The pandemic has changed how consumers purchase goods, with many avoiding brick-and-mortar stores due to the continued threat of catching the virus in public spaces.
Shoppers are instead redirecting their purchasing energies toward the digital realm, with recent PYMNTS research finding that 29.2 percent of U.S. consumers did at least some shopping online as of April 11 — a figure that had risen to 35.7 percent by May 23.
Consumers are also changing how they pay for their purchases, with a recent study finding that debit card spend was up 11.7 percent year over year during the third week of May. Consumers today are especially likely to use their debit cards for their eCommerce purchases or to make in-store purchases with mobile wallets, and card-not-present (CNP) transactions represented 43.1 percent of total debit spend during that week. This finding marked a big leap from the same period the prior year, in which CNP transactions accounted for 32.1 percent of total debit spend.
Not all consumers can afford to make necessary purchases, however, as many have lost jobs or face other financial strains due to the crisis. Federal and state governments are therefore working to provide emergency aid, and many are turning to debit to deliver it. Debit can offer quick disbursements to recipients who are unable to receive funds via direct deposit as well as allow them to access funds without facing the fees typically associated with cashing checks.
The July Next-Gen Debit Tracker® digs into how debit payments are being leveraged to support consumers during the pandemic.
Around The Next-Gen Debit World
The U.S. Department of the Treasury and IRS are switching gears to provide consumers with stimulus funds via prepaid debit cards rather than physical checks. The cards are expected to reach 4 million consumers and offer them a low-cost method to quickly tap into the funds, but initial rollouts have hit hurdles. Many individuals received the cards in unmarked envelopes and threw them out because the recipients believed they were scams or marketing offers. The government is trying to help those who have discarded the cards by waiving first-time card replacement fees and is working to resolve this issue as it debates whether — and how — to roll out additional aid.
This is not the first time the government has turned to debit to provide social safety net funds. Monthly Supplemental Nutrition Assistance Program (SNAP) disbursements have been delivered to hungry families via electronic benefit transfer (EBT) cards for more than a decade. The government is now looking to expand a pilot program that enables EBT users to spend the money online and remotely shop for groceries, which would help them avoid physical interactions that could expose them to COVID-19.
Debit cards are also being used to more quickly pay workers who need fast compensation now more than ever. FinTech Galileo recently announced a debit card-issuing solution that its financial institution (FI) clients can use to supply cards to their own business customers. The offering is especially useful for clients delivering FI-branded debit cards to their freelancers, enabling these firms to disburse payments onto the cards via automated clearing house (ACH) or instant payment rails and thus ensure rapid payouts.
To find out more about these stories and other headlines, read the Tracker’s News and Trends.
How Prepaid Debit Cards Bring Safe, Swift Aid To Vulnerable Households
Federal stimulus funding can provide lifesaving support, but not everyone is eligible to receive it. Even taxpaying undocumented immigrants and their U.S. citizen spouses and children are excluded from receiving such aid, prompting some states to step in to fill the gap. Providing relief to these vulnerable families is tricky, however. They may not have bank accounts, but they still require quick and inexpensive access to money while staying anonymous.
In this month’s Feature Story, Rose Jones, director of the Rhode Island’s Office of Healthy Aging and head of the state’s quarantine and isolation workgroup, and Kathleen Cloutier, executive director of immigrant- and refugee-focused nonprofit Dorcas International Institute of Rhode Island, discuss the state’s recently launched weR1 RI Relief Fund, which the nonprofit helps administer. Cloutier and Jones detailed how prepaid debit cards are enabling the program to offer undocumented families much-needed support without putting recipients at risk.
Find the full story in the Tracker.
Deep Dive: Why The Treasury Switched To Debit Card-Based Stimulus Payments
More than 45 percent of U.S. residents had no more than $2,500 in savings as of March 27, meaning that the economic downturn has hit them hard. The federal government has been working to distribute financial aid that could ease some of this pain, but consumers have faced long waits for money issued via paper checks.
This month’s Deep Dive examines the Treasury Department’s switch to sending funds via prepaid debit cards as well as the benefits and frictions experienced during the plan’s initial execution.
Download the Tracker to read more.
About The Tracker
The Next-Gen Debit Tracker®, a PYMNTS and PULSE collaboration, provides an in-depth examination of debit’s changing role in banking and retail and offers an insightful, data-rich look at how providers can innovate within these areas.