Photo: 123RF
Bank rules designed to stop money laundering, and the withdrawal of physical branches, may be making it harder for people to open bank accounts, Reserve Bank research has shown.
It has found a third of frontline staff said they were unable to open a bank account for a customer either on a monthly or weekly basis.
The main barriers were customer due diligence requirements, which are used to meet anti-money laundering laws, and the way those laws are implemented.
Problems included people who did not have proof of address or photo identification, language barriers or lack of access to a bank branch.
The Reserve Bank noted the number of bank branches dropped from 1130 in 2011 to 577 in 2022 across the four main banks.
Opening hours were dropping, too. Almost two-thirds of rural branches were open fewer than 35 hours a week, and 38 percent of urban branches.
People who were having the most problems opening a bank account included recent migrants, people who did not speak English, rural communities, trusts, young people and Māori trusts.
The Reserve Bank said while banks having a good understanding of their customers was important under the anti-money laundering regime, proving an identity could be an issue for some people or groups.
The government announced a reform work programme in October that would focus on improving problem areas but the Reserve Bank said identity verification was likely to remain an important pillar.
Respondents to the research said it was an issue for many young people, particularly those who had come out of Oranga Tamariki care. Those who were not able to open a bank account at a young age could have a financial literacy disadvantage over their lifetimes, one said.
Tom Bayliss, principal adviser of financial inclusion at the Reserve Bank, said the way banks were applying the rules around identification could vary.
"The specific requirements some staff would follow were quite prescriptive, they might need proof of address signed in the last 12 months. Other staff were able to apply a bit more flexibility and use a wide range of documents to open a bank account. It really depends on who customers saw on the day the outcome they were going to get."
He said part of the solution would be for banks to be able to offer simple bank accounts that were easier to open but had fewer functions. "It allows them to make basic payments, everyday transactions, things they need to live. People who might be receiving a benefit or young people looking to open an account for the first time and may not have identification or address verification, they may not have a driver's licence or passport."
He said it was an issue globally that changes to banking infrastructure and requirements were having unintended consequences on access to bank accounts.
There were a number of key action areas, he said, including banks keeping better records of the customers they weren't able to help. "What looking to do is create indicators that track access to bank accounts over time."
There would also be guidance on how "grey areas" could be handled and how flexibility could be used, as well as best practice for inclusive onboarding.
"Financial inclusion empowers people to manage money, build confidence, and engage in the economy. Addressing barriers to financial participation is a strategic priority aligned with our modernised legislation," said assistant governor Simone Robbers.
More than three-quarters of participating staff noted being encouraged to take a cautious or very cautious approach to onboarding. Just under half of staff said they were trained how to apply flexibility.
"This research provides a snapshot of the onboarding experience in Aotearoa New Zealand and outlines the shifts needed to promote efficient and inclusive access to bank accounts," Robbers said.
