shopping sites, such as icanbuy, doughNET, Cybermoola, PrivaSeek, CyberCash, RocketCash, flooz, SpendCash, and PocketCard ("See the sites"), vary in the degree of teen freedom, parental control, and Internet access they provide. Here's a look at just a few:

Paul Herman, icanbuy's founder and CEO, says its mission is to enable teens and kids to manage money wisely by allowing them to shop, bank, donate, and ultimately invest online, all within parental guidelines. "Frequently, since money management is not easily taught at home and at school, icanbuy provides financial training wheels so you can learn by doing. You can obtain skills early and use them every day of your life," Herman says.

While serving a core group of 13- to 16-year-olds, icanbuy has users as young as age five and as old as 19. icanbuy partners with upwards of 40 retailers and five charities, plus it offers online banking through a partnership with Atlanta-based Security First Network Bank. Using a credit card to set up a debit account for their child, parents can limit how much a child can spend on any given item, where he or she can shop, and how much he or she can contribute to which charities. Parents can review the child's account activity at any time and revise permission accordingly.

The site contains content about how to shop wisely, how to save, and how to be money-smart. Additionally, Herman says its purchase partners give access to their databases so icanbuy can screen out objectionable purchase options and streamline databases to search across merchants for comparison shopping. "We never sell any information on our customers to marketers and our partners are constrained as well," Herman says.

John Young, marketing vice president, says Cybermoola offers teens the ability to shop directly and independently at partnering Web sites that offer teen-appropriate merchandise, using a secure and convenient online payment mechanism. "Essentially, we're looking to allow teens to have the online equivalent of shopping in the real world."

Cybermoola, which targets teens from ages 14 to 21, gave away 100,000 Cybermoola Internet cash cards last year to teens in select markets across the country. "We hand out free money—either $10 or $20 cards—and put it in hands of teens at high schools, concerts, teen events," says Young.

After teens complete a brief registration form and receive a PIN (personal identification number), teens can spend the money online at partner e-stores. "This gives teens the opportunity to participate directly in e-commerce for the first time. If they want to add money to it, parents can use a credit card to charge up the account, or send a check or money order," Young says. "Starting in March we will have cards available for sale at retail locations.

"We don't censor products that are available at partner sites; in that way we are much akin to the real world," Young says. Young says Cybermoola provides the same level of monitoring you get when you drop kids off at malls. "If it's not something you're supposed to purchase in the real world, then don't get it here."

Launched last June, doughNET offers online shopping and banking alongside comprehensive money-management tools so teens can budget, save, donate, invest, and manage all aspects of their money in one place, according to Ginger Thomson, president and founder. "It's designed to encourage 13- to 18-year-olds to become financially independent in a safe, secure environment, and give their parents tools that can be customized to guide them."

doughNET, which teams with 62 retail partners and seven nonprofits, allows parents to open accounts for teens by making a credit card deposit or an electronic funds transfer (EFT) from a savings or checking account. Parents can set minimum balances or shopping restrictions, or they can let teens self-manage their accounts. Once an account has been opened, parents or teens can continue to fund the online account. Thomson says doughNET doesn't sell any information about its members and restricts partners from selling member information.

"We believe that social responsibility goes hand in hand with financial responsibility," says Thomson. She says the nonprofit part of doughNET is getting a lot of traffic and any contributions by teens are passed fee-free to participating nonprofits.

    By 2002, annual
    teen spending
    will have risen
    to $122 billion.

See the sites

Visit these Web sites for an overview of the digital allowance scene: And visit the Federal Trade Commission for information about the Children's Online Privacy Act.

© 2000 Credit Union National Association Inc.