Sometimes the best new technology we have is teaching old dogs new tricks. Take, for example, prepaid cards.
Recent economic pressures are placing consumers in positions where they need to control their spending, reduce debt or find new ways to pay for merchandise. The government is also involved and new laws aimed at protecting consumers for fees are forcing many financial institutions to rethink their payment disclosure notices and redesign their fee structures. Limits on overdraft fees and full disclosure of fees in all situations has the mail flooded with rate increases and creative new fees, which in the long run may not offer the consumer the protection the legislation intended.
Credit unions – established to serve their membership and communities – are in a perfect position to address the issue at hand, serve individuals and perhaps even grow a little bit as other financial institutions are seeing consumers searching high and low for a financial partner they can trust with their money.
Prepaid cards are great. In fact, I have a couple floating around my wallet. However, I wonder who keeps the funds that I don’t spend, when do the fees kick in for that card hiding in the bottom of my wallet and what happens if I lose the card? I even purchased a couple as gifts for that certain person who has everything. Still, there is another alternative that would allow credit unions to meet consumer demand for low-cost, safe and effective electronic payments.
As I step into this risky position …
I suggest to the credit union industry that you already have the tools and technology you need to offer another viable option to prepaid cards. Why not simply set up a new account type within your existing chart of accounts and keep the rules simple and clear for its purpose. Here are a couple of ideas:
- Issue no checks – no cost, no risk.
- Back the account with a personal financial management service like Jwaala.
- Establish a reasonable daily withdrawal limit to control risk.
- Allow and encourage remote capture, automated clearing house and branch deposits through a shared branch system.
- Issue a plastic card using existing card stock or inventory to control costs.
- Restrict all overdraft activity to reduce risk. This also eliminates the pesky overdraft fees which force some consumers into a virtual downward spiral of multiple fees all tied to a single mistake.
Using these approaches, credit unions can serve consumers that may not qualify for the typical payment options. Consumers benefit because they have a means to provide payment that is widely accepted, and helps them minimize mistakes and jump on board a road that helps build a sound credit relationship with a credit union they can trust.
Who knows, someday the blink of my eye may validate my identity, pay for coffee and get me into the theater. My watch may become a mobile payments FOB carrying my entire financial relationship; and my Facebook and LinkedIn pages and tweets may appear as images on the reverse side of my glasses. Until then, I say we take a look at the technology, services and tools that we have and see how we can all get creative to help consumers get the biggest bang for their buck.