Millennials? Those folks are geezers to Young Americans Bank.

The $16 million-asset bank in Denver caters to kids and kicks out its "senior" depositors upon their 22nd birthday, making it uniquely positioned to know and perhaps shape the banking habits of tomorrow's mainstream customers.

Founded by Bill Daniels, a billionaire cable magnate who thought kids needed to learn better savings habits, the 28-year-old bank is now focusing more on making sure kids understand how they're earning and spending.

As it turns out, younger kids still like paper statements, but mom and dad's reliance on plastic has meant less loose change ending up in the piggy bank. Mobile banking is hot, but peer-to-peer payments are off to a bit of a slow start.

Besides the banking operations, the bank also has Young Americans Center for Financial Education, which houses several educational programs, including a fifth grade program called Young Ameritowne that teaches 27,000 Colorado kids a year about economics. A similar project for seventh graders about global economics is called International Towne.

With low fees and a lot of small accounts held by its 16,000 kid customers in all 50 states and a dozen foreign countries, the bank doesn't turn a profit and that's OK, said Richard Martinez, president and chief executive of the bank.

In founding the bank, Daniels promised regulators to serve as a capital backstop for the entity. Daniels died in 2000, but his $1 billion Daniels Fund keeps the bank well-capitalized today. [Full disclosure: I received a college scholarship from the Daniels Fund and was a depositor of the bank. I, too, was kicked out on my 22nd birthday, 11 years ago.]

The following is an edited transcript of an interview with Martinez, who has led the bank since 2007.

Explain the creation and model for Young Americans.
Bill Daniels felt the world needed a place to learn about banking. They weren't going to learn any other way, because at that time banking was a secretive dark place. You needed money to get money. Things have changed dramatically since then, but Bill felt that every youth should have a personal banker like the wealthy.

We have all the products and services that an adult bank has, just on a simplified basis so we can maximize educational value. It was very important to Bill that we stay up with the times and offer the same products so kids really do get a good education about banking and can transition well into the adult banking world. We don't want to compete with other banks. We want to give them great, educated customers.

What is competition like now? Are other banks trying to get younger customers?
I don't think other banks want the youth accounts; they want the family as a whole. Our board members bring in solicitations from the adult banks that say we will give you a $100 to open up your kids' accounts. They are sub-accounts under mom and dad's accounts so, the banks aren't taking any risk on a standalone youth account. They want the stickiness of having the entire family.

There is a lot of attention put on this idea that branches are doomed because younger people don't want them. What's your experience?
Our younger kids are still interested in savings. It is still the novelty to them of bringing in their piggy bank.

For our older kids — say 13 or 14 and up — the thrill of coming into the branch is just not there anymore. We've been really trying to think about how do we change. Our background was really in trying to instill savings habits. The bigger challenge now is getting kids to understand the risks and the power of being transactional. We are looking for ways to make kids transactional much, much younger. Right now, we say 12 to get a debit card and checking account. I think we need to go much younger than that, seven or eight. They love debit cards, but I think as more young kids have devices — phones, watches or tablets — I think that is going to be the next piece for us. Savings is important, but they should also be savvy in the way they transact.

The bulk of your customers are kids born after 2000. The iPhone was introduced in 2007 — these kids don't remember a life before smart phones. How does that shape what they expect from you?
For young kids, everything is very physical. That gets confusing when they see mom and dad never touch cash and only hand others a card or flash their phone. It is like when ATMs came around and you got money by putting your card in a wall. It gets more and more difficult to match things that are developmentally appropriate — like the physicality of cash — to the way the world works today.

You'd think that affects piggy banks, too. If your parents don't carry cash, where do you get the change?
We've been training our parents to make their kids more responsible. For instance, having parents set up bill pay to put allowances directly into their account so that the kids don't have to bring anything down. We want them to use online banking, we want them to bank on their phone. The newest thing we've been trying to get kids to use is peer-to-peer payments. It is still very confusing to them that it works through the bank. We launched it at the end of last year and it is being adopted very, very slow but it takes time. We use Popmoney from Fiserv. I think that is going to be way that things go.

My board is terrified, but I believe we can manage the risks. Youths lose their phones all the time, they lose their plastic all the time. It happens just as much with adults. If we are really in the business of educating this next generation, then we need to take those risks.

Do you have to worry about the impetuousness of kids with that product? What's to stop a kid from sending all of their savings to someone?
That is one of the risks. You can't control that. As we talk about financial education, people can have the best financial education they've ever had, but if they have a mental state of wanting to keep up with their friend they will throw it all out the window. The ability to tell yourself 'no' is a discipline that a lot of us don't have.

Why do you think the adoption of peer-to-peer payments has been slow?
I think it is just new to them and they don't know how it works. For the industry, the same thing happened with internet retail banking. Mobile banking came on strong and I think we were late to that because we weren't sure the youth would take to that. We are at about 60% penetration rate for mobile banking with our checking account customers. Payments will catch on as they learn more about it. Kids just have fewer payments to make than adults. We only have one or two youths using bill pay, for instance.

How do you decide what products to offer?
We look at the products that adults are using and study the adoption there. We've been fortunate to have Fiserv as our data processer. I go to their conference and look at where things are going. In the industry, younger customers are earlier adopters, but also so are some of the older customers. The middle group is the one waiting around. I equate our older customers to seniors. They want to know where their money is, they want to know someone at the bank that they can talk to.

Our younger kids still like to get paper statements. We talked about going to electronic statements, but mail is still kind of a novelty. When that wears off, I don't know.

If we're talking five years from now, what does Young Americans look like?
I think we look a lot more like our adult bank counterparts. We are a lot more technologically advanced, meaning that our customers are using the latest and greatest. As any bank, we have to be cognizant of maintaining our brand and value proposition, which most banks are fearing now given the disruptors in things like payments, we have to make sure our value proposition holds true and that is giving them an education and a safe environment to learn.

You'd think big banks would be beating down your doors to get access to your data so that they could get some insight into the next generation. Although, if those customers aren't profitable until they are much older…
That's exactly it. I've sat across from many of the big banks and they are all so profit focused — that's where their stock price lies — that many of them don't want to take that risk now. "They'll come to me anyway, why do I want them now?" is their thinking and you can't blame them. It is very expensive proposition. I think a lot of the bigger banks are throwing out a financial literacy program aimed at youth and thinking that is how they reach them. It is a branding piece, than serving their needs. They're right that they'll get some of them, but it is perhaps naïve that they'll get all of them because of the disruptors.

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