Consider the following scenarios. When a major clothing retailer lost a class action lawsuit, counsel was looking for an effective and simple way to distribute members' settlement. In the automotive industry, a large North American car manufacturer wanted to distribute goodwill payments to customers in advance of potential legal action. Another car manufacturer recalled vehicles, and looked for help developing a compensation program that benefited both the customer and the corporation.
What are the similarities in all these cases?
When deciding on a strategy for distributing payments, organizations have to make tough decisions that impact customer loyalty and satisfaction, class member interests, budgets, timelines and administrative burdens.
Distributing cheques is the traditional method in Canada and the United States for disbursing rebates, settlements, and goodwill payments. They're a trusted method, but can be inconvenient for recipients and expensive for administrators.
Recipients have to go to an ATM or bank to deposit funds, which typically take 5 days to clear. For those who don't have a chequeing account, cheques mean potentially paying a fee to cash the cheque. Plus reissuing lost and stolen cheques can be difficult and time consuming, contributing to poor customer experience.
On the administrative side cheques have their benefits. But the costs associated with administering a cheque (the average cost to issue a cheque is estimated at $15-25) and the paperwork involved tend to be significant.
But there are alternatives.
Pay With Prepaid Plastic
The companies mentioned above chose prepaid Visa cards to distribute payments for the convenience and cost effectiveness to both the organization and the card recipient.
For payment recipients prepaid cards offer a world of convenience:
- Cards can be instantly activated via telephone or online.
- Funds can be spent at any retail or online store that accepts Visa. Money can also be withdrawn from ATMs.
- Those without a chequeing account can access and spend the money instantly
- Funds can be replaced if a card is lost or stolen
- Funds are protected from fraudulent activity
- Cards can be issued faster than cheques, which need to be deposited and need 5 days to clear at the bank
For clients, prepaid cards cut administrative costs and timelines:
- Clients can load or reload cards using a simple online platform, 24/7.
- Manufactured cards can be kept "in inventory" as part of emergency preparedness planning for quick deployment
- The cost to issue prepaid cards can be significantly less than a cheque, which can cost anywhere between $15-25/cheque (See cheque calculator here.)
- Improved response rate. By increasing the accessibility of the funds to claimants, claimant response rate can be higher than with traditional cheque distributions.
- Avoid "cashless" settlements: As an alternative to coupon settlements, cards can be restricted to a particular defendant such as a retailer or manufacturer allowing counsel and the court to avoid controversial "cashless" settlements.
- Easy integration and order processing. Orders can be controlled, tracked and automated by the client or accounting/law firm managing the process.
- Branding of the card and material allows the company to present a positive message with the payment.