A Year Later, 500,000 Takers for Social Security Card Surprises Experts

The U.S. Treasury Department's Direct Express card for Social Security recipients apparently is the right prepaid card at the right time. Treasury's Financial Management Service last week reported that more than 500,000 Americans use the Comerica Bank-issued card, which is aimed at getting Social Security and Supplemental Security Income (SSI) benefits to so-called unbanked or underbanked consumers electronically. That response has surprised observers. “We had underestimated the scale they would get to in this time frame,” says prepaid card researcher Tim Sloane, director of the Debit Advisory Service at Maynard, Mass.-based Mercator Advisory Group Inc. The MasterCard PIN-based card debuted about a year ago. After being tested by JPMorgan Chase & Co., Treasury announced in January 2008 that Dallas-based Comerica had won a five-year contract to issue the card. Some $1.7 billion has been loaded onto Direct Express cards since mid-2008, with the average load about $640, according to a Treasury FMS spokesperson. Comerica's processor partner is Dallas-based Affiliated Computer Services Inc. The prepaid card's target users are the approximately 4 million consumers who receive Social Security retirement or SSI disability benefits but don't use or have access to traditional banking services such as checking accounts. The card, however, isn't limited to that cohort though “a fairly large percentage” of users are indeed unbanked or underbanked, says Nora Arpin, director of government electronic solutions at Comerica. “[The card] absolutely has met our expectations,” she tells Digital Transactions News. “We are very pleased that we have enrolled over 500,000 benefit recipients … and the enrollments are still pouring in.” The Treasury spokesperson tells Digital Transactions News by e-mail that “FMS continues to work to promote enrollment, but the pace of enrollments exceeded Treasury's initial expectations.” A recent survey of 614 users showed 95% were satisfied with the card, according to an FMS release. More than half of the satisfied users cited the convenience of using it for purchases, getting cash, or paying bills, and not needing to cash or deposit a check. One in three of the satisfied group liked the immediate access to funds, and one in five cited security. There is no enrollment fee, and a user gets one free ATM withdrawal per deposit. A consumer who each month gets a Social Security and SSI benefit thus would get two free withdrawals, Arpin says. After that, the withdrawal fee is 90 cents. Monthly paper statements cost 75 cents, and funds transfers to U.S. banks cost $1.50. For Comerica, key sources of revenue on the card are interchange and the fees. “As with any card program, interchange is an important component,” says Arpin. Despite the Direct Express card having lower fees than most cards directed at a private-sector user base, Arpin says it is meeting Comerica's business objectives, especially in reaching the unbanked and underbanked consumer segments. “We found prepaid debit cards [to be] the best way to reach that audience,” she says. While it also encourages recipients to enroll in its Go Direct program that deposits funds into checking accounts, FMS promotes the Direct Express card through TV and radio public-service announcements, information disseminated through community organizations, and through inserts sent to federal benefits recipients who still get checks, the spokesperson says. Nearly a decade into the 21st Century, benefits cards seem certain to grow as Baby Boomers retire and prepaid cards of all stripes gain further acceptance. Mercator's Sloane predicts that with the rapid addition of Direct Express cardholders over the past year continuing, though at a slowing pace, the load value onto Social Security cards could hit $20 billion as early as next year, exceeding the $18 billion Mercator predicts for payroll cards in 2010. Comerica's contract with Treasury has options for two one-year extensions, Arpin says. The bank also issues about 4 million cards for 25 programs in 13 states.