For Students, Banking 2.0 Involves Social Media (and the Ads That Go With It)

Let's say you're in college. You're taking a full load of courses, balancing classes with a work-study job that pays minimum wage, and whether you eat or not depends entirely on the credit still left on your weekly meal plan. Money's tight and you're caught in between independence and still having to rely on your parents' generosity.

Financially speaking, college students are in a unique position . . . and it's not an attractive one to banks. A basic checking account is essential for everyday purchases, but banks stand to make little if any profit off a typical student's minor transactions. Additionally, the Credit CARD Act of 2009 makes it illegal for creditors to issue credit to anyone under 21, a previously lucrative practice that targeted inexperienced, underage consumers, setting them up for a potentially lifelong burden of debt. With such a low net worth, students' banking needs are often overlooked.

Waspit, an interactive social banking platform designed specifically with college students in mind, says it's found a unique niche by catering to the market. Bypassing brick-and-mortar branches, the company offers online and mobile banking services that are linked to pre-paid debit accounts. The charge: $2 per month. Users are issued a Waspit debit card (MasterCard-branded) or a tag for their cellphone that allows them to tap and pay at MasterCard PayPass terminals. The debit account can be linked to a traditional bank account or set up to receive direct deposits from a student employer.

The twist is social media integration, which lets students do things like automatically check in on Foursquare when they pay a merchant, post comments directly to Facebook, or rate a restaurant via their linked Yelp accounts. Students earn "buzz" points each time they interact with the banking platform, whether it's making a purchase or rating a merchant experience, and the points are redeemable for Amazon gift cards and other rewards. Other unique features include the ability to highlight transactions within Waspit bank statements to bring up information on merchants such as their web address, user reviews and street view images.

In addition to the connected social networks, Waspit's algorithms analyze users' spending habits and offer up relevant deals from companies like Groupon and LivingSocial. It will know for instance, if a student usually gets lunch between 12 and 2 p.m. on a weekday in New York City's West Village neighborhood, to send them a coupon at 11 a.m. on any given day, relative to their location and spending preferences. "We've tied all of these social elements and all of these behavioral elements . . . and brought it into one platform," said Richard Steggall, Waspit's CEO.

Waspit charges third-party merchants for the right to offer deals to the company's user base and receives a percentage of the fees. And it's easy to see why advertisers would be attracted to the readily available, detailed information on users' spending habits and tastes. Steggall insists though, that it's not a free-for-all when it comes to access. "We don't bring third-party advertisers in and say, 'Here, you can sell to our base.' We simply aggregate these things into our own deal stream . . . and provide them as we think the user wants to receive them."

For cash-strapped students who aren't shy about broadcasting their shopping experiences, the ability to earn rewards via the interactive social banking platform would seem appealing, despite the targeted advertising efforts they may be unknowingly supporting. Waspit currently has around 5,500 registered users and employs student ambassadors on various college campuses to drum up publicity. "It's giving students an opportunity to break away from using their parent's accounts, it's giving them an ability to pay for things without having to use cash all the time," said Steggall. He adds that Waspit's pre-paid debit accounts indirectly enable fiscal responsibility in students. "We do not let any student go into an overdraft scenario, they can only spend what they've got. There's no form of credit."

Waspit is in its final beta stage at the moment, and recently signed on The Bancorp as issuer of its products. In addition to the $2 monthly fee, students should consider the charges they'll incur for ATM withdrawals and whether they can forgo the convenience of having a bricks-and-mortar local branch.