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Cheque, Mate: Visa Cards for Kids or Financial Education?
Securities regulator ASIC told the Commonwealth Bank to leave our kids alone. Will CBA listen, now the waves from the banking royal commission have settled down?
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In 2019, CBA was forced to shut down their Dollarmites school banking program. For decades, Aussie schoolkids had been encouraged to open accounts and make savings deposits from class, ostensibly to help them establish good savings habits.
Dollarmites was canned when ASIC pronounced school banking to be unethical marketing. ASIC said there was no evidence Dollarmites helped kids build savings habits. However, they found oodles of evidence it helped CBA boost its market share by signing up kids early.
Fast forward to today. You're in charge of the CBA. You think to yourself, there’s a bit of clear water under the bridge after that pesky royal commission. So you think to yourself, maybe it’s time to go after the kids again.
What do you do? Should you give Visa cards to kids? Or bring back Dollarmites as education?
Can you guess what CBA did?
The Strategy Standoff
Strategy A: Dollarmites Financial Education
CBA could relaunch Dollarmites purely as a financial education app - with no accounts or spending attached.
This would see CBA regain its financial literacy credentials. The app would focus purely on money education for kids. They could use lessons, quizzes and other tools to teach kids about responsible saving and spending.
This would help maintain goodwill with ASIC, but might risk losing those valuable new account openings.
Strategy B: Visa Cards for Kids
CBA could launch a Visa card and app for kids.
This would modernise the bank's approach to kids' banking, teach the youth how to tap-to-pay and get CBA back into those lucrative early client relationships.
However, if ASIC hasn't forgotten about the earlier predatory marketing findings, CBA could find itself back in hot water again.
So, Which Did They Choose?
Cast your vote to find out!
Better luck next time, Strategy B was chosen!
Good Job, Strategy B was chosen!
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But what did this mean for CBA...
Outcome: Facilitator Commentary
Matt Braithwaite-Young
Managing Partner
t +61 2 9002 3100
CBA picked Strategy B. They found a way to obey ASIC on the surface and test them on the spirit.
Yep, they went back to the kids with a new product called Kit, a digital Visa card and savings app for kids.
Kit is a spending card and top-up app, cunningly disguised as a savings app to help kids learn financial lessons.
The Kit brand is owned by CBA New Digital Businesses Pty Ltd, and trading as HEY KIT, "a wholly owned but non-guaranteed subsidiary of the Commonwealth Bank of Australia."
Sound familiar?
Here are the 2019 findings of the ASIC review of school banking:
Young children are vulnerable consumers and are exposed to sophisticated advertising and marketing tactics by providers of school banking programs
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
A Visa card with a savings app for parents
Paying with Visa lets kids learn to spend without the friction and hassle of cash.
The Kit partner app allows parents to load up the Visa debit card, set and track chores and monitor savings.
Kids get the benefit of a convenient card to help them spend their pocket money in what is, to be fair, an increasingly cash-free world.
Where's the evidence?
There is little evidence these kinds of apps do much for kids financial literacy.
Consumer organisations are critical of Kit because the basic card and app set-up pays no interest, which, they argue, is the main thing young people ought to learn about saving money.
At the moment we only have a small CBA internal review to go by. They had EY evaluate the impact of Kit on kids' behaviours. Unsurprisingly, they used a parent self-reporting model to find Kit is “contributing positively” (with an 8% lift in share of parents reporting their child saves their own money).
The kids themselves might save more if they used a piggy bank. After all, it will be hard for the kids to find shops accepting cash which would be even better for saving than introducing them early to the slippery slope of contactless payments.
The Kit Visa will give CBA a wealth of personal data about future borrowers
Kit gives kids (parents) the option of linking the app to a CommBank YouthSaver savings account. So when these lucky kids want a mortgage, CBA already will presumably have all sorts of valuable information about their earliest financial habits - perfect to help with credit assessments.
It will be interesting to know over time if any independent, long-term evidence emerges to support the claims Kit is any better than the Dollarmites school programs it follows.
It's clever, though. Interestingly, CBA was sheepish about associating with this app, making the point that it was built through its venture arm. But they broke cover recently and are now advertising it as a CBA sub-brand (see the photo above).
This is a classic social licence problem. With the 3-legged stool of ethics, economics, and optics, you might be able to pick any two, but you’ll still need to work out trade-offs with the third.
Got this far? Good on you!
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