In traditional government disbursements and emergency payments, prepaid cards played a significant role in accelerating federal economic impact payments (EIP). This was particularly seen during the COVID-19 relief aid.
Prepaid cards are faster, more secure, and more cost-effective than paper checks. And they offer benefits to the recipient as well as the agency. They’re also especially useful for the unbanked and underbanked, which represent roughly 19% of U.S. households. According to the Report on the Economic Well-Being of U.S. Households, 40% of unbanked adults used an alternative financial service such as a check cashing service, a money order, or a payday loan in 2018. This is an important factor to consider when distributing funds.
In a recent podcast, Helen Brune, Senior Business Development Manager at Blackhawk Network, Tyler Gentry, Director of Payments for Good and Public Sector Partnership Development Director at Blackhawk Network, and Jordan Hirschfield, Director of Prepaid Advisory Service at Mercator Advisory Group, discussed how prepaid cards facilitate the disbursement of funds for agencies and give recipients the flexibility and security to receive these funds quickly.
The Key Benefits Driving Prepaid Card Adoption
The role of Payments for Good is to assist state and local government agencies and nonprofit organizations. It will assist them in updating their disbursement capabilities by replacing paper checks with prepaid cards. Prepaid cards are cost-efficient, faster, and safer than traditional paper checks.
“The pandemic really accelerated the adoption of cards by government agencies because they had an unprecedented number of COVID-related payments to send out,” said Brune. “They lacked the administrative staff and technology to do it in an efficient manner with checks.”
The advantage of using prepaid cards over checks is the ability to pay bills and purchase essentials. Consumers can also pay online or in person, giving them more flexibility. Prepaid cards also offer cardholder protections in a way that checks don’t.
“One of the biggest takeaways we got from getting though the pandemic was the ability of businesses, government, and consumers to quickly adapt and accept cards as a secure and desired payment mechanism because they have wide acceptance,” said Hirschfield. “They are instantly available and there is back-end security.”
Agencies can cut administrative spending when using prepaid cards, as they typically cost 10% to 20% less than issuing checks. Prepaid cards are also faster than checks. If an organization chooses to distribute virtual cards, they can be delivered instantly, Cards can also be programmed to only be used in certain businesses and industries.
Prepaid cards are a more cost-efficient way to deliver funds and savings. This maximizes program funds and the financial benefit being awarded to recipients.
How Prepaid Card Use Is Combating Fraud
Prepaid cards offer security benefits for both recipients and government agencies. Recipients don’t have to worry about receiving their prepaid cards via mail in order to support multiple or recurring payments. Funds are delivered digitally, ensuring that funds get delivered quickly and securely. Cardholders also benefit from protection against lost or stolen cards. With Cardholder Support, recipients can receive assistance when issues arise. The Federal Deposit Insurance Corporation (FDIC) also provides coverage.
Government agencies can analyze the program’s influence using spend information. It also offers transparency as well as accountability.
“Security continues to be an issue with consumers,” said Hirschfield, “Mercator has research that highlights that fraud and theft is a large concern across all payment mechanisms, especially within prepaid mechanisms. 55% of consumers were satisfied with a resolution with prepaid fraud or theft incident. People in a compromised position need to know they have the protections as well as a greater opportunity for a positive resolution.”
Payments For Good and Mobilization of Aid
Payments for Good assisted in the disbursement of $3 billion in state government and local nonprofit payments to individuals. One of its partnerships was in March of 2021 when it joined forces with CORE (Children of Restaurant Employees). CORE is a nonprofit organization that supports families in the restaurant industry who face financial hardship due to injury or death. They also provided prepaid cards during job loss in the middle of the pandemic. There was also Blackhawk’s partnership with the government of California in June of 2021 to provide prepaid cards as incentives to receive the COVID-19 shot before the state reopened.
“Our largest and most prominent clients were government agencies and departments of social and health services,” said Gentry. “Those funds have benefitted vulnerable populations, from foster youth and family welfare, assisted care facilities to immigrant workers excluded from federal emergency aid. During the pandemic, the state of California asked us to fill vaccine incentives to encourage health and human safety. It was in the form of $50 digitally delivered Mastercard to those residents who received the shot.”
Payments for Good takes on the operational challenges that many organizations face.
“What we do is take on all the administrative burden and all the servicing of disbursing the payments on behalf of the organization,” said Brune.