The FRB Finds Data On Government-Administered General-Use Prepaid Cards Hard to Come By

by Mercator Advisory Group 0

The Federal Reserve Board recently published the “Report to the Congress on Government-Administered General-Use Prepaid Cards” as mandated under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010. The FRB received 15 responses to the 68 surveys it sent, which went to 15 banks, 50 state treasurers, treasurers for the District of Colombia and Puerto Rico, and the Department of Treasury’s Financial Management Service. Some of the key findings from this 22% response rate included the following:

“In 2010, depository institutions provided cardholder-use information for 90 federal, state and local programs operating in 36 states. These programs employed 20 million cards [2 million federal and 18 million state], representing more than one billion transactions that were valued at $34.8 billion.”

“Interchange fees were reported for 45 of the programs, encompassing 24 states. The average interchange fee for transactions in these programs was 30 cents, or 1.1 percent of the transaction amount. This average interchange fee is lower than the average 2009 debit card (including prepaid card) interchange fee revenue of 44 cents per transaction and average 2009 prepaid card interchange fee revenue of 40 cents per transaction reported by payment card networks in a separate survey administered by the Board.”

The report identifies the average fees paid by cardholders:

“In addition, depository institutions provided cardholder fee information for 70 programs. For these programs, the average 2010 cardholder fee was $9.69 per card, or 0.3 percent of the total amount disbursed to cards.”

But perhaps the most revealing statistic is that programs lost money on ATM Transactions:

The average automated teller machine (ATM) cash withdrawal fee was 47 cents, or 0.3 percent of the amount withdrawn. The average ATMcash withdrawal fee charged to cardholders, however, was about 20 percent less than the amount paid by card issuers to the ATMoperators for these transactions.”

Mercator Advisory Group is currently compiling the responses received from processors that will likely be very different from these numbers because we ask for load values, not spend values and by going to the processors we believe we have established, at least for the moment, a larger sample size.

That said, our technique does not provide any information on what specific programs are being operated or for whom, and the Mercator Advisory Group survey does not collect information on fees charged to cardholders. As a result, we trust this FRB survey will provide an additional level of detail that will be additive to the Mercator Advisory Group benchmark survey due out in late August or early September.

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