ASIC releases "damning" report on the big four

ASIC yesterday released a ”damning school banking report” following its exploration of the benefits and risks of school banking programs, concluding that the purported advantages for subjecting students to the concentrated marketing-laced education are not clearly substantiable.

The regulator’s key findings include:

1. While school banking programs claim to help children develop long-term savings habits, providers were unable to demonstrate they do
2. Payments to schools for implementing school banking programs incentivise schools to encourage greater participation in the programs
3. Young children are vulnerable consumers and are exposed to sophisticated advertising and marketing tactics by school banking program providers
4. School banking program providers fail to effectively disclose that a strategic objective of these programs is customer acquisition

As such, consumer advocate group RateCity.com.au has called state and territory governments to “kick banks out” of primary schools.

The group recently conducted a survey of 1,000 respondents and found that over half of Australians used a school banking program as a child, and that 34% of that group still bank with the same institution as adults – some even into their late 60s. 

They argue this proves the early exposure to banking did not improve these people’s financial confidence later in life, but instead fostered complacency at worst; at best, it seems using school banking as a child made little difference to how confident people felt about managing their finances later in life.

Sally Tindall, research director at RateCity.com.au, said the “damning report” has made clear the weaknesses of letting banks into Australian schools to teach kids about money. 

“If McDonald’s came into schools to teach kids about healthy eating there would be an outcry. When it comes to teaching kids about money, parents and teachers should be taking the reins,” she noted.

“There are cash incentives for schools that sign students up, and it’s effective marketing for CBA which get customers, sometimes for life. There must be a better way to teach our kids about money that doesn’t involve kickbacks.

“School should be a safe environment where kids aren’t exposed to financial marketing and advertising.”

Last month, the Victorian government replaced the Dollarmites scheme with curriculum-linked financial lessons. Following this review, Bendigo Bank, IMB, Northern Inland and Southwest Credit have or are in the process of terminating their banking programs.

“Australia’s other state and territory governments should follow Victoria’s lead and replace school banking with financial literacy lessons,” Tindall said.

“Learning about money is a life skill but right now it’s buried in the curriculum. It should be a stand-alone subject.”