The age of the monthly pension cheque is over for retirees.
Prepaid debit cards, act as a sophisticated alternate payments technology to ancient chequing systems - that are both expensive and hard to control. According to Payments Canada, the cost of issuing a paper cheque can cost between $15-25 per cheque. By migrating towards an electronic payments option, pension funds can look towards saving 41% on these transactions.
Simply put, pension funds can no longer afford carrying on with this outdated practice of mailing their pensioners monthly cheques. By using prepaid debit cards, pension funds can not only cut dramatic costs from using cheques - but unlock hundreds of thousands of dollars of potential revenue from "cash back" on card swipes. As well, with the use of prepaid debit cards, pension funds can bring pension payments in house, to gain control and complete oversight over the payment process.
This article will explore how pension funds can utilize prepaid debit cards to turn the financial burden of pension payments into an additional revenue stream, as well as regain control over the pension payment process by moving it all within the corporate ecosystem.
"By using prepaid debit cards, pension funds not only cut dramatic costs from using cheques, but unlock hundreds of thousands of dollars of potential revenue from "cash back" on card swipes."
Why is There a Need for Change?
According to a new report by Mercer, there has been a large escalation of costs associated with offering pension programs to employees. North American pension plans have reached their lowest financial state in over two years, as companies can no longer afford to offer defined-benefits to their employees after retirement.
Since defined-benefit plans guarantee a perpetual pension payout upon retirement, companies are beginning to shy away from this long term financial burden.
Due to increasing interest rates, the average pension fund had only 85% of the necessary funds to pay out pensions, according to Mercer's 2020 Defined Benefit outlook. This has caused 63% of companies to consider eliminating their defined-benefit pension plans altogether within half a decade, by closing off these options to all future participants.
Therefore, it is now time for pension funds to shift from costly pension payment systems like cheques to prepaid debit cards, which transforms the financial burden placed on pension funds into opportunities for financial growth.
"North American pension plans have reached their lowest financial state in over two years, as companies can no longer afford to offer defined-benefits to their employees after retirement."
What are Prepaid Debit Cards?
Prepaid debit cards are the ideal method of distributing the pension funds that retirees depend on. With prepaid debit cards, pension funds can confidently ensure a smooth payment process, while providing a convenient and secure platform for retirees to manage their funds. Cheques are a relic best left in the past, with prepaid debit cards taking over the industry by simplifying the pension payment process.
Prepaid debit cards work just like a Visa or Mastercard debit card, but can be fully branded to match your pension fund's custom colours and artwork. Pension payments can be loaded onto the cards each month with no unnecessary chequing or mailing fee, and the funds can easily be used at ATMs, retailers and the bank. Regain the control and confidence in the pension payment process by relying on prepaid debit cards that pave the way for a smoother and cheaper payment process.
"With prepaid debit cards, pension funds can confidently ensure a smooth payment process, while providing a convenient and secure platform for retirees to manage their funds."
What Kinds of Financial Benefits do using Prepaid Debit Cards for Pensions Offer?
Cash Back
A major benefit of prepaid debit cards is the monetization of pensions payouts. Every time pensioners swipe their reloadable prepaid card, the company's pension fund will receive up to 1.5% back in revenue. This cash back comes from the interchange fee that is charged to businesses on credit card transactions. To put this into perspective, if your pension held 50,000 accounts, this would translate to over $6.6MM in annual revenue from interchange.
Monthly Savings on Eliminating Cheques
Using cheques to distribute funds is an extremely costly method of disbursing funds. Prepaid debit cards are an inexpensive alternative distribution method to cheques. Additionally, prepaid debit cards lower the amount of fraud and loss risk involved in using cheques.
Additional Financial Service Products
Prepaid debit cards act just as a bank account would, which opens the potential for value-added financial services like loans or lines of credit that can add additional sources of revenue for your pensions.
Promotional Tool
Prepaid debit cards are both branded with the pension fund's colours, logo, and messaging, and can be personalized with the pensioner's name - making them feel a part of the fund. This acts as a strong promotional tool as pensioners can increase the likelihood of others joining the fund by spreading awareness, whenever they use the card to spend funds.
"With prepaid debit cards, pension funds can confidently ensure a smooth payment process, while providing a convenient and secure platform for retirees to manage their funds."
Interested in Setting up a Prepaid Debit Card Program for Your Retirees?
Berkeley's payments-as-a-service platform enables all of the financial services capabilities you need to issue cards, transfer funds, and load accounts - all in real-time.
