Think-tank Demos has recently published a report on the benefits of local authorities using prepaid cards for a variety of purposes. At present, they are chiefly used in administering direct payments which give service users more choice and control over how to spend their social care budgets and have been popular with both card users and local authorities. The report outlines the potential benefits of using prepaid cards for administering Universal Credit, local welfare assistance (formerly Social Fund) payments, and in offering those on low incomes an alternative to a savings account. It identifies particular groups who would benefit from receiving their payments through a prepaid card: the ‘unbanked’, those at risk of financial abuse, and those who want to voluntarily ration their own spending.
People in supported housing – the elderly, disabled people, people with substance misuse issues, people with mental or physical health problems, and people experiencing or at risk of homelessness – often fit into one or more of these categories. This suggests that prepaid cards could be of significant benefit to them in the face of welfare reform. The potential benefits include:
Many people living in supported housing are ‘unbanked’ either by choice because of a distrust of the banking sector or by exclusion due to poor credit or lack of proper documentation. Demos consulted people, particularly those in supported housing, whose lives were ‘almost entirely paper-based’, relying on cash and cheques for all of their financial transactions. In an increasingly paper-less and electronic society, this excludes the ‘unbanked’ not only from financial institutions but from mainstream financial habits. Currently the ‘unbanked’ are able to receive their benefits through a Simple Payment card which can be used at local shops to withdraw cash and this is potentially how Universal Credit will be administered to those without bank accounts. However, while Simple Payment cards provide people a way to access their money without a bank account, they do not promote inclusion into the financial mainstream. Demos argue that prepaid cards could essentially serve as a ‘bank account lite’, offering the benefits of using a chip and pin card at tills, setting up direct debits, and online shopping without a formal bank account. They could also help people build a credit score and manage savings.
Safeguarding and Security
People living in supported housing are generally identified as being more vulnerable and in need of safeguarding measures. Prepaid cards could offer service users greater protection from financial abuse than they would have if they received their money directly into a bank account or with a Simple Payment card which only allows for cash withdrawals. This is because prepaid cards allow local authorities to easily monitor a service user’s spending activity in real-time, giving advisers the ability to spot unusual purchases and investigate them quickly. If Universal Credit payments are received monthly, using a Simple Payment card would also mean that people would be receiving large cash lump sums which in a supported housing environment could raise the risk of theft. Prepaid cards would offer more security in that they would eliminate the need to hold lump sums of cash and can be reported lost or stolen and cancelled immediately.
Budgeting and Independence
People in supported housing may have limited budgeting skills, so the proposed monthly Universal Credit payments are going to present a considerable challenge to service users. There will be an exception to this rule that will allow people to receive payments more frequently, however the process is still unclear and will be at the discretion of an adviser – the service user will not be able to decide for themselves how frequently they receive Universal Credit payments. A prepaid card could put this power back into the hands of the service user who could choose to include self-restraint measures on their card. For example, people could choose a weekly cap on spending, block certain kinds of retailers (e.g. betting shops) or limit the amount that can be withdrawn in cash to help them budget their money. In a sense, a prepaid card could provide people with a ‘trial run’ of managing a budget and bank account with an added safety net. This will help people develop budgeting skills for the future with the aim of achieving greater independence.
The Government’s personalisation agenda is intended to give people more choice and control over their own lives. Currently personal budgets are only used for social care, health, and education, but this could be rolled out to other areas, including supported housing. In the same way that people receive direct payments from local authorities to then choose and purchase their own social care, in the future service users could receive a direct payment with which to purchase supported housing themselves. Prepaid cards could be used for this purpose, offering service users and local authorities better monitoring and less administration as they have in the case of direct payments for social care.