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Thousands of consumers can receive their Economic Impact Payments (EIPs) much more quickly if they know where to look. As you read this, the U.S. Treasury Department and the Internal Revenue Service (IRS) are working around the clock to get COVID-19 financial relief payments out to individuals and families, but many are stuck waiting for paper checks.
The Treasury has initiated the first traunche of EIP payments totaling $200 billion to approximately 130 million Americans, with millions more facing a possible waiting time of weeks, if not months to receive their payments. This is unacceptable for families who need to pay rent and buy groceries today. The delay in accessing funds can be reduced, however. Consumers with prepaid cards are eligible to register their cards with the IRS and expedite their federal payment. However, the IRS must take affirmative steps to increase public awareness. The IRS launched new web tools: Non-Filers and Get My Payment, as part of the strategic plan to disburse CARES Act payments. These portals allow those who did not file taxes in 2018 or 2019 to quickly register to track and receive their relief payment. According to variety of public reports, the IRS has incomplete information on millions of Americans who may not have filed taxes, did not receive a refund in 2018 or 2019, moved, or who have changed their name due to marriage or divorce. If the IRS is unable to obtain this information, then the agency will likely send them a check, delaying the process of getting needed funds into people’s hands. On top of the delay of identifying the information of individuals, there is also the delay in cutting checks. The Bureau of Fiscal Service within the Treasury has been tasked with printing millions of checks per week in order to ensure all eligible Americans receive their payments. According to the Consumer Financial Protection Bureau (CFPB), cutting checks is time consuming, and it costs more than electronic payments. If a March memo from Ways & Means is accurate, it is conceivable that Congress passes a Phase 4 COVID-19 relief measure which could include additional EIP payments before some Americans receive their initial payment from the CARES Act. Last month the CFPB updated its COVID-19 guide to highlight prepaid cards as an option to receive CARES Act relief payments. While consumers can now receive their EIP payment via a reloadable prepaid card by registering their product in the IRS portals, the agency still has not clearly listed “prepaid” as an option alongside “checking” and “savings.” It is essential that consumers clearly see prepaid as an option. According to the IRS over 11 million people have visited their portals since they were launched in April. If prepaid is not visibly listed on the IRS’s portals it could discourage people with prepaid cards from registering their product with the IRS and cutting down the time it takes to receive their payment from weeks to days. This concern was recently highlighted in a letter from U.S. Representative Bill Foster (D-IL) and U.S. Representative Barry Loudermilk (R-GA) addressed to U.S. Treasury Secretary Mnuchin requesting that the IRS update its portals to make it clear that non-traditional payment methods like prepaid cards are a critical option for millions of Americans to receive their pandemic relief payments. Now more than ever, it is imperative that we leverage existing payments capabilities and clearly communicate the available technology to deliver relief to all Americans. Prepaid is faster than receiving a check and is efficient and secure. Right now, the federal government has a tremendous opportunity to leverage an existing vigorously regulated bank product to ensure they are ready for whatever the future holds.
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Ben JacksonIPA COO An article in The American Prospect reported that the Treasury’s Bureau of the Fiscal Service told banks that they could take relief funds from recipients’ accounts to settle old debts. The IPA’s advice to its members is simple: think twice before using relief funds to settle old debts. While using those dollars to cover outstanding balances might seem like a good idea, it nonetheless carries a number of risks to an institution. First, the primary purpose of these funds is to help our economy get up and running again. While keeping companies solvent is important, financial services providers need their customers to have sound financial footing for long term success. Customers who feel like their providers have helped them are more likely to stick with their provider over time and repay whatever they might owe. From a big picture perspective, the sooner we can get the economy up and running, the better it will be for us all. Second, taking stimulus funds will cause reputational risk and eat up business resources at a time when they are scarce. If customers do not see the full amount of their payments, they will be calling customer services lines looking to yell at live agents. At a time when resources are already under pressure from people being ill and facilities being closed, adding a rush of customer service requests that would ultimately end with unhappy customers and exhausted employees will not be worth the money gained. Finally, while there is nothing in the CARES Act that prevents taking the funds, several states have said that laws on their books prevent taking this money to cover old debts. In particular, Ohio’s attorney general and Massachusetts’ attorney general have both said that these funds are protected from creditor under laws in their respective states. In addition, a letter from 25 states’ attorneys general and a bipartisan letter from two senators to Treasury Secretary Steve Mnuchin have urged him to protect these funds from debt collectors. So, there are some legal stops in place, and seizing funds now could lead to a political and regulatory backlash in the future. Working through this crisis is going to require the industry to think a little differently about problems and opportunities. A recurring lesson is that short-term sacrifices likely will lead to long-term gains. By looking at the big picture and keeping this lesson in mind, companies can work to ensure their future profitability. 