As countries struggle to help their citizens deal with the economic fallout of the COVID19 pandemic, many are finding that prepaid cards and accounts offer a fast and convenient way to support people.
The pandemic has shifted the payments behavior of governments – through the way they disburse funds and the way they look at different payment types – as well as the behavior of individuals. Now the question is, what changes will last beyond the pandemic and what will the future look like?
We have pulled together an international panel to try to answer some of these questions. In this episode, we talk with Jennifer Tramontana of the Canadian Prepaid Providers Association, Matthias Spangenberg of Prepaid Verband Deutschland, Diane Brocklebank of the Prepaid International Forum, Kevin McAdam of Global Processing Services, and Brian Tate of the Innovative Payments Association.
We cover how prepaid cards have been used to distribute benefits in various countries. We talk about the regulatory response to the crisis and prepaid’s role in relief. We also cover the future of payments in general and the future of cash in particular. While the world is in constant flux, it is safe to say that more things change, the more some things will stay the same.
To learn more about the Canadian Prepaid Providers Organization, visit: https://cppo.ca/
To learn more about the Prepaid International Forum, visit: https://prepaidforum.org/
To learn more about the Prepaid Verband Deutschland (German Prepaid Association) , visit: https://www.prepaidverband.de/en/
To learn more about Global Processing Services, visit: https://globalprocessing.net/
Interested in becoming an IPA member and helping to shape the future of payments? Reach out today and talk to us about the benefits of joining.
The COVID-19 pandemic presented the payments industry with challenges that had never been seen before and that required immediate responses and solutions. The IPA is proud to say that the payments industry stepped up to help local, state, and the federal governments distribute emergency funds during our current national emergency. Whether it was ensuring that Economic Impact Payments and state unemployment benefits were safely and quickly delivered to those most in need during this national emergency or continuing to keep prepaid programs operational in the midst of a shift to a work from home culture on the turn of dime, the prepaid industry showed why it continues to be a trusted product for consumers, businesses, and government agencies.
While the industry worked hard to effectively respond to the COVID-19 pandemic, the IPA also worked hard to support the industry’s immediate response as well as ensure that the IPA was continuing to advance the long-term priorities of the industry. The IPA wanted to take a moment to highlight the Association’s efforts to support the industry since early March.
IPA Comment Letter in Response to FDIC Notice of Proposed Rulemaking (NPR) on Brokered Deposits – In the NPR, which was first released in December 2019, the FDIC proposed that payments companies be able to apply for an exemption to the FDIC’s brokered deposits regulations. This exemption could help lower the costs for deposit insurance for prepaid deposits, which means prepaid and other similar transaction accounts will continue to be attractive to consumers.
IPA Comment Letter in Response to the CFPB's Request for Information (RFI) to Assist Taskforce on Federal Consumer Financial Protection Law – In late March, the CFPB issued an RFI to assist the Taskforce on Federal Consumer Financial Law. The CFPB’s Prepaid Rule regulates prepaid cards, digital wallets, and peer-to-peer payments. Given the important role the CFPB plays in regulating the payments industry, the IPA submitted comments in late May that highlights the industry’s response to the COVID-19 and recommends rule changes that could be beneficial to consumers.
IPA Comment Letter in Response to FDIC Request for Information (RFI) on its Sign and Advertising Rules – In February, the FDIC issued an RFI seeking input regarding potential modernization of its sign and advertising rules to reflect that deposit-taking via physical branch, digital, and mobile banking channels continues to evolve. As innovation in the payments industry has accelerated, it is important the FDIC understands the myriad of new avenues that banks acquire deposits and what effect their regulations have on both banks and those who place deposits with them.
In addition, the IPA took immediate action after the emergence of the COVID-19 pandemic to support and bolster the industry’s response. Notably, the IPA sent a letter to Treasury Secretary Steve Mnuchin in April on the IRS’ web tools (Non-Filers and Get My Payment). The IPA’s letter urges IRS to update its online portals and clearly list prepaid cards as a viable option (alongside checking and savings accounts) in regard to receiving Economic Impact Payments (EIP) to reduce public confusion and significantly reduce the time for Americans without traditional banks accounts to receive much needed financial support.
This is just a snapshot of what the IPA has been hard at work on over the past few months in the policy arena. We also continue to engage in conversation with regulators, legislators, and their staff informally to ensure that they are aware of what is going on in the industry and ways that the industry continues to serve Americans.
Outside of the policy arena, the IPA continues to assist our members in their efforts to combat fraud and provide our members with new educational resources. The IPA’s Financial Crimes Task Force meets regularly to exchange information and coordinate with law enforcement. If you would like to learn more about or join the Task Force, please contact Ben Jackson, IPA COO, at firstname.lastname@example.org.
