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In a new twist on prepaid cards in Canada, Vancouver-based Peoples Trust Co. is extending eligibility for deposit insurance from the Canadian Deposit Insurance Corp. to general-purpose reloadable prepaid cards and payroll cards issued by the financial institution.
The CDIC ruled in 2020 that prepaid cards can be eligible for deposit insurance. Peoples Group, which is the parent company for Peoples Trust, worked with the CDIC to extend deposit insurance to prepaid cards. Peoples Group provides financial services to Canadian consumers.
Peoples Trust is offering CDIC deposit insurance as a way to boost the competitive value of its prepaid cards. In the United States, prepaid cards have been eligible for deposit insurance since 2008.
The insurance offering is also a way for Peoples Trust to differentiate its prepaid cards from those issued by fintechs and banks that are making prepaid products a core part of their digital wallets. Offering deposit insurance will give Canadian consumers who want to store value on cards additional comfort, according to Howard Klein, president of Peoples Payments and Cards.
“Canada has fallen behind the U.S. in recognizing that general-purpose reloadable cards are more akin to bank accounts then they are to anonymous prepaid cards,” Klein says by email. “While it is quite common for general-purpose reloadable programs in the United States to have FDIC insurance, this is not common in Canada. The insurance does not apply to anonymous cards.”
Prepaid cardholders can have their balances protected by CDIC insurance, just as they protect their funds in savings and checking accounts. The CDIC extends deposit insurance for separate eligible deposits up to $100,000 Canadian, including principal and interest. Eligible accounts include savings and checking accounts, guaranteed investment certificates, and other term deposits. Cardholders can determine if their reloadable prepaid card is eligible by looking for the CDIC notification on the card program’s Web site or mobile app.
In the U.S., the FDIC insures funds loaded on prepaid cards if the funds are held in an FDIC-insured bank. “The insurance covers individual cardholders to the extent that the balances in the funds can be shown to belong to individual cardholders,” says Ben Jackson chief operating officer for the Innovative Payments Association, a Washington, D.C.-based trade group. “Deposit insurance protects money on deposit and helps people feel more secure about their deposits.”
In related news, Peoples Payment Solutions Ltd., which is part of Peoples Group, has enabled the e-Transfer Request Money feature on Canada’s Interac network. The feature allows money transfers via an identifier such as an email address or mobile number. When a consumer fulfills the request, the funds are guaranteed and are typically be available within 30 minutes.
