How Banks And Fintechs Can Build COPPA-Ready Youth Apps

As youth-focused debit, savings and investing experiences expand, fintechs and sponsor banks face a familiar challenge: delivering products that are user-friendly for kids and teens, while meeting compliance requirements that focus on children's use of digital technologies, and aligning with fast-moving expectations around data minimization, security and advertising.

For example, the Children's Online Privacy Protection Act applies when an online service is directed to children under 13, or when the service holds actual knowledge that it is collecting personal information from children under 13.

For fintech products, in which identity, payments and analytics are tightly coupled, COPPA can shape onboarding design, third-party integrations, retention schedules and even marketing strategy.

That's especially true for bank-fintech partnerships powering youth offerings such as prepaid or debit cards, allowance and savings tools, and early investing or rewards features. The right compliance approach lets teams support financial literacy without overcollecting data or creating friction that drives families away.

What's Changed Recently In Product Team Care and Considerations

Recent COPPA activity has raised the compliance bar. The Federal Trade Commission issued a notice of proposed rulemaking in early 2024 to modernize the COPPA rule, and the agency announced and finalized COPPA rule updates in 2025 emphasizing, among other points, stronger limits on monetizing kids' data, clearer mixed-audience treatment, tighter retention expectations, and more explicit security and transparency requirements.[1] Operators subject to the rule had until April 22, 2026, to come into full compliance.

Key changes relevant to fintechs and digital services include:

• An expanded "personal information" definition: This covers biometric identifiers – fingerprints, voice prints, facial templates and genetic data – and government-issued identifiers such as Social Security numbers.
• Separate parental consent for third-party disclosures: Operators must now obtain separate verifiable parental consent before disclosing children's personal information to third parties for purposes including targeted advertising, monetary compensation or training in artificial intelligence.
• Written security programs: Operators must implement a written children's personal information security program with safeguards appropriate to the sensitivity of the data collected and the operator's size and activities.
• Data retention limits: Children's personal information may only be retained for as long as reasonably necessary to fulfill the specific purpose for which it was collected, and indefinite retention is prohibited.
• New parental consent mechanisms: The amendments permit knowledge-based authentication, government-issued photo ID verification and text messaging coupled with follow-up confirmation steps.

Additionally, states are rapidly expanding children's data protections well beyond COPPA, and many of these laws apply to any digital service that minors might reasonably access, according to legal threshold state-level age-appropriate design code laws, which can encompass fintech apps. Many of these state laws now require mobile app stores and developers to verify user ages and implement safeguards based on age of anyone under the age of 18 – not just 13.

On Feb. 25, the FTC issued a policy statement clarifying that it will not pursue enforcement against operators that collect personal information solely to determine a user's age through age verification technologies, provided certain conditions are met.

This was prompted by concerns that the age verification process itself could trigger COPPA obligations, creating a catch-22 for operators trying to comply. This guidance is particularly relevant for fintechs that onboard younger users and need to determine whether COPPA obligations apply before collecting additional data. Here are six strategies product teams should consider.

1. Start with defensible age-gating and assurance.

Age assurance is the trigger that determines whether you can proceed with standard onboarding or must pivot into a COPPA flow, including verifiable parental consent.

For mixed-audience products, which are common in teen banking, it's not enough to ask for a birth date if the rest of the stack can still collect identifiers or share data before a COPPA decision is made.

In these situations, it is important to build an onboarding path that clearly separates (1) limited, strictly necessary collection to determine age from (2) broader collection and feature enablement after age is established.

• Use neutral age-gating early in the sign-up process – e.g., date of birth – and explain why it's required.
• For higher-risk journeys, add age-assurance or validation controls – including third-party tools where appropriate – and document decision rules.
• If the user is under 13 – or age is uncertain – route to a verifiable parental consent flow and retain an auditable record of consent.

Done well, age-gating reduces downstream rework and helps align product, compliance and compliance oversight from day one.

2. Minimize data by design, especially before consent.

Data minimization is central to COPPA and has become a focal point in recent regulatory commentary. For fintechs that may collect data on teens and children, this is both legal and architectural: Collect only what you need for the feature a family is actively using, keep it only as long as you need it, and avoid just-in-case enrichment that can expand risk with analytics, attribution and identity data in particular.

