Key Takeaway: Mitto hopes that its digital payment card wins over Generation Z clients in Spain, Latin America, and the E.U., but heavy competition and an underwhelming history with prepaid debit cards might put the breaks on its global expansion.

Mitto, a Spain-based company tailoring its digital payment cards exclusively to Generation Z, wanted to allow them to make online purchases without a credit card — or asking their parents.

What they discovered was a lot of competition and that zeroing in on a target market was only half the battle.

“They are impacted by the market on Instagram, Facebook, Snapchat, but they don’t have easy access to payment solutions and the ability to buy anything online, so we provide that to them,” said Mitto co-founder and CEO Marcos Cuevas in an interview with Karma.

Cuevas was inspired to create the company when his 14-year-old daughter wanted to buy things online without having to hassle her parents every time. He knew his daughter was a part of a huge market that perhaps had similar needs as the ones in his own household.

Gen Z captures anyone born between the mid-1990s and the aughts, and is a larger generational cohort than either the Millennials or Baby Boomers. 

Mitto raised over $2.5 million in seed funding in September from various investors, including Spanish social media gaming stars AuronPlay and Wismichu, who have more than 26 million combined subscribers on YouTube. 

“If they want to buy something on Playstation they have to ask their parents to let them use their credit card, which is something very personal, and now there’s friction at home,” said Cuevas, who also thinks that young people are now “blind to ads” and is hoping that an influencer-driven campaign will start the conversation between Gen Z and their parents about how loading money onto a Mitto digital wallet would be the perfect solution to their needs.

Rising Competition

Among the competitors mentioned by Cuevas in the mobile banking and digital wallet space are Revolut, a banking app and payment card based in London that claims over 1.1 million daily active users; Monzo, a mobile-only bank also headquartered in the U.K., reports over 2 million customers and has recently announced plans to expand into the U.S.; and N26, a German mobile bank with over 3.5 million users and a $3.5 billion valuation.

Cuevas notes the differences between those companies and Mitto is not just the focus on users born after 1995, but also the social impact of their decisions and that they want to attract users who will prioritize fintech over traditional banking solutions.

“The goal of our service is to give Gen Z the tools to learn how to manage their finances but also within that the challenges of this generation are special.”

However, is a prepaid debit card for parents to safely control their children’s spending habits an innovative idea? Not really, said Alex Jiménez, chief strategy officer at Extractable, a consulting and analytics fintech agency based in San Francisco. 

“This very specific use case is actually what many legacy banks are targeting their prepaid cards for,” says Jiménez. “It hasn’t necessarily taken off as expected.”

He noted that banks have spent years pitching customers on the idea of using prepaid cards, which are virtually the same as general use gift cards, as ways to provide money to their children without having to worry about their credit. And the parents haven’t been as receptive to the concept as the banks hoped.

But with seed funding, 50 million potential customers in the E.U. and recent fintech laws being passed in Mexico that pave the way for expansion into Latin America, Cuevas sees next year as a chance for Mitto to break new ground. 

“We’re considering starting with one country in 2020, probably Mexico, and then in Europe we are going towards the usual suspects; Italy, France, Netherlands, Germany.”

Just don’t expect Mitto in the U.K. any time soon due to heavier competition and the complications of Brexit. Jiménez would also caution anyone on expanding into the fintech space in the U.S. for similar reasons. 

“(There is) so much more competition. We have 6,000 banks, 6,000 credit unions [in the U.S.], and you have some really strong players that are doing interesting things in digital,” says Jiménez, adding that regulation and complying with both federal and state laws make any attempt at expanding into the U.S. market a “pain in the neck.” 

Cuevas remains confident that their Gen Z-focused strategy, influencer partners, and the addition of parental controls and “social responsibility” features to the app will help the company stand above the swath of competition as they expand into Mexico and beyond beginning next year. 

Given the number of powerful competitors in the space already, both foreign and domestic, and the added hurdle of financial regulations, their success will likely hinder both on their ability to reach and influence the youth market that they’ve built the company around but also Gen Z’s ability to influence their parents to give them financial freedom through Mitto. 

Financial Education

Cuevas also sees Mitto’s mission as a way to teach a unique generation about the importance of their financial decisions while being aware of their social and global impact. 

“The goal of our service is to give Gen Z the tools to learn how to manage their finances but also within that the challenges of this generation are special,” says Cuevas, noting that circumstances like climate change and poor working conditions in disadvantaged countries are often at the forefront of the thoughts of their potential users and that Mitto will have features that highlight the global impact of their purchases.

“We want to let them have the opportunity to be the first generation to be aware of how the things they’re buying impact the planet,” he said.