Despite all the talk about checks, the Federal Government’s individual stimulus payments will be delivered mostly electronically. This will present challenges and opportunities for the payments industry.
According to the text of the bill that the IPA has seen, stimulus payments can be delivered electronically to any account that the recipient has authorized to be used for the direct deposit of tax refunds.
Allowing money to go to accounts authorized two years ago leads to a lot questions. One would presume that accounts would be verified and no surprise deposits would be made. But, if payments are rushed out the door, individual Americans might find their payments going to unexpected places.
People use prepaid cards for tax refunds to get their money quickly, to separate tax refunds from day-to-day accounts, and as substitutes for bank accounts. In some instances, the recipient spends that money and leaves the card empty. In other cases, the care becomes an on-going spending tool.
Providers should review their portfolios and look at the status of the cards. Are they closed, inactive, or still being used? Can you reach out to current and former cardholders and let them know that they may soon have the option to get their stimulus payments on their cards? This may be a time to offer new cards at no or a low cost for those who have abandoned their previous cards, but might technically have an account on the system. It is also an opportunity to remind current and former cardholders of the features, functions, and benefits of prepaid cards.
Of course, while these payments provide an opportunity to help Americans, there are risks that will come with them.
With so much money being distributed, criminals will look for any opportunity to capture it. Since these are government payments, it is likely we will see schemes similar to the ones that we see every tax season including stolen identities, diversion of funds, and social engineering to tell people that they need do something like pay taxes before they can get their payments.
Providers need to fine tune their fraud detection systems, prepare their call centers for social engineering, and warn their customers of increased risks.
Stimulus payments will be an important tool to help Americans and keep our economy going. The payments industry will need to become a partner in making sure that the funds are delivered and used safely and efficiently.
The current pandemic and its associated market and economic gyrations have left people disoriented and apprehensive about the future.
We know that the economy will slow down and there will be people and businesses who have trouble managing their finances.
The federal government and state governments are taking or weighing action to help individuals and companies weather this crisis. But the private sector can do a lot on its own to help contain this crisis.
Unlike the federal government, companies don’t need to wait for an act of Congress to get something done. Policy changes and company planning can alleviate some of the stress of the pandemic for partners and customers.
As an example, like many people, I had plans to travel for work this week. And like many people, I had to cancel those plans, along with flights and hotels.
I was worried that I would lose money, particularly with the airlines, because I was cancelling at the last minute. All the same, I cancelled and asked for a refund. In my request, I said I would settle for a credit for future flights, but could they please waive the change fees.
This morning an e-mail arrived to tell me that I had received a full refund. In the short term, this is going to be a hit for the airline, but that airline has won some loyalty from me for future flights. Long term, I am more likely to start with them for planning travel.
As Americans struggle will income disruptions and possibly job losses, what kinds of things can payments companies do to help them? It might be offering a monthly fee holiday, or comping one or more out-of-network ATM fees.
These things will cost money in the short-term, but if they win long-term customer loyalty and help the overall economy recover, then a short-term revenue decline will be an investment that pays dividends in the future.
In the midst of this crisis, companies will do well if they remember that their success depends on the success of their customers in weathering the storm. Now is a time to look at your customer base, your business, and where you can offer help, and some wiggle room in coming days.
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