Treasury Transformations Government Prepaid Card Solutions 2011 NASC National Conference March 24,...
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Transcript of Treasury Transformations Government Prepaid Card Solutions 2011 NASC National Conference March 24,...
Treasury Transformations Government Prepaid Card Solutions2011 NASC National Conference
March 24, 2011│ Phoenix, AZ
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Government Prepaid Solutions
Prepaid solutions for government agencies have been developed to deliver increased efficiencies, significant cost savings and improved recipient payment/purchases experiences
Bank of America Merrill Lynch has over 12 years experience issuing innovative prepaid solutions to U.S. Federal, State and Local Governments
Program types range from payroll wages, to benefit payments, to disaster relief payments
Recently launched a program with the California Employment Development Department for the disbursement of unemployment, disability and paid family leave benefits which will be the largest State Disbursement Card program in the nation at full rollout
By the end of 2012, it is estimated that $196 Billion in government benefit payments will be made through a card solution
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Government Prepaid Segment Size By Type
32% 32%
16% 16%
22%
22%
10%
10%
12%
13%
2%
2%
6%
6%
$0
$50
$100
$150
$200
2010 2012$Billions
Govt Wages
Disaster
Welfare -- CS
State Tax Refund
Federal TaxRefund
Unemployment
Social Security
Government Benefit Type 2010 2012 CAGR
Social Security $56 $63 5.7%
Unemployment $29 $32 5.7%
Federal Tax Refund $38 $44 7.4%
State Tax Refund $18 $20 7.4%
Welfare & CS $22 $23 2.0%
Disaster $2.9 $3.0 1.6%
Govt Wages $10 $11 5.2%
All Government Benefits $176 $196 5.7%
$ in Billions
Social Security is the largest program
growing from $56B in 2010 to $63B in
2012, or 5.7% CAGR
Segment Size
Source: Visa Inc. U.S. Prepaid Industry Segment Study, 2011
Figures represent estimated prepaid industry opportunity and do not reflect anticipated Visa volumes, transactions or prepaid segment share. The estimated opportunity sizing in this presentation is directional only and Visa is not responsible for any business decisions made using the enclosed data.
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Recipients of Government Disbursements Via Prepaid Card
Recipients of Government Benefits via a Prepaid Card
Targets underserved recipients defined as …
- 80 million consumers in the U.S. without a traditional deposit account or with limited access to credit
- These consumers received almost $1 trillion in payments from employers, states, government entities, insurance companies and others
- Over $1.5 billion in fees are paid to cash checks
Approximately 80M “Underserved”… (Population in Millions)
..with almost $1T in Income ($ Billions)
9.0
44.8
27.1
131.4282.3
541.3
Unbanked (no banking relationship)
Underbanked (low/ no credit score)
Recent Immigrants
Underserved Consumers
Source: Study commissioned by Visa and performed by Bearing Point in 2004/2005 using Department of Labor, Bureau of Statistics
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FDIC Profile of the Underserved
Target Customer is principally a cash user earning approx. $35K annually and using non-traditional providers for basic financial services
Unbanked estimated at 9.1MM households; Underbanked estimated at 21.3-26.3MM households
Average age between 41-44 years old
Household incomes range between $22,000 (unbanked) and just over $44,000 (underbanked)
Why are these consumers electing not to use retail banks?
- Product Gaps
Minimum balance requirements; don’t have enough money to need an account; don’t write checks; service charges are too high; too long to access my money/clear checks
- Service Gaps
Banks are not welcoming; don’t trust banks; don’t see value in having a bank account; inconvenient hours, not near where I live or work
Source: FDIC National Survey of Unbanked and Underbanked Households. A quantitative study sponsored by the FDIC, December 2009
Supporting Government Agencies
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Card Overview
A card solution helps agencies to remove checks and fully automate the
payment process
Targeted to underbanked recipients who do not have traditional bank accounts
Direct deposit option funded via ACH direct deposit process
FDIC-insured deposit accounts accessed by a branded card
Convenient, accurate and timely access to payment
Can be used everywhere debit cards are accepted – in stores, online, by phone
Bank of America offers zero liability on unauthorized transactions (subject to certain restrictions)
Cardholder customer service 24 hours a day
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Government Cost Savings
Elimination of check processing and distribution fees (postage, stop payments, etc.)
Faster disbursement of payments
No abandoned property administration – escheatment
Agencies can save upwards of $4.00/check with EFT disbursements
Allows agency to focus on servicing citizens
“Treasury must lead the way in developing methods to deliver payments that are safe and secure in a manner that is efficient and reliable. By moving to all-electronic
payment, Treasury will save hundreds of millions of dollars and substantially reduce our environmental impact, making this a win-win for all Americans.”
