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The surge in the nation's unemployment rate has been good news for the distribution of network-branded prepaid cards that pay jobless benefits, according to a report released by Mercator Advisory Group.
In its 36-page study report "The Resilient Nature of Prepaid: A Bright Spot in a Down Economy," Mercator identifies the issuance of branded prepaid unemployment cards as one of 18 prepaid segments that is growing despite the nation's down economy.
The report identifies 33 prepaid card segments. Seven of the segments were likely to see negative growth, and eight were likely to experience neutral growth, Maynard, Mass.-based Mercator says.
Twenty-six states offer prepaid debit cards to pay unemployment benefits, according to survey conducted by ATM&Debit News. Another 20 states either are considering or are planning to use prepaid cards.
Some of those states are conducting pilots in which they are using prepaid cards to pay out unemployment benefits.
JPMorgan Chase & Co. is one the largest issuers of prepaid cards for unemployment benefits.
New York-based Chase provides unemployment benefits via prepaid debit cards in Arizona, Colorado, Louisiana, Michigan, New York, Rhode Island and Texas.
"JPMorgan helped seven states distribute more than $887 million in funds to approximately 925,000 cardholders during February," John T. Murray, a Chase spokesperson, writes ATM&Debit News in an e-mail message.
The figure does not include Alaska and West Virginia, which Chase began working with after February, Murray says.
Chase now issues debit cards to pay unemployment benefits for a total of nine states. The nation's growing unemployment rate will continue to benefit debit card issuers such as Chase, Mercator says. In June, the unemployment rate rose to 9.5% as nonfarm employment shed 467,000 more jobs, according to the U.S. Bureau of Labor Statistics. The number of unemployed persons is 14.7 million. Since the recession began in December 2007, the numbr of unemployed persons has increased by 7.2 million, the bureau says.
"The big winner in prepaid is almost certainly going to be state unemployment," Mercator says. "Every major state except California [which is considering paying unemployment benefits with prepaid cards] has now made distribution of state unemployment funds on prepaid cards the preferred mechanism whenever the resident is unable to receive funds through direct deposit. With the unemployment rate increasing dramatically since the middle of 2008, this segment is sure to see a major increase in loads." ATM
