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School banking programs are not helping children with long-term finances and are taking advantage of vulnerable consumers, according to a report.

The Australian Securities and Investments Commission (ASIC) reviewed 10 programs to determine if they are beneficial in the long term.

The key findings said that providers “failed to demonstrate” claims that the schemes improve savings habits and did not reveal that they are essentially used to acquire customers.

The Commonwealth Bank administers the most widely used school banking programs.
The Commonwealth Bank administers the most widely used school banking programs. (Dion Georgopoulos)

“Young children are vulnerable consumers and are exposed to sophisticated advertising and marketing tactics by providers of school banking programs,” ASIC said in the report.

“Providers of school banking programs do not effectively disclose that a strategic objective of these programs is customer acquisition.”

More than 60 percent of schools across the country participate in programs, and the vast majority of children have accounts with the Commonwealth Bank (CBA).

There are 175,138 school-age children with CBA accounts through its Dollarmites program, with more than 92 percent market share.

The chief executive of consumer group CHOICE said the programs “are nothing more than marketing schemes.”

“This is the first time in more than a century that these school-based marketing schemes have been reviewed,” said Alan Kirkland, CEO of CHOICE.

“ASIC has painted a damning picture of school banking programs, making it clear that a key goal of the programs is to recruit clients at a young age.

“ASIC found that banks like the CBA are not transparent about their business objectives and haven’t even bothered to evaluate the effectiveness of their programs.”

The review looked at 10 banking programs offered in schools across the country. These are:

  • Commonwealth Bank of Australia (CBA)
  • Bendigo and Adelaide Bank Limited (Bendigo)
  • Heritage Bank Limited (Heritage)
  • Hume Bank Limited (Hume)
  • IMB Bank Ltd (IMB)
  • Maitland Mutual Limited (La Mutual)
  • Northern Inland Credit Union Limited (Northern Inland)
  • South West Slopes Credit Union Ltd (South West Slopes)
  • South West Credit Union Co-operative Limited (South West Credit)
  • Lutheran Lay League of Australia Limited (LLL Australia).

In July, Bendigo, IMB and South West Credit informed ASIC that they would terminate their school banking programs in light of the key findings of the review and the change in the school environment as a result of the COVID-19 pandemic.

IMB’s show ended on August 31, while Bendigo confirmed on September 30 that their show had ended.

On December 2, Northern Inland also informed ASIC that it would be closing its show.

“We welcome other vendors like Bendigo and Adelaide Bank who are ending their school marketing programs in light of this ASIC review. That’s the ethical thing to do,” Kirkland said.

“The CBA should follow suit and stop paying money to schools to enroll primary school children as clients.”

CBA said it worked with ASIC throughout the report.

“While we acknowledge some of the findings, we do not believe they are completely consistent with international research or our own, and we do not agree with the overall assessment of school banking programs,” a statement on its website reads.

Customer Service Network Executive General Manager Mark Jones said the program “reinforces the importance of regular savings, equips students with the knowledge of how to access and use a bank account, and provides a structure for parents help their children save regularly. “

He said the CBA’s own research showed greater satisfaction with the program and has made significant changes to the scheme in recent years.

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