Banks told to make it easier for teens to get bank accounts

Monday, 17 April 2023

Banks used to have school banking programmes, signing up children from an early age, but most no longer do.

A survey by a school software provider indicates a high proportion of teens do not have their own bank accounts because banks’ sign-up processes are too onerous.

Banks used to go to schools to open accounts for children, but now some schools are taking pupils to bank branches to open accounts, so they don’t end up leaving school without having one, says Jeff King, founder of the MyMahi school software company.

He surveyed about 47,000 teen school children who used the platform, asking whether they had bank accounts. Just over 1000 responded within 24 hours, and King found a third said they did not.

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Those affected are asking the industry to make banking more accessible.

“It’s the banking sector’s on-boarding processes,” he said.

Most discussion until now about “unbanked' people struggling to get bank accounts has been in relation to homeless people, former prisoners, and bankrupts.

But King said banks usually required a passport or birth certificate to open a bank account, and young people also needed to make an appointment with their parents in person at the bank.

Some families could not manage this, sometimes because they could not afford the identity documents banks demanded.

It had also become harder for families as banks had shut many of their branches, especially in rural areas, King said.

He believed banks could be making it much easier for teenagers to get accounts.

Teens in schools were already identified by schools, he said, and MyMahi had developed a tamper-proof, secure digital student ID that could help every secondary school student open a bank account, if banks would accept it.

“It meets AML requirements for identity verification, despite it not being a ‘traditional’ form of ID,” he said.

Dan Russell had just joined MyMahi from having worked as a career adviser at Te Aratai College in Linwoood, Christchurch.

While there he had taken a lead role in organising account applications, even driving students and their guardians to banks to open accounts.

Jeff King, founder of MyMahi, says banks must lower the barriers that are preventing many teens from getting bank accounts of their own.

The cost of getting identity documents could be a real pain point for some families, he said.

On occasion, the school even paid for students to get birth certificates issued.

“It’s not just the physical stuff. People don’t like banks, and need a person to help them navigate the massive cultural difference they feel between them and the person in the suit in bank,” he said.

Access to bank accounts for teens was worst for teens from less well-off sections of society, Russell said.

Pushpa Wood from Massey University's Financial Education and Research Centre said the responsibility for ensuring financial inclusion lay in the hands of decision-makers at the banks.

“It’s the responsibility of those who have the power to decide whether, or not, people can open an account to design their processes, so they are not excluding anyone,” she said.

Sam Stubbs, chief executive of the not-for-profit Simplicity KiwiSaver scheme, said it should be part of banks’ social licence for them to ensure teens were not being unfairly excluded from getting bank accounts.

“None of this surprises me,” he said.

Several years ago, Stubbs attempted to get law changes so KiwiSaver accounts could be opened for young people in state care, but faced a lack of interest from lawmakers.

Many years ago banks ran programmes in schools, which included opening accounts for children. The most famous of the programmes was run by ASB, which still exists, but is no longer accepting new schools.

But banks no longer did banking in schools, though they were involved in financial literacy programmes like Kiwibank’s link-up with Banqer.

King said: “Everyone focuses on financial capability education, but it's an abstract concept if students don’t have an account.”

Financial inclusion has become a growing buzzword in government, but the Reserve Bank Te Pūtea Matua’s financial policy remit drafted in 2022 does not explicitly include young people amongst those at risk of financial exclusion.

“The Government has a priority of improving financial inclusion and maintaining financial sector diversity, including supporting access to finance and financial services for those who are less well-served by traditional institutions, including rural communities, disabled persons, low-income individuals, and small businesses,” it said.

Russell said teens lacking driver’s licences and bank accounts were most at risk of ending up classified as NEET, not in employment, education or training.

Banks appear not to have done any specific research on the issue identified by MyMahi.

But Mike Norfolk, Westpac consumer banking and wealth general manager, said the bank’s Access to Banking in Aotearoa Report found the cost of obtaining ID was a barrier for some people who wanted to get an account.

The report concluded there was scope to build more flexibility into anti-money laundering rules, as well as how banks applied them, to make it easier for people to sign up for accounts.

“Westpac NZ is currently exploring possible solutions for young people in care through a pilot with Oranga Tamariki and Voyce – Whakarongo Mai that streamlines ID requirements,” he said.

“We have discussed access to bank accounts for teenagers with MyMahi previously and remain in contact. The idea of a digital ID holds promise, provided any AML issues are mitigated.”

Bank of New Zealand has about 44,000 under-16s with bank accounts, and Frances Ronowicz, the bank’s head of social impact, said BNZ was open to discussing its findings.

“We recognise that some people in the community face barriers, for example when attempting to open bank accounts due to a lack of ID or address verification,” she said.

These barriers disproportionately affected specific groups, including teens and young people with experience in state care, she said.

In some cases support staff could help a young person who did not have a parent or guardian, or could not access things like official identification or proof of address documents, she said.

ANZ said it could also work around its usual requirement for teens who lacked ID documents.

“For vulnerable customers who cannot provide certain documents, we do have an exemption process in place to help them,” a spokesperson said.

New Zealand Banking Association Te Rangapū Pēke chief executive Roger Beaumont said banks were working to address financial inclusion issues, “which often needs to be balanced with the need to comply with legal and regulatory obligations, including things like anti-money laundering law”.