Getting Stimulus Funds To Those Who Need Them — Without The Paper Check

The stimulus bill designed to combat the economic ravages of COVID-19 is massive.

Getting that aid into the hands of affected families — wracked by swelling unemployment numbers, and of course, an ongoing healthcare crisis — will be slow going.

If ever there was a time to kill the check, that time would be now.

The $2 trillion economic stimulus bill is making its way through Congress, having been approved by the Senate and now up for consideration by the House. As part of that stimulus package, payments of as much as $1,200 will be given to individuals, and $500 per child.

The logistics of getting that cash into the hands of those who need it show a bit of a divide. As reported, those Americans with direct deposit account information stored with the Internal Revenue Service (IRS) — the conduit through which they get refunds — will get those payments within a few weeks after legislation is finalized and signed. That’s about 70 million Americans.

The remaining tens of millions, those who do not have direct deposit payment information on file with the IRS … will have to wait for the proverbial (paper) check in the mail.

Thus far other options to get these urgently needed funds to those who need them, in the digital sense, are not being embraced fully.

But those options are there, and at the ready.

In one example, Mastercard has been working with a number of public agencies to get federal benefits to 4.5 million recipients faster through Direct Express, where Comerica Bank acts as the Treasury Department’s financial agent for prepaid debit cards.

There also is Mastercard Send for push payments as an alternative to ACH. In an interview with Karen Webster, Kathryn Cleary, Mastercard’s senior vice president of business development for North America, pointed out that push payments offer a cleaner authentication path and requires less sensitive user data — where the 16-digit card account number acts as the authenticator.

Visa’s own push payments offerings come through Visa Direct, which “reverses” payment flows across the Visa network, enabling real-time payouts to debit and re-loadable prepaid cards. In an interview with Webster late last year, Bill Sheley, global head of push payments for Visa, said that a series of partnerships helps the network giant cover “99 percent-plus of banks, consumers and small businesses.”

Growth in Prepaid

Prepaid cards are gaining increased traction, as users find convenience in being able to access (and allocate) funds as needed.

As noted in this space last month, ADP surveys of 500 U.S. employees found 35 percent were paid by direct deposit, and that members of that sample held two or three prepaid cards to help them budget or designate different cards as spending “buckets.”

Belinda Reany, division vice president and general manager at ADP, told PYMNTS consumers have a reason for that. “More than half the people we spoke to [said], ‘I need to save me from myself,’” Reany explained. “[They said], ‘I know I need to be more disciplined about my spending, but I need structure. I need to be able to segregate the money into my entertainment envelope or rainy-day fund or whatever, so I can get into that rhythm.’ [There’s a] shift toward supplementing traditional banking accounts with alternative payment mechanisms.”

Prepaid cards also can allow those without bank accounts (i.e. those who wouldn’t get funds directly from government agencies deposited directly to traditional banking accounts) to have access to funds. It’s a sizable chunk of the U.S. population, as the Federal Deposit Insurance Corp. (FDIC) has estimated that 8.4 million households are unbanked, at 6.5 percent of the population.

The Security Aspect

Security, of course, is top of mind and front and center (or should be) when it comes time to send out those stimulus funds, highlighting the appeal of push payments.  Drew Edwards, CEO of Ingo Money, noted the importance of that in a separate interview with Webster:

“Mobile deposit fraud was a $2 billion a year problem for banks before we were in a crisis where everybody’s desperate and people are fighting over bottles of water and toilet paper in the supermarket lanes,” Edwards said. “What do you think happens to people when they get desperate? When they haven’t been paid in a few weeks? They steal checks. So the fraud goes up, not down. The risk aversion goes up, not down.”

Edwards said platforms such as Ingo Money can speed (and secure) authentication by triangulating data on the check, data supplied by the recipient, and information gleaned from third-party databases, and then push payments to the end user.

The stimulus is urgent, but the way it’s laid out now … with reliance on the paper check, it may all translate to a rough period of “hurry up and wait.”