Going cashless

Payment though the ages has been a slowly evolving process. We started with a system of barter, which was not always convenient: who would want to be a tax collector in those days? We then moved to paying in gold which got replaced by cash and, for a huge proportion of the World, life did not really move on, until now. Whilst cheques and direct deposits are used by the public sector to provide money to employees, suppliers and citizens, many of citizens still have to be paid in cash as they do not have access to bank accounts (the ‘unbanked’). There have been numerous problems with all these payment methods, such as fund-clearing periods and the cost of distribution, that I’m sure you’re only too familiar with. However a revolution in ‘prepaid’ technology means that we can now all, banked and unbanked, go cashless. It has huge implications for the public sector and the efficiency and cost of distributing payments.

In the UK we are actually behind the developed World in exploiting the potential of prepaid. It is not a term that many British people understand, even though we use it all the time without thinking about it (ever used a postage stamp?). Prepaid is sometimes thought of as a card, which you can use like a credit or debit card. However prepaid is not just a card, it can take many forms, from mobile phone top ups to codes for safer online payment. Recent innovations in technology, such as Smartphone payment, have seen an explosion in the possibilities, and the ways prepaid can be used. In addition the initial outlay of implementing prepaid is very low so the resource benefits are almost immediate.

Prepaid is a way for all end-users, policymakers and processors to have immediate access to money, and monitor the transactions made. It can also be used to improve cost and introduce greater efficiency and control. In the US this monitoring has helped them to manage fraud and corruption as, unlike traditional methods, a payment trail is left so that the Government or employer can see that the money is being spent where it should be, and by the right person. Yet, unlike most efficiency savings, the customer also benefits as payments are quick and can be ‘invisible’ (even the child themselves need not know, for example, if the council or their parents are topping up their prepaid lunch card).

In the UK prepaid is already issued, in the form of cards, to asylum seekers, and some local councils have used it to improve the way they make payments to residents. It has proved popular with residents and staff. People no longer need to come in person to the Council’s offices and the staff do not have to transport cash and make cash payments, with its obvious security problems. The cards can be automatically reloaded on set dates through a central system. This reduces staff workloads and has significantly reduced the costs for processing payments.

A charity has also used prepaid to make payments to those in need. St Monica Trust provides accommodation, care and support to older and disabled people. Their Community trust fund provides monthly payments designed to help individuals through a crisis. They worked with Grass Roots to introduce a Visa Prepaid card as the most efficient way to payout short-term grants. The card has proved popular with recipients.

The recent media reports of benefit claimants spending the money on luxuries such as plastic surgery, expensive weddings and foreign holidays have provoked quite a heated debate. Of course the simple solution is to use prepaid technology to ensure that benefits are used as intended. In the US, prepaid for welfare payments is long established. Although there have been reports of claimants spending prepaid food vouchers on cigarettes, new technology can even restrict the purchases within a shop.

One of the most high profile uses of prepaid in the UK is Transport for London’s Oyster card. I recently hosted a round table with representatives from the Department for Transport, Transport for London and other bodies. It was an interesting discussion as it made us (the prepaid industry) realise that we didn’t fully appreciate all the problems providers face but, in turn, they had many misunderstandings about how prepaid could solve the challenges of delivering an efficient service. I think it is only by having these open forums that we can match solutions to problems.

Prepaid understanding and adoption is starting to grow in the UK with many predicting that it will explode this year. I think one reason for that is that prepaid will solve many of the challenges you face in the public sector, to cut costs and improve efficiency.

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