Treasury Secretary Timothy Geithner, 4/19/2010
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Recipient Benefits and Features
Benefits
Can save time through easy access to payment when using standard direct deposit availability of funds, and by eliminating waiting in lines to cash checks
Offers convenience as it can be used everywhere Visa debit cards are accepted and any ATM
Eliminates check-cashing costs
Features
Functions like a Check Card – in stores, online, phone, mail, pay bills
Account is FDIC-insured and zero liability on unauthorized purchases
Unlimited signature purchases at no cost and no daily limits on ATM withdrawals or purchases
Generally, negotiated amount of free access transactions on ATM withdrawals and Teller Cash Access transactions at network branded association member bank locations
Dedicated customer service and access to account information 24 hours a day via Internet, Automated Account Information, Customer Service Representative and ATMs
Replacement of lost/stolen/damaged cards
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Government Prepaid Solutions - Opportunities
Where have governments spent the most money for repetitive, frequently issued payments?
Social Security & Retirement
Income
Disaster Relief
Veterans Affairs
Payroll Child Support
Unemployment & Disability Insurance
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Government Prepaid Solutions - Opportunities
Emerging Government Disbursement Categories
T & E
Housing Authorities
Commercial Prepaid
TANF, Adoption & Foster Care
Tax Refunds
Current Arizona Agency Program Examples
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State of Arizona CashPay® Payroll Card Program
State of Arizona provides payments to more than 38,000 employees working for 120 agencies
Previously reached 90% - 94% direct deposit penetration, but needed an option for the underbanked
Launched CashPay Visa Payroll Card program in December 2009 with a goal to not only increase direct deposit penetration, but to also make financial life easier for underbanked employees having to deal with check-cashing hassles
Results
• Reduced warrant-related expenses
• Added a new benefit for underbanked employees
Keys to success
• Payroll management focus on efficiency and cost reduction, strong partnership with card issuer and an integrated communication plan across agencies
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State of Arizona Payroll Payments
37,0
06
38,2
51
39,3
27
39,5
84
36,9
62
35,5
54
35,7
84
333 291 281 202
68 100 97
4,567 4,340 4,202 3,050
2,040 2,359 2,288
79.6%81.9%
85.9% 87.6% 88.3% 89.2% 89.8%92.4% 94.6% 93.5% 93.8%
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
50,000
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 3/11/11
Pay
men
ts o
n L
ast
Pay
roll
of
Yea
r .
Dir
ect
Dep
osi
t %
.
Years
Warrants (Exclusive)
Paid by Warrant & DD
Direct Deposit (Exclusive)
Direct Deposit %
12/09 CashPay Rollout12/31/09 Warrants Mailed from GAO12/08 Direct
Deposit Advice Print Elimination 12/30/10 Warrants
mailed from GAO
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State of Arizona CashPay® Payroll Card Program
Strategies Moving Forward
• Mandated Direct Deposit• Legislation in process
• Payroll Card is the Strategic Component of solution for the unbanked
• Provides employees opportunity to choose direct deposit options
• Payroll Card will be the option unless they choose another direct deposit method
• Retains ability to pay by warrant if needed
Keys to success• Effectively remove all obstacles to driving direct deposit
• Get your financial institution to help support your direct deposit initiatives
• Promote/list the banks that offer incentives for employees to sign up for direct deposit on your website
• Explore deposit incentives and strategies for your employees with your bank provider (Employee Fair or other event)
Results
• Continue to manage and drive efficiency to the extent practical
• Leverage the card solution concept to other government payments such as tax refunds
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ASRS Going Green!
Saving more than just our environment!
Leveraged existing payment card solutions to achieve economies of scale
ASRS Benefit Card launches April 2011
Traditional direct deposit remains first payment option
Electronic payment for everyone – if retiree does not provide a traditional deposit account for payments, an ASRS Benefit Card account will automatically be provided
Comprehensive communication plan through early direct mail efforts, check payment inserts and website content
Close to 4,000 retirement benefit recipients will receive cards in April
ASRS estimates an annual savings of $80,000 for postage and 25-30 hours per month of staff time
Arizona State Retirement System Benefit Card Program
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Arizona State Retirement System Benefit Card Program
ASRS Benefits
- Eliminates 25-30 hours of staff time:
Reconciling bank account and stale checks GL account
Reissuing checks
Reduces calls to the Call Center – members call Bank of America Merrill Lynch with questions
Reduces potential check fraud loss
Don’t have to deal with unclaimed checks
- Saves approximately $80,000 in annual postage
- Marketing support
- Dovetails with Social Security Administration Plans
As of March 1, 2011, individuals applying for and approved to receive Social Security benefits will have two options: debit cards and direct deposit. Those who currently receive Social Security benefits via checks will be transitioned by March 1, 2013.
- It’s green!
Cons for the ASRS: Have to “re-tool” our retirement application process
Proposal - Phase 1: Start with new retirement checks (includes estimate checks) and lump sum payments – Refunds, Survivor Benefits, Forfeitures
Questions
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