• Map every data field and software development kit you collect. Keep only what is necessary for onboarding, fraud prevention, servicing and requested youth features.
• Avoid collecting sensitive identifiers unless they're truly required for the product and permitted by your compliance design; be cautious with government identification, biometrics, precise geolocation and any data used for profiling.
• Where possible, use tokenization, pseudonymous identifiers and partitioned environments so product analytics and payments operations don't expose more child data than needed.

The payoff is simpler compliance. Less data collected means less data to secure, disclose, retain and delete.

3. Make parental control and transparency a first-class product feature.

For under-13 users, COPPA requires verifiable parental consent and meaningful parental rights. This includes the ability to review and delete a child's information. In practice, sponsor banks and fintech program managers should treat the parent as the primary account holder experience, with clear disclosures, simple controls, and low-friction ways to manage permissions across both the fintech layer and the bank layer.

• Build a parent dashboard with balances, activity history and configurable alerts.
• Offer spend controls – such as limits, merchant category controls and time-of-day rules – aligned to what the bank can actually enforce on the card and payment rails.
• Make it easy for parents to access, correct and delete child data – and ensure the request propagates to downstream vendors and bank partners.
• Send real-time notifications for key events such as card presents and online funds transfers, new payees, and settings changes.

Strong parental tooling builds trust, and also makes consent, notice and deletion obligations operational rather than theoretical.

4. Treat security as a shared control environment, and document it.

Youth fintech stacks often span the fintech app, sponsor bank systems, processors, know-your-customer and anti-money laundering vendors, analytics providers, and customer support tooling.

COPPA requires reasonable procedures to protect children's data, and recent rule updates and commentary have underscored expectations for more explicit, programmatic security controls. For partnerships, that means agreeing on who owns which safeguards, how incidents are handled, and how third parties are governed.

• Use encryption in transit and at rest and standard key management practices for systems handling child data.
• Implement strong authentication, including multifactor authentication for parents and administrators, and secure step-up checks for sensitive actions.
• Run regular security testing – vulnerability scans and penetration tests – and track remediation through a documented program.
• Require written assurances and security obligations from vendors and partners that receive child data and ensure consent/notice artifacts align across the ecosystem.

5. Be disciplined about marketing, analytics and third-party sharing.

Many youth financial products rely on third-party software development kits for attribution, analytics, customer messaging or ad measurement. That's where COPPA risk concentrates: Disclosures to third parties and the use of persistent identifiers can quickly look like data monetization.

Recent COPPA rule activity has highlighted the need for more explicit, separate choices for certain disclosures, particularly those connected to advertising or other nonessential purposes.

• Default to no third-party advertising for under-13 users; avoid sharing child data with ad tech and measurement partners unless you have a clear legal basis and consent where required.
• Design separate, granular parent choices for disclosures that are not integral to delivering the service – and ensure declining does not block core access, where feasible.

This is where many programs succeed or fail: If your third-party stack is not COPPA-ready, the rest of the controls won't matter.

6. Operationalize change management to keep up with COPPA and state law.

Children's privacy expectations are evolving quickly. The FTC's COPPA rule review process – including the 2024 proposed amendments and the 2025 finalized updates – signals continued scrutiny of data sharing, retention and security. Fintech-bank partnerships should treat COPPA compliance as an ongoing program – not a one-time launch checklist.

• Monitor FTC guidance, enforcement trends, state law changes and COPPA rule updates; translate changes into product requirements and bank program controls.
• Reassess vendors and SDKs periodically, especially analytics and attribution, and confirm contracts, configurations and disclosures still match reality.
• Review data retention schedules, deletion workflows and consent logs at least annually – and after major feature or vendor changes.

Conclusion: Build trust with families – and resilience with regulators

Youth banking and fintech products can be a powerful on-ramp to financial literacy, saving habits and responsible spending. But serving kids and teens also means building privacy and safety protections into the product and the partnership model – across the app, the bank and every vendor that touches data.

The most durable programs treat COPPA as a design constraint. They establish age-gating, minimize collection, empower parents, govern third-party disclosures, and maintain a documented security and retention program.

With the FTC's 2025 COPPA rule updates taking effect on a staged timeline throughout 2026, now is the right moment to pressure-test flows before scale amplifies risk.

Ultimately, compliance is also a growth strategy. When parents can understand data practices and control their child's experience, they're more likely to adopt and stick with a product.

For banks and fintechs, that trust is what turns a youth program into a long-term customer relationship.

Republished with permission. This article, "How Banks And Fintechs Can Build COPPA-Ready Youth Apps," was published by Law360 on April 30. 2026. (login required)