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 email@example.com.
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 firstname.lastname@example.org.
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
The COVID 19 pandemic has caused a lot of chaos for every industry in the economy. But when it comes to payments, the effects of the pandemic likely will be far reaching.
In the latest episode of the IPA Payments Pod, Brian Tate, the CEO of the Innovative Payments Association, and the Association’s government relations director, Grant Hannah, talk about how the pandemic is affecting the industry now, and what the long-term implications might be. They cover COVID19 payments and the role that prepaid plays in delivering them and how future oversight might lead to more regulations.
Of course, the pandemic is not the only thing happening in payments. Events that preceded the COVID19 outbreak have continued on their course. So, our guests talk about how the ongoing PayPal lawsuit against the Consumer Financial Protection Bureau will have its own effect on the payments landscape independent of the virus.
If you want to stay on top of new developments in the industry, plan to attend the IPA’s compliance boot camp on June 3. The boot camp will feature sessions spread out over a day that cover topics such as fraud, the PayPal lawsuit, and earned wage advance products. Register today!
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.
Director of Government Relations
Congress passed the CARES Act in March to help provide relief to individuals, businesses, state and local governments, and others during the ongoing COVID-19 pandemic. This $2 trillion package expanded unemployment insurance, provided over $850 billion for loan, grant, and investment programs to rescue and bolster businesses of all sizes, and additional funding for state and local governments and the healthcare system. In addition, in order to help American households, the CARES Act authorized relief payments, called Economic Impact Payments (EIP), of up to $1,200 for individuals and $2,400 for married couples and tasked the Department of the Treasury (Treasury) and the Internal Revenue Service (IRS) with distributing these funds.
As of May 8th, the IRS reports that it has disbursed approximately $200 billion to 130 million Americans.
Given the unprecedented size of the CARES Act, it is only natural that Congress would want to ensure that waste, fraud, and abuse are minimized and exercise as much oversight over the distribution of these funds as is possible.
To do this, Congress created two new mechanism in the CARES Act for oversight of the business focused programs. First, they created a congressional oversight panel, called the Congressional Oversight Commission (Commission). According to the CARES Act, the Commission is tasked with “…conducting oversight of the implementation of the business loan, grant, and investment programs under Title IV of the CARES Act by the Department of the Treasury and the Board of Governors of the Federal Reserve System.” The Commission is also tasked with submitting reports on the findings of their oversight activity to Congress as well.
Congress also created an inspector general position at Treasury to oversee the business loan, grant, and investment programs that were created by Title IV of the CARES Act, and perhaps some of the other non-business related programs as well. This new inspector general position is called the Special Inspector General for Pandemic Recovery (SIGPR). According the statute the SIGPR shall:
“…conduct, supervise, and coordinate audits and investigations of the making, purchase, management, and sale of loans, loan guarantees, and other investments made by the Secretary of the Treasury under any program established by the Secretary under this Act, and the management by the Secretary of any program established under this Act…”
On April 3rd, President Trump announced that he would nominate Brian D. Miller to be Special Inspector General for Pandemic Recovery. Mr. Miller currently serves in the Office of White House Counsel and has previously served as Inspector General for the General Services Administration.
The Senate Banking Committee held a hearing on Mr. Miller’s nomination on May 5th. This is just the first step in the confirmation process. The full Senate Banking Committee will vote on whether or not to send Mr. Miller’s nomination to the full Senate for consideration. Only after a favorable vote from the Banking Committee would the full Senate consider his nomination.
While there are no oversight provisions in the CARES Act that directly address Economic Impact Payments, in order to prepare for the road ahead, it is best to assume that a broad approach to oversight will be taken by the Commission and the SIGPR. It is possible these two entities will examine how Treasury and IRS implemented the Economic Impact Payment program, how financial institutions assisted Treasury/IRS in this process, and what financial institutions did to ensure their customers quickly had access to their full funds.
Regardless of what happens with the Commission and SIGPR though, congressional committees will also play a part in the CARES Act oversight. The House Oversight and Reform Committee, House Ways & Means Committee, House Financial Services Committee, Senate Finance Committee, Senate Banking Committee, and Senate Homeland Security and Governmental Affairs Committee will all likely hold oversight hearings and issue reports on the CARES Act.
When it comes to the Economic Impact Payment program specifically, the House Ways and Means Committee, Senate Finance Committee, House Financial Services Committee, and Senate Banking Committee are the most likely to examine the Economic Impact Payment program. The House Financial Services and Senate Banking Committees have the relevant jurisdiction to examine how financial institutions aided both Treasury and IRS in the distribution of Economic Impact Payments and ensured that their customers were able to access their full payment expeditiously.
The IPA will be keeping track of all hearings, reports, etc. from the various entities discussed above and will be keeping our membership updated through our Government Relations Working Group (GRWG). Additionally, the IPA will continue the conversation with policymakers on how the prepaid industry serves governments, businesses, and Americans of all backgrounds, and how the industry responded to the COVID-19 crisis.
If you would like to join to the GRWG, please contact Grant Hannah, Director of Government Affairs, at email@example.com.
The Vice President’s visit to the Mayor Clinic last month caused a stir after pictures were posted of him not wearing a mask during the tour.
Putting political punditry aside, the event offers a lesson for companies about cybersecurity, especially in the COVID19 era when so many people are working remotely.
The Mayo Clinic has a policy that everyone on its campus needs to wear a mask. Making sure the Vice President was following that policy was the responsibility of the Mayo Clinic staff.
So how did he end up not wearing one? Maybe no one felt comfortable telling the Vice President that he had to don a mask. Maybe someone thought it was someone else’s responsibility. Either way, the Mayo staff did not strictly enforce their own procedures and a bad situation resulted.
What does this have to do with cyber and financial security?
Much of the fraud that we see today comes from social engineering and business e-mail compromise. An account specialist gets an e-mail that looks like it is from a corporate vice president, or even the CEO, and then they end up transferring money to a fraudulent account. The employee gets an e-mail that they aren’t comfortable questioning, or they think it is someone else’s responsibility.
What they should do when something seems suspicious is to stop and go back to the established protocols and procedures. When something seems funny or not quite right, it is time to call someone (ex: maybe a Compliance Officer) and doublecheck, especially in this time when you can’t just walk down the hall or catch someone in the break room.
Brian Kreb’s recently did an article on this in regard to consumer-based fraud, but it is as important in business settings as well. You can find that article here: When in Doubt: Hang Up, Look Up, and Call Back.
Following these steps when something seems wrong will save a lot of time and money. It might lead to a few awkward conversations, but policies and procedures are established for a reason, and everyone needs to follow them.
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.
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.
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