The IPA has additionally worked hard to bring IPA members new educational resources. In May, the IPA released an updated version of its Prepaid Glossary. The Glossary is designed to give an overview of the most common terms used by the prepaid card industry. It includes definitions of the types of prepaid card programs, common transaction terms, and high-level definitions of several regulatory concepts.
The IPA’s focus on educational resources also includes webinars. Earlier this month, the IPA hosted our Virtual Compliance Bootcamp. The IPA will also host a virtual happy hour for our annual award ceremony on July 7th. Looking ahead, the IPA is working to bring exciting new webinars throughout the rest of the summer as part of our Summer of Learning series. Please stay tuned for more updates on these upcoming webinars!
Thank you for all you do and for your continued support for the IPA. If there is anything we can do to support your efforts further, please don’t hesitate to contact me at email@example.com.
The economic effects of the COVID19 pandemic are far reaching and will last longer than the pandemic itself. These affects are rippling through financial institutions’ portfolios as borrowers feel pressure from lost wages and the economic slowdown.
Despite moratoriums on evictions and foreclosures, it is not clear that these will last long enough to let the economy recover enough to prevent a wave of defaults.
But companies don’t need to stand by as problems ripple through their client bases and portfolios. As the IPA noted in an earlier blog, companies do not need to wait for government action to alter their policies to help their customers. Resources exist to help companies find aid for borrowers who need to regain a solid financial footing.
In the latest episode of the IPA Payments Pod, we talk with Rochelle Gorey, the co-founder and CEO of SpringFour, a fintech that helps lenders find assistance for borrowers in financial trouble. We talk about how Springfour provides resources for call centers and online customer services and the business case for connecting customers to vetted nonprofits and government agencies that can provide aid.
To learn more about Spring Four, visit: https://springfour.com/
Whether it is using outside resources like SpringFour or making internal policy changes and resource decisions, companies should take control of their own destinies and look for ways to help their customers and clients weather the storms that everyone is facing right now.
Atlanta payments processing companies' role in the federal distribution of stimulus funds through prepaid debit cards
Rather than send out checks, the government will issue prepaid debit cards to about 4 million Americans.
The U.S. government began sending out prepaid debit cards on May 18 for the $1,200 Economic Impact Payments sent to Americans during the Covid-19 pandemic through the CARES ACT.
The distribution of Fiserv prepaid cards, which are being issued through MetaBank, to about 4 million Americans is a safer, cheaper and faster option than using traditional checks, says Robert Skiba, executive vice president of Atlanta-based financial services company InComm.
Payments companies based in Georgia’s “Transaction Alley” played a pivotal role in instituting this.
“I think the fintech community in Atlanta is very influential. They have gotten the attention of policy makers, which I think is wonderful. I’m hoping the goodwill that carried through these conversations and the productivity of the industry over the last couple months will be a part of the conversation down the road when Congress looks back at what happened here,” said Brian Tate, President and CEO of the Innovative Payments Association (IPA), an industry group that encourages the use of electronic payments and promotes financial inclusion by working with leaders in Washington, D.C. “Our industry has played a very strong role in getting money to people who need it in this difficult time.”
The IPA along with the American Transaction Processing Coalition, based in Atlanta, began working on this issue in March.
“Atlanta elected officials on a bipartisan basis played a role in terms of encouraging the U.S. Treasury and others to consider using these products to disburse benefits,” Tate said.
A memo from the House Committee on Ways and Means in early April estimated that it could take up to 20 weeks for some Americans to receive their checks.
Atlanta’s payments industry saw an opportunity to get stimulus money out faster.
“The payments industry galvanized around saying ‘We’re here, we can do this and let us help.’ Because we saw it was a crisis," said Scott Meyerhoff, CFO of InComm.
While the prepaid cards are being used by the government specifically for stimulus money, industry leaders see changes in consumer behavior due to Covid-19 that could have lasting effects on the use of these products.
The share of payments made with cash and checks declined from 31% of transactions in 2015 to 23% in 2018, according to a 2019 study from the Federal Reserve Bank of Atlanta, but the virus is accelerating the trend.
“This crisis has made many people rethink the way they go about their day-to-day lives and I fully expect it’s going to make them rethink their banking relationships and their access to their funds just the same,” Meyerhoff said.
Skiba says there has been tremendous growth in gift card sales due to Covid-19 and the necessity of shopping online.
The industry also believes prepaid cards and other electronic payments can be a solution for those without access to traditional banking. More than 25% of Americans were unbanked or underbanked in 2017, according to research by the Federal Deposit Insurance Corporation.
“It depends upon the cycle of the economy,” Skiba said. “For instance in 2008 when a lot of people lost their jobs and there was economic upheaval of that whole period of time, people lost their credit and checking accounts and they became ‘unbanked.’”
We could see another increase in the unbanked population following the Covid-19 crisis, he says.
Atlanta Business Chronicle
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