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Table of Contents

Lead Story

No train, no gain

News

Industry Update

Heartland clamps down on breach

Heartland's call to action

Money launderers game for online merchants

Friendly fraud raises fears

2009 Calendar of events

Features

Strong LINC in the payments chain

One council, one voice

Selling Prepaid

It's a wide, wide world of prepaid

Prepaid in brief

The prepaid landscape for 2009

Lessons learned from European prepaid

The benefits of tax refunds on plastic

Views

Make security a small-merchant priority

Scott Henry
VeriFone

Revisit that elevator speech

Biff Matthews
CardWare International

The long fingers of PCI

Ross Federgreen and Rick Allen

Education

Street SmartsSM:
Remain in service? Be of service

Jason Felts
Advanced Merchant Services Inc.

Stand by your plan

Jeff Fortney
Clearent LLC

Helping merchants help themselves

Christian Murray
Global eTelecom Inc.

Collecting opportunities

Curt Hensley
CSH Consulting

Totally tailored presentations

Daniel Wadleigh
Marketing Consultant

Get the FUD out of PCI

Tim Cranny
Panoptic Security Inc.

Company Profile

ProPay Inc.

ACH Payment Solutions

New Products

When taking debit becomes a snap

Snap-on Mobile Payment Device
Company: Motorola Inc.

A mobile printer for the payments jungle

EM 220
Company: Zebra Technologies Corp.

Inspiration

Ditch the dark side

Departments

Forum

Resource Guide

Datebook

A Bigger Thing

The Green Sheet Online Edition

February 09, 2009  •  Issue 09:02:01

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SP
The benefits of tax refunds on plastic

In recent years the Internal Revenue Service has pushed electronic income tax filing and direct deposit for refunds. But most of the 100-plus million refunds the IRS issues annually are still accomplished by mailing paper checks to recipients. The majority of checks are mailed to lower-income individuals, a portion of whom can be termed unbanked.

But the unbanked are starting to receive their refunds on open-loop, reloadable prepaid cards. It reduces overhead costs for the IRS - paper, postage and handling. It also reduces the costs for recipients without bank accounts. Instead of having to cash checks at check cashing businesses that charge high fees, refund-loaded prepaid cards come with minimal fees.

Furthermore, refund cards act as alternative banking tools. Unbanked consumers can use Visa Inc.- or MasterCard Worldwide-branded cards to pay for goods and services online, as well as in face to face retail environments.

According to Brent Watters, Senior Analyst at Boston-based consultancy Mercator Advisory Group, the market for cards loaded with tax refunds can be lucrative. While still in the preliminary stages of exploring this market, Mercator estimates the load amount on open-loop, reloadable refund cards might exceed $800 million in 2009.

On the bandwagon

Tax preparer H&R Block, with its Emerald Card program, is the leader in this market, accounting for more than half of Mercator's projected total load volume. In 2008, H&R Block reported 2.6 million Emerald Cards were in circulation. The IRS stated the average tax amount refunded to taxpayers was $2,383 in 2008.

Watters combined those two statistics to come up with an approximate 2008 load volume for the Emerald Card at $460 million. To account for the remaining portion of that $800 million figure, Watters pointed to the potential amounts garnered by newer players in the market: Jackson Hewitt with its ipower CashCard and UniRush LLC with its RushCard, for example. Financial institutions recognize tax refund cards can act as a gateway product for establishing relationships with unbanked or financially underserved consumers.

"Just like the program manager or issuer of a general purpose reloadable card, they want to build a relationship, and what a great introduction," Watters said. "Get your tax dollars loaded onto here. Start learning the benefits of these cards. So, absolutely, it's a good way to promote additional services."

Just getting started

In 2008, The U.S. Department of the Treasury's Financial Service implemented a prepaid card on which Social Security payments are loaded.

"That was a major program, and we identified it in our prepaid benchmark study," Watters said. "We're going to see some pretty amazing growth out of various federal government agencies turning to the cards for making payments."

Notice to readers: These are archived articles. Contact names or information may be out of date. We regret any inconvenience.

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USAePay | Impact Paysystems | Electronic Merchant Systems | Inovio | Board Studios, Inc.