Eliminating waste, extraneous expenses and keeping budgets in check are important for any business. But when it comes to the public sector, departments must be even more cognizant of inefficiencies. In 2014 the Canadian federal government announced it was considering using prepaid cards to distribute federal benefits to individuals currently receiving payments by cheque.
Government organizations who are considering prepaid cards want to:
- Simplify and track business travel and expense claims
- Provide an alternative method of tax refund disbursement to those without bank accounts
- Efficiently manage and measure the disbursement of social security and disability benefits
- Eliminate the high administrative and postage costs associated with distributing cheques
- Provide fast access to funds for emergency relief payments
1. Better Budget Departmental Expenses
A prepaid card is a simple way to ensure employees and recipients receive the funds they need without the risk of overspending. Prepaid cards can only be used for the amount placed on the card. If that limit is reached, the card will no longer work, preventing overspending and accumulated debt.
The cards are easily reloadable and can be instantly funded via an online platform that integrates with existing systems, such as SharePoint. This simple fail-safe helps managers and departments meet strict budgets and helps employees and recipients easily identify when they've reached their spending limit.
2. Track and Limit Card Usage
Not only can limitations be placed on the funds loaded onto prepaid cards, but limitations can also be put on merchant types and merchant locations as well. This means cardholders can only use their prepaid card at certain locations - for example, at gas stations if the card's purpose is for refueling government vehicle fleets. This active security feature prevents the misspending of funds, and is highly customizable depending on the requirements of the program.
Transaction data from prepaid card usage can also be measured and monitored, with custom reporting allowing administrators full visibility into how much money is loaded, how much is spent, geographic data, and card activity data.
3. Get Rid of Receipts and Petty Cash
The traditional way of managing business expenses (using petty cash, collecting receipts or waiting for a monthly bill, filling out an expense report and then reimbursing the employee) is outdated and time consuming.
The drawback to this method is how limiting it is for employers and employees. Petty cash is insecure, hard to track, and useless for purchases that need to be made online. Collecting paper receipts is always a hassle. Simply provide employees with a prepaid card whenever they travel; employees use them to pay for expenses. Daily limits can be set and employees' purchases are automatically recorded on statements/reports and accessible via an online platform, meaning no additional expense reports needs to be filled out.
4. Replace Cheques With Plastic
A 2014 survey conducted by the federal government polled Canadians on what they thought about replacing paper cheques with reloadable prepaid cards for those who can't receive payments using direct deposit. The obvious benefit to government is reduced costs. The average cost of issuing a cheque is estimated to be $15-25 - this includes materials and distribution costs, as well as labour and time taken to issue a cheque.
Postage is another cost that is significantly higher when issuing cheques. By implementing a reloadable prepaid card program, recipients receive funds instantly and automatically on their card, bypassing the snail mail system completely.
Consumers also benefit from prepaid cards. Those without direct deposit accounts must pay fees to cash cheques and are easily exploited by predatory lenders and payday loan establishments. With prepaid cards this isn't a problem, as cardholders can realize the entire benefit of the funds instantly by either using the card at point of service terminals or withdrawing funds from an ATM.
Consumers have the additional benefit of being able to make online purchases as well, since cards work on Visa or MasterCard networks anywhere around the world.
5. Distribute Payments Faster in Emergency Situations
With prepaid cards' instant issuance capabilities, funds can be immediately loaded on-location and delivered to victims of ice storms, floods, fires and other natural disasters. In these situations recipients need the funds without delay for hotels, gas, food and other urgent necessities.
Instead of relying on donations or waiting on funds from an insurance assessment, prepaid cards allow victims to quickly access funds and purchase required items for themselves and their families in times of need.