Commonwealth Bank will close its school banking program, following a critical ASIC review of school banking arrangements and moves by state government to discontinue them.
But the bank, which is the biggest provider of school banking services in the country, said it would develop “alternative solutions for youth banking and financial education”.
The latest blow to school banking is the New South Wales Government’s announcement that the state’s public schools will “no longer be able to offer the program from an ADI from day one, term one 2022”.
In December last year, ASIC released a report on school banking services, with the key finding that providers of the service were unable to demonstrate that their programs improved savings behaviour, despite their claims that the programs helped children develop long-term savings habits.
It also criticised the way the programs exposed young children to sophisticated marketing and advertising, and found that payments made to schools appeared to be the main reasons schools encouraged participation.
And it said banks did a poor job of disclosing their commercial interests.
“School banking programs are a marketing exercise for the financial institutions that offer them,” the report said.
At the time of the report’s release, Bendigo Bank, IMB, South West Credit Union and Northern Inland Credit Union advised ASIC that they would terminate their school banking programs.
ASIC said a number of other ADIs, including CBA, had their programs under review.
The release of ASIC’s review came a few weeks after the Victorian government announced that it would stop financial institutions running banking programs in its schools. The Queensland and ACT government have taken similar steps.
According to ASIC’s figures, about 63 per cent of Australian primary schools were participating in banking programs and there were about 180,000 student accounts.
CBA responded at the time, saying it had developed a detailed action plan to improve its program and address the issues in the ASIC report. It said it has already made a several changes.
It defended the program, saying: “Our school banking program reinforces the importance of regular savings, equips students with the knowledge of how to access and use a bank account and provides structure for parents to support their children to save regularly. We are proud of the program and the positive impact it delivers.”
In a statement issued yesterday the bank said it would move its program from an in-school service to an online delivery of “education resources, and further development of alternative solutions for youth banking and financial education”.
CBA group executive retail banking services, Angus Sullivan, said: “Support from schools, parents and teachers for our school banking program is strong, with over 1450 schools around the country that choose to run the program. We are disappointed with the position taken by ASIC and subsequent decisions by some state and territory governments to take that choice away from individual schools and parents.”
CBA has a very high market share among young adults, which flows from the school banking program. The bank will be keen to try and find a way to keep that going.