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. Is the CFPB constitutional? Is its prepaid rule constitutional? These are questions in front of the courts right now. Two lawsuits have called into question both the structure of the CFPB and the validity of its prepaid accounts rule. The outcome of these two cases could determine who is subject to the prepaid rule and even whether the Bureau should exist in its current form. On the state level, a lawsuit over payroll card rules is making its way through the New York State courts. It could determine whether or not the Department of Labor can regulate financial products. In this episode, the Innovative Payments Association’s CEO, Brian Tate, and Government Relations Director, Grant Hannah, talk about these lawsuits and what their effects might be. We also talk about the long-term effects of these lawsuits in the context of the possible outcomes of the 2020 elections. The IPA will keep its members updated on developments in these suits through its regular government relations calls. If you want to stay on top of new developments in the industry, plan to attend the Innovative Payments Conference in Washington DC, April 6-8. Learn more and register at: https://www.americanbanker.com/conference/innovative-payments 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. Go to www.ipa.org to learn more. Cyber criminals have an advantage over the companies and people they target because they are better at working together than the financial services industry. Hackers use online forums to trade trips and tricks, and even sell software to one another in online forums. They help one another exploit weaknesses in the defenses of financial services providers. Although the industry is lagging behind the crooks, organizations like the IPA and the Payments Risk Fraud Consortium are working to bring industry experts and investigators together to push back the hackers, In the latest episode of the IPA Payments Pod, Andrea Valentin, the secretary of the Payments Risk Fraud Consortium talks about the power of collaboration and how to build a culture that helps the financial industry keep up with the hackers. This episode is an edited version of a webinar presented to IPA members. Members can access the full recording and associated slides in the members’ only section of the Web site. You can learn more about the Payments Risk and Fraud Consortium at their Web site: https://www.fraudconsortium.org/ If you want to stay on top of new developments in the industry, plan to attend the Innovative Payments Conference in Washington DC, April 6-8. Learn more and register at: https://www.americanbanker.com/conference/innovative-payments 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. Go to www.ipa.org to learn more. Everyone likes to believe that they are rational, especially when it comes to money. But people often make irrational choices, despite what economists would have us believe. While irrationality might seem like a bad thing, it can be harnessed to help people achieve their goals. By understanding human foibles, financial services providers can design products that will direct that behavior down positive paths. Both individual customers and the provider’s bottom line can benefit from recognizing that even seemingly bad behavior can be turned towards good outcomes. In the latest episode of our podcast, we talk with Kristen Berman, the co-founder of Irrational Labs, and Brad Swain of the Common Cents Lab at Duke University, about what their research shows when it comes to money management and what that can mean for product design. For example, people of all kinds will often say they want to achieve a goal but do things that are counter to that goal just because something else is easier. Leveraging the path of least resistance preference can turn into more savings for customers and less risk for providers. Our guests talk about why encouraging borrowers to pay off their loans early might be a win-win for lenders and borrowers. They also talk about how financial can build good behaviors into the onboarding process for accounts and loans. You can listen to our podcast on iTunes, Google Play, or your favorite podcast app. Please subscribe and leave us a review. If you want to learn more about our guests’ research, you can visit the Irrational Labs Web site at and the Common Cents Lab web Site at https://advanced-hindsight.com/commoncents-lab/ If you want to stay on top of new developments in the industry, plan to attend the Innovative Payments Conference in Washington DC, April 6-8. Learn more and register at: https://www.americanbanker.com/conference/innovative-payments 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. Go to www.ipa.org to learn more. Our wallets have become more than our billfolds and pocketbooks, but unless we stop to think about it, it is easy to ignore how all the little changes add up. If you are a card manufacturer, though, you need to think about what the how tools like tap and go cards, mobile payments, and wearables are reshaping business and daily life. Peggy O’Leary, CPI’s Director of Sales and Client Services in Prepaid, sees payments innovation