Report 676, released today, sets out the key findings of a review of school banking programs.
The review was undertaken to determine the benefits and risks of school banking programs. ASIC sought to identify why banks, schools and students engage with these programs, understand whether banks assess the impact of their programs on students’ savings habits, and analyse the long-term impact on children of marketing through these programs.
As part of the review, ASIC conducted qualitative and quantitative consumer research, carried out public consultation and engaged with financial institutions that offer school banking programs (school banking program providers), as well as accountable state and territory education authorities. A literature review on the impact of marketing to young people was also commissioned.
- School banking programs claim to help children develop long term savings habits; however, providers were unable to demonstrate that these programs in and of themselves improve savings behaviour.
- Payments to schools for implementing school banking programs incentivise schools to encourage greater participation in the programs.
- Young children are vulnerable consumers and are exposed to sophisticated advertising and marketing tactics by school banking program providers.
- School banking program providers fail to effectively disclose that a strategic objective of these programs is customer acquisition.
Based on findings from the review, ASIC has developed a set of questions which school communities could consider to assist them in assessing and implementing school banking programs.
School banking programs facilitate the establishment of bank accounts for students. These programs support arrangements for students to make ongoing deposits into those accounts at school.
ASIC is aware that a number of banks and other financial institutions also offer financial literacy education programs to schools, which are designed to build understanding of key financial concepts. As these programs are not promoting a financial product, they have not been captured in this review.
To conduct the review, ASIC:
- engaged with school banking program providers to understand how their programs operate and analysed documents obtained from providers to understand how school banking programs are measured and evaluated
- engaged a consumer researcher to undertake qualitative and quantitative consumer research with school authorities, parents, and current and former students, to understand their experiences and expectations of school banking programs
- procured academic research, to better understand the impact on children that marketing through these programs has
- undertook a public consultation process seeking responses to questions on school banking programs. We received over 1,200 responses and submissions from individuals and organisations
- consulted state and territory education authorities to understand existing school banking programs policies and practices.
ASIC regulates the deposit accounts which must be opened in order for a student to participate in these programs. The ADIs that issue these deposit accounts must comply with their Australian financial services (AFS) licence obligations under s912A of the Corporations Act 2001, including the requirement to provide financial services efficiently, honestly and fairly.
One of ASIC’s core statutory functions is to promote confident and informed participation of consumers in the financial system.