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The Many Benefits of Government Payment Card Programs

Faster delivery. Lower cost. Greater convenience for government and citizens alike. It’s a small wonder, then, that government prepaid cards have taken such a central role in financial benefit delivery, accounting for $146 billion in disbursements in the U.S. alone in 2016.

But government payment cards are earning particularly strong uptake at the state level. For instance, the State of Oklahoma has moved a wide range of recurring benefits and one-off programs to payment cards — from child support and state supplemental payments to energy assistance and adoption subsidies. Most programs are routed to a single government payment card for citizen convenience.

In fact, every state has issued government payment cards for at least two major programs. The Federal Reserve’s July 2017 report shows that all 50 states plus the District of Columbia use government prepaid cards for Supplemental Nutrition Assistance Program (SNAP) and child support payments. What’s more, almost all issue cards for Temporary Assistance for Needy Families (TANF) and unemployment insurance benefits. And another major federal grant program, the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC), mandates that all states move to online card solutions by 2020.

There is evidence that agencies of all sizes can save on costs by switching to government prepaid cards. Indeed, the U.S. Treasury has reported that the cost of a government-issued paper check is ten times that of an electronic payment.

Plus, electronic payments to government prepaid cards save both time and money. Instead of waiting days for the mail to be delivered, these funds can typically be credited within a single business day. This eliminates the need to track down paper checks that go missing, which are often the source of a high volume of service calls.

Citizens find the cards more efficient, too. Because the cards can be used for online purchases just like a standard debit card, users of government prepaid cards can convert benefits into payment for a variety of needs — and do so without recourse to additional banking products. That’s a significant fact to consider when, according to the FDIC’s 2015 survey, 7% of American households remain “unbanked,” meaning that no one in the household has a checking or savings account. Government prepaid cards can simultaneously remove the need for a separate banking relationship and give unbanked citizens an on-ramp to mainstream financial transactions. Government payment cards also allow agencies to block Merchant Category Codes (MCCs) in order to keep funds from being spent in ways that are not authorized.

Finally, there is even evidence to suggest that electronic payments generally promote economic growth. For instance, one recent study by Moody’s Analytics shows that electronic payments account for a 0.12% uptick in annual GDP in the U.S. alone, while increasing global GDP by $74 billion on an annual basis.

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