Getting money to the unbanked? It’s all in the cards

Since the start of the pandemic, the government of Canada has rushed to disburse financial relief through the country’s largest financial aid program, the Canada Emergency Response Benefit ( CERB), by leveraging paper cheques and direct deposits, which Canada’s banks helped enable quickly and easily. Despite the government’s impressive speed and diligence in establishing an aid program of such size and scale, one hurdle remains: reaching all eligible Canadians with these customary financial tools.

According to ACORN Canada, an estimated three per cent of Canadians ( close to one million) are unbanked and around 15 per cent (close to five million) are underbanked, meaning they don’t have access to a wide range of everyday banking facilities. This leaves Canada’s most vulnerable segments of society at risk of delay in receiving needed relief funds, difficulty in safely converting a cheque to cash, or being entirely left out of the aid program.

Prepaid cards are different from credit cards, even though they carry the Visa or Mastercard logos. Rather than tap a line of credit, prepaid cardholders can spend only the amount loaded onto the card. Each transaction reduces the cash balance, but unlike debit cards, prepaid cards are not tied to a bank account. At the same time, they maintain the fraud and loss protections offered by credit card networks. This makes them ideal not only for underbanked consumers but also for high school and college students. Some U. S. schools offer campus- specific prepaid cards for the distribution of financial aid and other benefits.

What’s most relevant in today’s environment is that the prepaid cardholder does not have to wait for support payments to be mailed or deposited. The cards arrive pre- loaded with funds and can be used immediately, just like any debit or credit card, by presenting them at point of sale — whether curbside, in- store, or online — at no cost. With a touchfree payment option, users can feel comfortable spending money contact- free. There is no cost for consumers to receive or use these cards, unlike cashing a cheque. Network interchange fees are charged to a merchant similar to debit and credit cards.

Prepaid solutions have worked in previous emergencies that required quick disbursement of financial relief. For example, Berkeley Payments enabled leading relief agencies to quickly issue more than 20,000 disaster relief cards in 2018 to provide emergency funds for Alberta’s wildfire victims. Berkeley manufactured, personalized and delivered 2,500 cards within 48 hours to get support to evacuees and fire victims quickly.

In addition to providing speed, accountability and efficiency, prepaid solutions can help guide how financial aid is spent. Unlike cash, prepaid products can be limited for use at selected merchant categories, such as grocery, childcare and transit. They can even be programmed to give recipients a set timeframe for usage. In the current crisis, they have been proposed as part of a “menu and venue” stimulus for the dining and entertainment sectors, once they’re deemed safe for reopening. Prepaid solutions also eliminate the need to send followup cheques in the event of supplementary relief disbursements. Additional funds can simply be reloaded onto the cards electronically.

Today, electronic vouchers are being used in Europe to provide effective payment methods for vulnerable and at- risk individuals. In the U. K., one prepaid card program is helping more than 50 local authorities get funds to people experiencing hardship. In the U. S., many eligible Americans have started receiving their stimulus money through Netspend’s prepaid cards. In Canada, challenger banks KOHO and STACK, which provide digital- only banking solutions, and We Financial were quick to facilitate receipt of CERB deposits onto their prepaid cards.

Despite these efforts, Canada still lags behind global efforts when it comes to adopting prepaid technology for the delivery of government relief payments. Prepaid solutions tailored to the specific requirements of both CERB and the Canada Emergency Student Benefit ( CESB) program could ensure that all Canadians get access to financial support with ease and convenience.

Canada’s $ 4.3- billion prepaid industry includes an extensive value chain including the networks — Mastercard, Visa, and Unionpay — big banks, challenger banks and program managers. We should use the power of this network to help our most vulnerable citizens. Working closely with governments, the prepaid industry can get these programs up and running overnight and in a manner that ensures safety and security and, most importantly, gets money into people’s hands immediately.

PREPAID CARDHOLDERS CAN SPEND ONLY THE AMOUNT LOADED ONTO THE CARD.