Bendigo Bank, IMB, South West Credit Union and Northern Inland Credit Union have advised ASIC that they are terminating their school banking programs.
According to ASIC, their decisions were prompted by changes to the school environment as a result of the pandemic and also by the critical findings in the regulator’s review of the sector, which was released yesterday.
Commonwealth Bank, Heritage Bank, Hume Bank and LLL Bank all advised ASIC they would review and modify their programs.
ASIC’s key finding was that providers of school banking services are unable to demonstrate that their programs improve savings behaviour, despite their claims that the programs help 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 appear to be the main reason schools encourage 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.
The release of ASIC’s review comes only a few weeks after the Victorian government announced that it would stop financial institutions running banking programs in its schools.
ASIC’s review set out to assess the benefits and risks of school banking programs, as well as develop a set of questions to assist schools in identifying appropriate conduct and good practice in the implementation of programs.
About 63 per cent of Australian primary schools participate in banking programs and there are about 180,000 student accounts.
ASIC found that schools did not need school banking programs to promote financial literacy, as they already have programs in the Australian Curriculum, as well as a range of resources provided by the Australian Curriculum, Assessment and Reporting Authority.
However, its survey of schools and parents found that school banking programs are supported by schools and a majority of parents said they would like the programs to continue.
In light of this, ASIC has come up with some questions for consideration by schools and parent bodies, to satisfy themselves that the program they are using follows best practice.
The questions include:• Does the program have a clear educative purpose?• Does the implementation of the program engage students?• Are learning opportunities related to the program reinforced in the classroom?• Has the school considered potential harms and benefits to students?
Commonwealth Bank, which is the dominant school banking provider, issued a statement saying it has developed a detailed action plan to improve its program and address the issues in the ASIC report. It said it has already made a number of changes.
CBA defended the program. Mark Jones, executive general manager customer service network, said in a statement: “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.”