The Commonwealth Bank’s Dollarmites school program targeted ‘vulnerable’ children as customers without actually educating them, an ASIC investigation finds

(Commonwealth Bank)
  • Financial regulator ASIC has released its final review of bank-run school programs, finding they were largely “customer acquisition” channels and provided little actual value to school kids.
  • While the report covers 10 different school programs the Commonwealth Bank’s Dollarmites program, representing upwards of 97% of all school programs and valued at $10 billion, is the most well-known covered in the report.
  • CBA will modify its program in light of the review, while other banks are cancelling theirs and the Victorian state government bans them outright.
  • Visit Business Insider Australia’s homepage for more stories.

The Australian financial watchdog has slammed school financial literacy programs for becoming “customer acquisition” channels instead of actually teaching kids about money.

On Tuesday, ASIC released its final multiyear report into school banking programs, of which the largest and most notable by far is the Commonwealth Bank’s (CBA) ‘Dollarmites Club’, finding they ultimately were not fit for purpose.

“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,” the regulator wrote.

However, while the regulator took a look at 10 different programs, it is ‘Dollarmites’ that has dominated the school program landscape. With more than 3,600 schools currently involved, the Dollarmites holds a 92% market share of all school programs examined by ASIC, and one of just two programs operating nationally.

It’s just one indication of the enormous success Australia’s largest bank has enjoyed as a result of the program, which reaches more than half a million school kids a year — a stat that ASIC doesn’t think is worth celebrating.

“Young children are vulnerable consumers and are exposed to sophisticated advertising and marketing tactics by school banking program providers,” it wrote. “School banking program providers fail to effectively disclose that a strategic objective of these programs is customer acquisition.”

It’s a goal that CBA has undoubtedly satisfied, with more than 175,000 students signed up as of June 30 this year. Less impressively, it has also received Choice’s ‘shonky’ award for relentless marketing to children.

The Dollarmites Club is entwined in the Australian school system

The conclusion of the report would shock few familiar with the Dollarmites program, which due to its size and reach is a very large proportion of Australians.

Started initially in 1931, when the bank was still owned by the Commonwealth government, the country’s largest, longest-running and most prolific program has come to be valued at $10 billon by former equities analyst Reji Eapen. The figure might seem astronomic but consider the customer acquisition channel has managed to sign up hundreds of thousands, if not millions, of Australians to a single bank.

In a country known for its big four bank, none of the other three – Westpac, NAB, and ANZ – even run school programs. As ASIC notes, “it is uncommon for schools to offer more than one school banking program” meaning most school kids are only being exposed to CBA.

This effective monopoly has helped CBA acquire an entire generation of savers, borrowers and spenders. For the pleasure, it pays around $2.3 million in commissions to the schools that permit it to operate.

With all that money flying about, it has been no stranger to controversy. An investigation by the Sydney Morning Herald’s Adele Ferguson in 2018, revealed thousands of Dollarmite accounts were manipulated by bank staff eager to claim some of the financial incentives on offer, by depositing money into them and keeping them activated.

Parents’ opinion divided

On the back of the review, the Victorian state government has moved to ban school programs altogether, while Bendigo Bank, IMB, and South West Credit have all decided to voluntarily end theirs.

CBA meanwhile, with more at stake, has decided to amend its program instead.

“On 4 December 2020, CBA wrote to ASIC advising it is modifying its program to: enhance the financial education, measurement and evaluation of its program; remove statements from digital and printed program materials about program objectives that cannot be substantiated; not distribute program materials to students; and ensure greater visibility of program payments,” ASIC said.

But for all the controversy, and for ASIC’s findings, public opinion at least amongst parents appears to be split.

ASIC’s report quotes one from regional New South Wales who says they “love the school banking program”.

“It teaches children the value of money and how to save. It shows that there are rewards to saving your money, even if at the moment it is only something trivial.”

Another suggests it would be better targeted to high school kids, while another laments the fact they can’t afford to participate as a single-income family.

But there is obvious criticism as well. One appears to sum up ASIC’s concerns, saying, “I feel like it is just a way for the banks to get my child’s information and as soon as they turn 18 send them a credit card offer.”

The Commonwealth Bank has been contacted for comment.