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In today’s digital world, financial literacy has become equally important as other skills for children to learn at a young age.

While it is still not part of the traditional educational system’s curriculum, new-age neo-banks and fintech apps are teaching children below the age of 18 important financial skills, such as savings, compound interest rates, along with ways to track their pocket money and expenditures.

One such startup is Pencilton. Founded in 2020 by BITS Pilani alumni Vishwajit Pureti, Ashish Singh, Pallavi Tipparaju, and Viraj Gadde, this Hyderabad-based startup aspires to educate the younger generation on financial literacy and management, and aims to be the most innovative and prominent player in this space.

Operating in beta since April 2021 with more than 17,000 users, the startup has launched an NCMC-compliant (National Common Mobility Card) prepaid RuPay smart card — the PencilCard — on January 27, 2022, which works with the Pencilton App on iOS and Android devices. The card is can be used without the app too, once the KYC is done by the parent/guardian.

Vishwajit tells YourStory, “Pencilton app allows for gamified learning around pocket money, facilitated by interactive community involvement, making it more than just a payment app. Quizzes and exercises at various levels are included in this type of learning, and youngsters can earn PencilPoints while learning about money.”

How it began

Pencilton’s origin lies in a project Vishwajit and his co-founders (then classmates) executed in 2018 with a school in Calicut during their time at IIM Kozhikode. 

Aimed at teaching kids about money via presentations and curriculum building, they built a small boardgame to demonstrate various concepts of money using currency denominations, letting them buy a house against a loan, buying insurance for a house, storing money in the bank to get more money (interest), etc.

“The response was fascinating. We ended up building a simulation using virtual currency and gamified learning, essentially like a ‘Farmville meets Monopoly’,” recalls Vishwajit.

This led the team to build Kubero, where they worked with multiple schools across Bengaluru, Kerala, and Hyderabad. 

“Based on increasing feedback from parents that they wanted to link real pocket money to the gamified learning in the simulation and also based on our own observation that kids wanted to have access to various financial tools (such as a debit card) easily, we pivoted in 2020 to start Pencilton,” he adds.

While Kubero is not functional anymore, the simulation, algorithms, and backend remain in Pencilton.

An all-encompassing fintech product

Essentially, teenage users can use Pencilton’s smart card without a bank account and use the app to view and manage their balance and spending.

To start using Pencilton, users need to sign up on the app and add their parent/guardian. Once the parent/guardian’s KYC is completed (virtually), the child’s virtual card is activated instantly. 

The parent/guardian will have to use the app to send pocket money to their kids. They can also approve money requests, set spending limits, track the expenses of their child, avail spending reports, and use additional gamified features like badges, levels and points, and more.

The Pencilton app allows teenagers to learn more about savings by setting savings goals, and also has a ‘digital piggy bank’ to save money. They can also finish chores assigned by parents on the app for bonus pocket money. 

“Parents can give pocket money with ease at the tap of a button on the app, have an overview of the spend (not detailed transaction-wise details) of the spend, give savings challenges, give reward-based chores, and teach kids the basics of money,” says Vishwajit.

Apart from the virtual card, Pencilton has also launched a physical card. While the digital card is free of cost, the physical PencilCard is priced at Rs 199. However, right now, as part of the launch promotion, users can buy this at Rs 99.

If a parent/guardian doesn’t want their child to use a smartphone, they can still buy a physical card for the child and themselves use the app to add money and track expenses on their phones.

The startup claims that the PencilCard is a Platinum RuPay card, which has additional benefits like free access to lounges at all airports in India.

An all-in-one card

“The fintech for teens space has grown rapidly in recent years, highlighting the need for innovation and technology adoption to make financial literacy more accessible to teens. Therefore, Pencilton chose to bridge the market gap,” says Vishwajit.

For teenagers, a single PencilCard can serve multiple needs as it works online and offline just like any other debit card and can also doubles up as a metro card, and bus card.

The smart card is already compatible with Delhi Metro (Airport Line) and as a bus card in Goa (across KTC buses). It is also scheduled to be accepted for metro travel in Pune, Chennai, and Mumbai, as well as a bus card for BEST buses (Mumbai). 

Vishwajit explains, “PencilCard aims to transform the entire debit card experience as it is equipped with NCMC’s unique features. This card is a part of the most advanced generation of contactless prepaid debit cards that can be used for payments across various channels, including retail shopping offline, online shopping, travel and in the future — tolls and parking, among others.”

It also comes with the capability to store seasonal tickets and monthly passes, using which Mumbai Local authorities are planning to let season ticket holders top up the ticket via the card and purchase tickets. 

The card is designed and packaged keeping minimum wastage during manufacture and unboxing in mind. 

Market, funding, and future

The teen/pre-teen banking segment is nascent and growing rapidly. Vishwajit says there are 250 million teens and students in India, the largest percentage of teen and student population for any country in the world.

Neobanks such as FamPay and Junio are also focusing on building fintech products for teens and young adults.

The startup’s initial focus will be on acquiring customers to expand its user base.

“We plan to build a user base of teens and their parents. This will give us two of the most valuable user sets which we can monetise via cross selling and upselling (using fintech and financial education tools) as we scale up. We will also earn interchange on the money transacted on our cards platform,” Vishwajit says.

Last July, Pencilton raised $330,000 in a Pre-Seed round led by Jupiter (registered as Amica Financial Technologies Pvt Ltd). 

The round also saw participation from prominent founders including Nilesh Patel and Prashant Singh (Founders of LeadSquared), Ashish Sharma (MD, Innoven Capital), Abhishek Goyal (Founder of Tracxn), Himanshu Sharma (Founder, Aspiring Minds), Kunal Sinha (Founder, GlowRoad), Vignesh Ramanujam (Partner at Spoonfeed), and angel investor Tirumalareddy Karri.

Speaking about its future plans, Vishwajit says, “We are looking forward to scaling up and working with stakeholders across the fintech ecosystem to introduce extensive features to help bring the fintech revolution to the fingertips of the next generation.”