Prepaid accounts are one option the federal government has at its disposal to give U.S. citizens financial assistance due to the coronavirus pandemic, allowing consumers to maintain access to the financial services system, avoid check-cashing fees, and pay bills online or by phone, Brian Tate, president of the Innovative Payments Association writes. These products give Americans access to the digital economy through online shopping and effective budgeting tools.
Over the next several weeks, prepaid accounts will be a central tool the federal government uses to help Americans who are bravely enduring the twin health and financial crises gripping our country.
The truth is, prepaid accounts have been assisting governments at all levels to help their citizens in good times and bad for over a decade.
Congress and the Trump administration reached agreement last week on a $2 trillion “Phase 3” coronavirus relief package. We hope the initial, bold steps taken by our nation’s leaders will help our country weather this crisis and recover quickly once it is finally over.
Thanks to an influx of technological advancements, individuals now have more choices than ever to save and manage their money. But ensuring that financial tools are best serving consumers takes cooperation among regulators, policymakers, and the private sector.
Recently, Federal Deposit Insurance Corp. Chairman Jelena McWilliams said the agency will be releasing its proposal on updating the definition of brokered deposits for the 21st Century by the end of the year. This is a positive sign that the FDIC is working to understand how yesterday’s regulations should keep up with today’s technology.
Revolutionary payments technologies have changed the way money flows into the banking system. Branches are no longer the only way that banks receive deposits. Now, funds flow into banks through mobile wallets, ATMs, and a variety of apps.
Smart financial choices are tough, even for the savviest consumers. With more choices than ever before on how best to manage money, getting honest information is critical for success.
Unfortunately, that information can be hard to find. Outdated facts, product misperceptions, and outright bias threaten the consumer’s ability to find the knowledge they need to make smart choices.
Critics of prepaid accounts have been left behind by the rapid transformation taking place in payments. Like all industries, the payments sector had its growing pains, but the community kept innovating, learning, and working with policymakers to bring innovative, accessible, and lower-cost products to market. This evolution has been noticed, with prepaid and fintech products becoming a staple in recommendations by experts like the Financial Health Network (formerly CFSI).
The following statement can be attributed to Brian Tate, President and CEO of the Innovative Payments Association (IPA), on inaccurate and misleading consumer advice in The Motley Fool regarding prepaid accounts:
“The Motley Fool’s readers deserve accurate and timely advice regarding their financial options. Unfortunately, The Motley Fool, who markets itself as an unbiased observer, has run with a poorly researched and inaccurate ‘article’ that cherry picks the highest fee prepaid cards and compares them with credit cards to promote its advertisers’ products. This is a disservice to readers. Attacking the use of prepaid accounts – utilized by all segments of the American population – fundamentally ignores the realities of our financial landscape. Prepaid bank accounts, regulated by the CFPB, are mainstream products encompassing everything from mobile wallets to P2P payments apps. They are used by individuals, businesses, and federal and state government agencies to save money and control finances.
“It appears the Motley Fool wants its readers to believe prepaid accounts are high cost products. The motivations for this apples-to-oranges comparison are clear: to steer consumers away from these emerging innovative products and push them toward products advertised on the Motley Fools website. The IPA believes empowering individuals to make smart financial choices means providing accurate information to give them the full scope of their options. But misleading consumers in such a deliberate fashion is unacceptable.”
April 18, 2019
WASHINGTON (April 18, 2019) – Last week, leaders from across the payments industry gathered at the Hilton Washington DC National Mall for the Innovative Payments Association’s (IPA) 8th Annual Power of Prepaid® Conference. For three days, attendees heard from experts pushing the innovative payments community forward. A key takeaway from the conference: the industry is taking proactive action to make financial security a top priority.
“The prepaid, fintech and broader innovative payments community has emerged as a dynamic force in our digital economy. Unfortunately, with growth, comes added threats from bad actors looking to do harm to consumers,” said Brian Tate, president and CEO of IPA. “Our members understand that as we develop new avenues for payments, we must also constantly update and adapt to the ever-changing realities of data and financial security.”
You may not have known it, but April 1 was a pivotal day for the payments community. The Consumer Financial Protection Bureau’s final rule for prepaid accounts officially extended existing consumer protections to mobile wallets and P2P products. It also placed requirements on traditional prepaid products, which have for years been regulated by banking agencies.
It is important to keep in mind that the prepaid community was providing consumer protections disclosures, as well as Federal Deposit Insurance Corp. insurance, years before the CFPB’s rules were finalized, but this deadline formalized revamped thinking from regulators on what constitutes a prepaid account.
The industry is ready for this evolution.
The following statement can be attributed to Brian Tate, President and CEO of the Innovative Payments Association (IPA), on the April 1st effective date for the Consumer Financial Protection Bureau’s (CFPB) final rule for prepaid accounts:
“Since 2012 the prepaid community has engaged the CFPB in good faith to try to ensure the final rules protect consumers while continuing to foster innovations that allow customers to better manage their financial lives. The April 1st effective date for the prepaid accounts rule officially extends consumer protections to all prepaid based payment platforms like wallets and P2P products and will consider them as full-fledged bank accounts. It is important to keep in mind that the prepaid community was providing consumer protections years before the regulations were finalized. We encourage the Bureau to make sure their rules continue to keep pace with the innovation in the payments sector to make sure that all consumers have the opportunity to take advantage of the empowering opportunities created by prepaid accounts. The innovative prepaid community looks forward to working with policymakers to continue cultivating financial inclusion and consumer empowerment.”
More consumers are finding alternatives to traditional banking that empower them with new flexibility and capabilities. Even previously unbanked or underbanked consumers are discovering these innovative options and accessing all that the digital marketplace has to offer.
This holiday season, you probably noticed more stores with mobile payments options at the counter. The American consumer can use cash, cards (credit, debit or prepaid), and now even their phones or wearable tech. This rapid evolution in how we bank and shop reflects incredible innovation in the fintech sector, and policymakers, tasked with overseeing this growing market, have a tremendous challenge on their hands. Either keep up with the payments revolution or be out of step with how a growing number of their constituents are banking — especially millennials.