Nonprofit Distribution of Prepaid Cards
by Rachel Schneider
This report explores experimentation in nonprofit distribution and marketing of prepaid debit cards to underbanked consumers. We focus on three community organizations to discover the potential role for such groups in distributing financial services.
 
Community organizations play a critical role in the lives of their members. By providing a variety of services such as credit counseling, legal assistance, and employment training, they seek to directly improve the lives of their members. Nonprofit community-based organizations have begun to explore their possible role in distributing prepaid debit cards to members. By distributing prepaid debit cards to their members, they are seeking to provide members with a convenient, cost-effective financial tool that will, in turn, strengthen member participation and a sense of shared ownership. 
  
This paper explores how three such organizations—the Center for Community Change, the Consumer Credit Counseling Service of Delaware Valley, and the Service Employees International Union—are combining a new product, prepaid debit cards, with new marketing and distribution methods to provide economical and convenient financial services to their communities. These organizations serve many people who have low incomes, often lack bank accounts, and frequently use check-cashing services. As a result, their costs for the services can often be high and the ability for saving and asset building is limited.
  
Community organizations frequently work with individuals who have no bank relationship and rely upon check cashing or related services for their transactional needs. Prepaid debit cards provide an economical financial tool for the underbanked, and community organizations provide a distribution and support channel for these products.
 
 For millions of U.S. consumers, prepaid debit cards are an important financial tool. They offer safety, convenience, predictability, and accessibility, especially for those who lack a direct relationship with a traditional financial service firm. By providing a safe way to carry an account balance, manage cash, and pay for purchases, prepaid cards can mimic the functionality of a bank account.
 

The relationships between community organizations and their members provide unique opportunities for the distribution of prepaid debit cards. Many of the underbanked population need guidance regarding how to properly use these cards as well as education related to the basics of financial management. Community organizations have a relationship with their members to provide this guidance as well as the mission to see it through. By adjusting operational models to meet consumers where they are, local community organizations are uncovering the significant potential in providing financial services to the millions of individuals who are currently underserved by traditional banks.

 

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Nonprofit Distribution of Prepaid Cards

 

 

Author Name: 
Rachel Schneider
17 pp.   

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