Regulatory changes are coming to the prepaid market. As the industry combats inflation and tries to sidestep recession, adjustments will need to be made to reflect these macro-economic conditions.
In “2023 Prepaid Regulatory Update,” Jordan Hirschfield, Director of Prepaid at Javelin Strategy & Research, discusses what adjustments need to be made concerning prepaid cards due to macro conditions, how the current economic landscape will affect policies aimed at the prepaid market, and how changes in regulation at the international level will affect the global prepaid market.
Upcoming Regulatory Changes in Prepaid Cards
Although Hirschfield pointed out that there are not a lot of changes, adjustments have been needed, especially within health savings accounts (HSA), flexible spending accounts (FSA), and other government programs to reflect the cost-of-living increases.
Hirschfield said it’s important for sponsors to communicate these changes. He gives an example of how employees can now increase the deduction on their HSA cards by anywhere between $300 to $700, depending on whether it’s a single or family plan.
Moreover, states are looking to reinforce current regulations, especially regarding payouts.
“I think there’s a lot more emphasis on enforcement of existing regulations. You see a lot of states looking to enforce their regulation, especially on gift card payouts,” Hirschfield said. “If you have less than $5 or $10 balances, the sponsoring retailer may be required to pay you out, based on certain conditions that differ in each state. You’re seeing a little bit more enforcement of that.”
Not issuing these payouts could result in fines. Although such fines won’t necessarily break the bank, Hirschfield said that it is less of a hassle to simply issue the payouts.
How Economic Conditions Will Affect Prepaid Market Regulation
Regulatory bodies are concerned about the welfare of consumers and therefore have focused their efforts on ensuring consumers get the most benefit from prepaid programs. This includes receiving payouts easily and appropriately.
“In a lot of the programs that are kind of government-regulated—HSA, FSA, nutritional assistance—the economy and inflation is going to add to cost-of-living adjustments and other increases,” Hirschfield said.
“It’s just keeping up with the cost of money in those programs.”
International Regulatory Changes and the Global Prepaid Landscape
When it comes to adhering to international regulations, it is best to err on the side of caution, Hirschfield said. Europe is known to have the most rigorous regulations, and therefore it is best to be overly cautious and follow its protocols to avoid penalization, he noted.
“When you’re looking at international policies and especially program managers and retailers that operate across borders, there’s the need to pay attention to what are the most stringent regulations,” he said.
“A lot of times those come out of Europe, so it really makes sense for those organizations to follow the most stringent rules possible to make sure that they have a simplicity about their program across all of their stores or all across all their employees.”
Learn more about how policy changes will change the prepaid landscape and how changes on the international scale are poised to affect the global prepaid environment.