reshaping everything from what we do at the checkout counter to the design of our wallets. In this episode, we talk about how these changes open up new opportunities for financial institutions, payments providers, retailers, and consumers alike. Contactless payments mean that cards no long need to be card-shaped. What does that mean for the shape of our purses and wallets? What does it mean for the kinds of products that can be used as a payment form factor? Our physical reality could change because of changes in payments. Mobile wallets allow for the instant delivery of not only payments credentials, but also of information ranging from special offers to directions to information on how a purchase might affect a shopper’s budget. What does this mean for financial institutions and retailers? In a wide ranging discussion, Peggy and the IPA talk about some of these possibilities and the promises and pitfalls that come with them. If you want to learn more about CPI and their manufacturing capabilities for all kinds of payments tools, you can visit their Web site at: https://www.cpicardgroup.com/ If you want to stay on top of new developments in the industry, plan to attend the Innovative Payments Conference in Washington DC, April 6-8. Learn more and register at: https://www.americanbanker.com/conference/innovative-payments Cash remains an important part of the payments landscape, so access to cash can be a powerful tool for a variety of programs. In an emergency when payments systems are down – the aftermath of a hurricane for example – cash can keep an economy going and ensure that people get their needs met as rebuilding starts. Incentives programs can use cash as an instant motivation. And cash can make it easy to transact without concerns about acceptance. ATMs have been an important tool for debit card holds to get cash and make deposits, but mobile technology makes it possible for anyone to use an ATM if they can receive text messages. It isn’t even necessary to use a smartphone in many cases. So, cash access can extend to anyone with a mobile phone. In the latest episode of the Innovative Payments Pod, we talk with PIN4 and its subsidiary, HalCash International, about how cardless transactions can help payments companies deliver services to their customers. PIN4 is working with IPA member MasterCard on its MasterCard Cash Pick-Up service in the United States and working with a variety of companies in countries like Spain to deliver instantly available cash payments to individuals. They have used their technology for incentives and gaming payments, but have plans to make it available for use cases like disaster payments and helping companies suffering system outages. If you want to learn more about PIN4 and the Mastercard Cash Pick-Up capability, you can visit their Web site at: http://pin4.com/ If you want to stay on top of new developments in the industry, plan to attend the Innovative Payments Conference in Washington DC, April 6-8. Learn more and register. 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. Go to www.ipa.org to learn more. Recently, fintechs and large banks have clashed over who should have access to customer data. Fintechs often rely on connections to their customers’ bank accounts in order to deliver products and services. Banks, on the other hand, do not want to be deposit hotels where customers are storing money until they can move it some place better because they worry about losing the customer. Additionally, banks are worried that allowing outside companies to access their customers’ data will lead to more identity thefts and hacks. An example of this is the recent disruption connections between PNC Bank and Venmo accounts. In December, PNC Bank customers could not connect their bank accounts to their Venmo accounts. The Wall Street Journal reported that the bank had updated its data security systems and that led to it blocking access from a company called Plaid, which is a data aggregator that works with multiple fintechs to provide connections to bank accounts. PNC did suggest in tweets that its customers use Zelle, which is a person-to-person app provided through a consortium of banks. Plaid links third-party apps to bank accounts using a process called screen-scraping, which essentially allows the app to log into a customer’s bank account by storing their logon credentials. PNC was not the only bank in this kind of conflict. The American banker reported on Jan. 2 that J.P. Morgan Chase also planned to block screen scrapers of all kinds. This is interesting because in October 2018, Chase has signed an agreement with Plaid and three other companies to provide data through a secure API, according to the American Banker. The Wall Street Journal reported on Jan. 13 that Visa has struck an agreement to acquire Plaid, which will further shake up the Fintech industry. But Plaid is not the only player in the data sharing space. Since companies are not thrilled by their customers handing out login credentials to third parties, a group of financial services companies created the Financial Data Exchange to facilitate secure data sharing through an API. (Visa is a member of the Financial Data Exchange.) In the latest episode of the Innovative Payments Pod, the IPA talks with Don Cardinal, managing director of the Exchange about its API and how it works. You can find it here or wherever you get your podcasts. Data sharing is critical to many Fintechs as they work to help aggregate customers’ financial data and help their users make financial choices. The payments industry will no doubt be affected by the outcome of this merger and the outcome of the conflict that is playing out in the background. |
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