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A year after the U.S. Department of the Treasury launched a prepaid card for Social Security and Supplemental Security Income recipients, the agency's Financial Management Service announced Tuesday more than 500,000 recipients have signed up for the MasterCard-branded Direct Express card.
That figure helps back industry predictions that Social Security benefits likely will become the largest single open-loop prepaid card segment. But many consumers who are accustomed to receiving benefits by check will continue to resist converting to a prepaid card, one analyst says.
The card is designed for the approximately 4 million unbanked federal-benefit recipients who rely on paper checks. David Lebryk, Financial Management Service commissioner, says the cards have helped the department meet both of its chief objectives: serve unbanked citizens and reduce the mailing costs associated with a paper checks.
This accomplishment benefits both the government and the taxpayers, he says. "Those are two things we feel very strongly about and think are important," Lebryk says.
Sending a check costs between 98 cents and $1, while a direct deposit into a card account costs about 12 cents, Lebryk says. The department did not make available how much it has saved in mailing costs.
When the cards first launched in April 2008, the Treasury Department promoted them on a rolling basis involving about eight to 12 states per month. The southern states were a primary focus at the start because of the impact the hurricane season has on states such as Florida, Louisiana and the Carolinas.
"The primary purpose for that was we really tried to make sure we had the ability to deliver people's benefits payments in a safe, secure way," Lebryk says.
The focus shifted last year to the western states, a region prone to wildfires.
William H. McCracken, CEO of Synergistics Research Corp., an Atlanta- based research marketing firm, believes the department may need to change its marketing strategy to convert more check recipients to the prepaid card.
A recent letter sent to Social Security recipients highlighted the start of both the hurricane and wildfire seasons as reasons to sign up for the card. Those warnings fail to connect with many recipients other than those potentially affected by such disasters, McCracken says.
"I don't think that will resonate with consumers, particularly the farther you get away from a natural disaster," he says.
Instead, McCracken insists the government continue to promote the safety, convenience and low cost of the cards. "That's what they need to be focusing on to help overcome the resistance consumers have to receiving benefits a different way," he says.
Through the end of June, Financial Management Service had deposited more $1.7 billion in Social Security benefits directly into the card accounts, Lebryk says. The average load was $640.
Dallas-based Comerica Bank issues the cards. ACS State and Local Government Inc., a wholly owned subsidiary of Dallas-based Affiliated Computer Services Inc., processes the transactions.
Cardholders receive one free cash withdrawal per deposit from any ATM in the United States. Additional withdrawals cost 75 cents. The Direct Express card network offers surcharge-free access at approximately 50,000 ATMs throughout the country, including such banks as Comerica, Charter One and PNC Bank.
Surcharge-free ATM networks Privileged Status, owned by EFT network Shazam; Alliance One; and the MasterCard Worldwide ATM Alliance; and MoneyPass also are included.
Cardholders pay no sign-up fees for the card, and purchase transactions are free, Lebryk says. Recipient satisfaction is high, according to a recent survey by the department. Of the 614 recipients surveyed, 95% said they are satisfied with the card, and 86% said they would recommend it to family members and friends who receive federal benefit payments.
A large marketing campaign involving senior-citizen groups, law-enforcement agencies and some financial institutions helped many recipients understand how the card works, Lebryk believes. "We're quite pleased with the initial response, and we believe the level of satisfaction with the card will speak loudly and encourage others to sign up with the card," he says.
As the department looks for other ways to reduce the cost to handle and distribute paper checks, Lebryk believes the card holds promise for other entities such as the U.S. Department of Veterans Affairs, which provides patient care and federal benefits to veterans and their dependents.
"We'll continue to look at other opportunities where we can use the card," he says. ATM
