According to statistics compiled by The Guardian, 20.3 million families (or 64 percent of all families) in the U.K. receive some form of welfare. Additionally, government benefits account for more than half of the income for 30 percent of U.K. families. In those households particularly, many individuals have never held jobs or budgeted finances, as they have relied on the government to handle the payment of rent and other utilities.
Those recipients are in for a shock this October. July 2013 research by the U.K. charity and financial planner, Citizens Advice Bureau, said that 90 percent of 1,700 Citizens Advice clients polled are not equipped to handle their own finances, with majorities unable to keep track of monthly expenses, prioritize bill payments and manage benefits online.
The shift to UC is therefore also of concern to housing authorities and other businesses that have received payments in a timely fashion from the government; they don't know if they will be receiving payments on time, or at all, starting in October.
Prepaid card providers like London-based Contis Group Ltd. are positioning themselves to offer the flood of benefit recipients without the means or knowledge of how to manage finances with alternative financial services solutions. Geoff Leech, Head of Partner Development for credecardplus at Contis Group, said disruptions will be unavoidable with such a massive shift forced on benefit recipients. But Contis Group has been working with credit unions in the U.K. to ease the transition.
Through credit unions, Contis Group offers the credecardplus digital wallet that comes with a Visa Inc.-branded prepaid card component. Contis Group Managing Director Mike Fromant said the program allows cardholders to set up individual buckets (or envelopes) for recurring bill payments to individual billers, with the prepaid card used as a separate envelope for day-to-day spending. The e-wallet thus automatically "segregates" welfare payments to reduce account holders' temptation to overspend or misuse funds, Fromant said.
Contis Group also offers a 4 percent cash back reward feature on its program. Fromant said the company partnered with 20 U.K. retailers, including Asda Stores Ltd. (owned by Wal-Mart Stores Inc.), for the reward program. Fromant noted that accountholders who shop at the stores in the program can more than make up for any fees they incur, such as to withdraw funds at ATMs with the cards.
It is anticipated that 8 million U.K. claimants will eventually be affected by the implementation of UC. Contis Group estimated that hundreds of credit unions across the U.K. do not provide alternative banking products, making them critically unprepared for UC and the onslaught of individuals without access to traditional bank accounts who will seek out credit unions for financial assistance.
"The credit union partners that we're dealing with are working on ways of actually helping them overcome that massive transition in their lifestyle, so they don't suffer from rents arrears and don't fall behind with their council tax and essential bills such as gas and electricity," Leech said. "What we've got to do as a responsible, ethical organization is to make sure that those that are going to be severely affected by it are helped."
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