The Bundestag, Germany’s federal parliament, has passed legislation to introduce specialized debit cards for asylum seekers, with strict limits on how and where users will be able to spend the money. The plan closely mirrors a pilot program initiated in New York City earlier this year that provides migrants with prepaid debit cards.
In Germany, these debit cards would prohibit users from sending money abroad, a measure intended to prevent asylum seekers from sending money to family and friends in other countries. Migrants would also be limited in their ability to withdraw cash from the card. The main objective of the debit card is to reduce “the administrative burden on local authorities, preventing the possibility of transferring money from state support to countries of origin and thus combating the inhumane crime of people smuggling.”
Currently, asylum seekers in Germany receive roughly €500 in monthly benefits. Due to their lack of residency status, they can’t open their own bank account. Prepaid cards have been growing in popularity among migrant workers for some time now, since they provide a way to mitigate the problems of the unbanked.
A German Pilot Program
Since late last year, the German initiative has undergone a trial phase in Greiz, a town with a population of just over 20,000 people located in the former East Germany. The usage of these debit cards is limited to local stores in Greiz that accept Mastercard, with restrictions on online purchases.
This effort was spearheaded by a conservative state administrator Martina Schweinsburg, who considers it a success. She also acknowledges that providing migrants with cards instead of cash carried a cultural component.
“When they go into a supermarket and buy groceries for €20 and unroll a big pack of money to pull out a hundred-euro note then it doesn’t make a good impression,” Schweinsburg told the German state-owned media outlet DW.
New York’s Debit Card Plan
Earlier this year, New York City launched a pilot program to provide migrants with prepaid debit cards. The cards—loaded with an average of $12.52 per person, per day for 28 days—can only be used to buy food and baby supplies.
The cards were touted as a replacement for the non-perishable food boxes the city had been providing to migrants. Despite the pilot program’s $53 million price tag, city officials anticipate annual savings of $7.2 million.