Sunday, July 7, 2013

Employers Face Blowback Over Payroll Cards

Reloadable prepaid debit cards are becoming bank accounts for a new generation of consumers. These consumers are younger, tech-savvy, and they want anytime, anyplace access to their accounts. They are not necessarily unbankable. Many say they just don't like fees and policies. Now some of that blow back is being directed at nonbanks.

According to a July 3 article appearing in the American Banker, Green Dot Corp. is coming under fire for placing long funds availability holds on personal checks deposited electronically to GoBank.

Moble Phone App GoBank

Reloadable prepaid debit cards are becoming bank accounts for a new generation of consumers. These consumers are younger, tech-savvy, and they want anytime, anyplace access to their accounts. They are not necessarily unbankable. Many say they just don't like fees and policies. Now some of that blow back is being directed at nonbanks.

According to a July 3 article appearing in the American Banker, Green Dot Corp. is coming under fire for placing long funds availability holds on personal checks deposited electronically to GoBank.

Moble Phone App GoBank
GoBank, launched in June, is being billed as the first-ever bank account designed mobile access. It has a prepaid debit card, boasts cool features like a "pay what you want" model that it likens monthly fees to "tips," and mobile check deposits.

In a statement announcing GoBank, Steve Streit, Green Dot's Founder and CEO, described the new mobile app as "a feat of consumerism that offers consumers a wide array of features and services with fair, simple and transparent pricing." Well, fees may be transparent, but according to the American Banker some customers are grousing about funds availability holds of up to 10 days on personal check deposits. A Green Dot executive defended the policy, telling the newspaper the extended holds were a fraud-protection tool.

Nonsense! We're talking about mobile remote deposit capture, as in snapping a picture of a check with your smartphone and sending it to the bank, which uses the image to electronically clear and settle the payment, typically on a next-day basis. There are fraud risks, sure, but payments companies have sophisticated tools for identifying and avoiding those risks. Ingo is one. Billed as "The Good Funds Network," Ingo customers can cash checks and have the funds loaded to prepaid debit cards, with immediate availability for a fee; it's free to those willing to wait out a 3-day funds availability hold.

I've interviewed Drew Edwards, Founder and CEO of Ingo; more recently I attended a session at the Underbanked Forum featuring Edwards, and he was asked about fraud. "It's only in the beginning," he said. "Our risk model is designed to allow us to spread risk as the network grows."

Ingo has another thing going for it: backing from card giant Visa. Lisa McFarland, Head of Consumer Prepaid Products at Visa, said Visa's support comes from an understanding that consumers are spending hundreds of billions of dollars a year with cash and check payments that can be moved to plastic.

Prepaid card companies should be looking at the long-term gains from consumer adoption. Ten-day holds on consumer deposits doesn't bode well for the long term. In fact, it's vaguely reminiscent of the check-hold policies that got banks into a lot of trouble in the 1980s and led to the imposition of federally-mandated limits on checks.


I'm interested to hear about your mobile banking experiences.
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Artwork by Mark Kelly. Say hello to Mark at  G+

1 comment:

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