Young people without accounts: A very different bank probe is launched

Saturday, 24 June 2023

MPs are to inquire into concerns disadvantaged young people face a prohibitively hard time getting bank accounts.

The probe has been prompted by education software entrepreneur Jeff King, who revealed in April the extent of problems some young people have in getting accounts.

He surveyed about 47,000 teen school children who used the MyMahi education platform, asking whether they had bank accounts, and within 24 hours just over 1000 had responded, with a third saying they did not.

On Thursday, King delivered a petition to Parliament asking MPs to take action, so every young person had the chance to open a bank account before they left school.

The petition was accepted on the steps of Parliament by National MP Andrew Bayly, formally beginning a process that looks set see MPs on the Finance and Select Committee consider his call for action, take evidence from the public, and report on their recommendations.

It came two days after the Government ordered the Commerce Commission to conduct a market study on the state of competition in the banking market.

King said it was too hard for young people to open an account, and time politicians stepped in to fix the problem.

'We believe young people have better financial wellbeing when they can access banking services,” King said.

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.

“We believe requirements for physical IDs and in-person appointments are costly and outdated barriers. Young people, educators, and parents tell MyMahi that many rangatahi struggle to open accounts,” King says.

But he said there was no reason why banks should not be able to accept school-verified digital IDs in place of formal ID documents like birth certificates and drivers’ licences.

Young people in school had already been identified by school authorities, and every one should be offered the opportunity to open an account, King said.

New Zealand might look to the example of the European Union, King said, where it was a basic right to have a basic bank account.

“Allowing young people access to banking services is an essential component to enabling rangatahi to enter the workforce,” Bayly said.

“It is an important step in building financial literacy, which is so desperately needed in New Zealand,” Bayly said.

The country used to be good at making sure young people got bank accounts, King said.

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 hoped banks would be called to give evidence in Parliament. He also hoped the Reserve Bank Te Pūtea Matua would give evidence.

In April, deputy Reserve Bank governor Christian Hawkesby said: “A review of 2600 banks in 86 countries found a higher level of inclusion contributes to greater bank stability, particularly in countries with strong institutions and sound regulatory settings.”

King said he had met with the Reserve Bank, the Department of Internal Affairs, and several banks to discuss the issue.

Banks blame rigid anti-money laundering laws that require them to identify customers for some of the hurdles young people face.

In April, 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.

It wasn’t only young people from less affluent households who faced exclusion from banking. Homeless people, prisoners, former prisoners, and people who were bankrupted also faced high hurdles to getting, and keeping, bank accounts.