Page 126 - Pay Magazine s2014

vertical opportunities
snapshot: Government-administered prepaid Cards
a bevy of benefits
Payments via prepaid cards offer advantages for governments, recipients and payment companies.
In 2014, issuers reported collecting $310 million in interchange fees
and $158 million in cardholder fees from government-administered prepaid programs.
Cost saving
•A paper check costs a government agency up to $1.05 to print, issue and mail, compared to just 9 cents to make an electronic payment to a card, according to the Treasury Department’s Financial Management Service (FMS). Direct deposit to a bank account is always the first choice, but one in 12 Americans is unbanked.
•By 2020, Treasury expects to save a total of $1 billion by continuing to move more Social Security, Supplemental Security Income and other benefit payments to prepaid cards.
•Saving at the state level also is significant. California’s Economic Development Department reports annual saving of $4 million
in postage costs since the agency began offering a prepaid card option.
•Un/underbanked benefit recipients typically can access funds on a prepaid card at a lower cost than a paper check, which often requires the recipient to pay check cashing fees to get his money. Most government agencies stipulate a certain number of free ATM or OTC cash withdrawals for their cardholders.
•U.S. unemployment compensation benefit recipients saved up to $389 million in 2011 by using prepaid cards instead of paper checks, according to a report by Visa and AGA.
One of the highest profile government-administered prepaid programs is the U.S. Treasury’s Direct Express program, which launched
in 2008. Federal programs that make payments through Direct Express cards include Social Security, SSI, Veterans Affairs, Railroad Retirement Board, Office of Personnel Management benefits and other non-tax payments.
Today there are more than
5 million citizens enrolled in Direct Express, which has saved the government an estimated $100 million since 2008, according to the Treasury Dept. The program has been a hit with customers too, earning a 95 percent satisfaction rate among card- holders in a 2014 Treasury- commissioned survey.
FinanCial inClusion
•With Visa or MasterCard branding, prepaid cards can be used wherever those payment networks are accepted, in store or online.
•Many programs offer financial literacy support to help cardholders learn how to better manage their finances.
sPeed and seCurity
•Holders of government-administered prepaid cards can access their funds immediately upon loading.
•Widespread acceptance means cardholders don’t need to carry lots of cash, which could make them a crime target.
•Cardholders are protected in the event of a lost or stolen card, and funds are FDIC-insured. Most programs give cardholders consumer protections set by Regulation E.
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