Westpac unveils 'basic' bank pilot for people excluded from system

Monday, 14 April 2025

Westpac is operating a pilot project in hopes of ensuring everyone has access to at least a ‘basic’ bank account.

One of the first recipients of a Westpac “basic” bank account for people unable to meet other banks’ on-boarding criteria was a young mother caught engaging in money mule account fraud.

Westpac has started a pilot project to open basic bank accounts for people who find themselves excluded from the banking system.

Research, including some paid for by Westpac, has shown that an uncounted number of less-privileged young people, people who have committed crimes, people with no fixed address, or who lack identity documents, can find themselves being turned away by bank after bank.

But regardless of the reasons for their difficulties, there’s a growing recognition that having a bank account ‒ even a basic one with limited transactional capability and no access to an overdraft ‒ is essential to people living decently, and doing things like renting a place to live and receiving wages or benefits, and should be tantamount to being a basic human right.

Banks have been wrestling with the problem of account holders being recruited by criminals to run mule accounts to launder the proceeds of crime, or transfer money stolen in scams to criminals overseas.

And in some cases, like the young mother who had been caught engaging in money muling, there turns out to be a story behind the story.

The Reserve Bank has lowered the OCR to 3.5%, its fifth cut in a row. Banks have followed suit with reduced mortgage rates, offering some relief to homeowners as more cuts are expected.

“She was a victim of domestic violence and was coerced into doing that,” said Louisa Brock, Westpac’s manager for financial inclusion and vulnerability.

Westpac has gone public with details of its pilot project ahead of the expected release next week of an issues paper from the Council of Financial Regulators Kaunihera Kaiwhakarite Ahumoni on basic bank accounts.

The council’s interest grew out of the Commerce Commission’s market study into retail banking during which it was identified that there was a possible market failure in banking.

It recommend banks work to ensure widespread availability and awareness of basic bank accounts, including setting minimum standards for accounts.

Louisa Brock, manager for financial inclusion and vulnerability at Westpac, said the pilot had included finding ways to work within anti-money laundering laws to identify people who lacked the identity documents that banks rely on.

The best estimate is around 50,000 in 2023 did not have accounts, but that was a World Bank estimate, and it only included people aged 15 and over.

Banks have no legal duty to provide a bank account to anyone who asks for one, and they also claim anti-money laundering rules mean they have to turn away some people, including those who lack identity documents.

But Westpac’s pilot is about trying to navigate those issues, and reducing the “risk” banks see in taking on, or not debanking, people convicted of crimes, or who go bankrupt.

Brock said that had included finding ways to work within anti-money laundering laws to identify people who lacked the identity documents that banks rely on.

Two of those who have got accounts through the pilot were a 15-year-old and a 17-year-old who had left an abusive living arrangement, but had no identity documents, and no money to get them.

But they had been identified by a government agency which was providing services to them, and had trusted people who could vouch for the young people’s identities.

“We worked with their teacher to on-board them with basic bank accounts,” Brock said.

Government agencies have verified people’s identities, and can help them get bank accounts.

Westpac saw this model as something that could be expanded, and was inviting community groups to refer people to the pilot.

Westpac has also been working with the Department of Corrections and the Ministry of Social Development’s Youth Service to get accounts for people they have responsibilities for.

In some cases, a lighter touch at the on-boarding stage meant Westpac had to more closely monitor the use of accounts for a period of time.

Westpac chief executive Catherine McGrath says basic bank accounts may serve as a pathway, with some people ultimately able to transition to a regular bank account.

But Brock said for many people a basic bank account would just be something they had for a short period of time until they were transitioned a fully functioning transaction account.

Westpac chief executive Catherine McGrath is championing the push to reduce the ranks of the unbanked.

“Research we have commissioned over the past few years, including the Westpac NZ Access to Banking in Aotearoa report and the Westpac NZ Disability and Inclusion in Banking report, has really brought home the need to reduce the barriers to opening a bank account,” she said.

“A bank account is like a passport to the economy. Without one, you struggle to receive work or benefit payments, pay bills or do many of the other day-to-day tasks that allow you to participate in society,” she said.

However, she has warned several times that all banks must commit to taking their fair share of the unbanked.