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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