Non-bank alternatives for debit card programs

For government agencies, changes in the payments landscape have created complexity - and new opportunities - for agencies seeking to elevate service levels.

The recent withdrawal of major banks from the government benefits market has created confusion and reduced options for government agencies.

The establishment of the Consumer Financial Protection Bureau in 2011 led to many changes in the debit card program market. The increased scrutiny on cardholder fees and compliance, combined with shrinking margins and higher costs to meet new regulations, prompted many banks to withdraw from this space.

For administrators of government debit card programs - particularly finance, treasury and procurement officials - these changes have created speedbumps on the road to efficient, fast service delivery of benefits.

Government benefits and payment program needs are rapidly evolving

Traditionally, many states have required that a depository bank act as the contractor for debit card programs due to the classification of benefits as state-owned funds. However, the growing absence of depository banks providing debit card services leaves many agencies without a contractor.

In addition to providing a disbursement option alongside direct deposit and checks, agencies looked to banks to ensure that their program was compliant with all federal, state and payment industry standards, including Mastercard/Visa Operating Rules, FDIC insurance requirements, NACHA automated clearing house rules, and Federal Reserve regulations.

However, even with the withdrawal of several financial institutions from the debit card marketplace, government agencies still have many options for continuing their debit card programs through payment processors, program managers, and financial technology companies.

The upside of modern government payments

The most significant advantage of these industry changes is that agency leaders now have the flexibility to partner with organizations that often provide service levels equal to or even superior to those offered by banks.

In Conduent's decades of experience working with our state agency clients, fraud prevention and detection remains at the top of the list of government agencies managing debit card programs. Protecting benefit funds from nefarious actors requires robust fraud-fighting plans that include identity verification services, payment and disbursement account validation, and continuous fraud monitoring. Without these measures, there is a heightened risk of funds being redirected by fraudsters, posing a threat to agencies, taxpayers and cardholders alike.

Why Conduent

Our state agency clients benefit from a unique, tailored approach to managing payment programs. Our services are designed to address the specific challenges and requirements of government clients, offering a level of specialization and flexibility. Our solutions and commitments are built on:

• End-to-end program management: We act as both a program manager and processor, offering a complete end-to-end solution, including dedicated customer call centers. In contrast, banks often outsource processing to third parties.
• Customization: Our proprietary processing platform allows for tailored program configurations that meet specific client needs, whereas banks are often limited by the capabilities of third-party processors.
• Specialized call centers: Our call centers specialize exclusively in government payment programs, while bank call centers typically handle multiple lines of business, diluting their focus.
• Regulatory compliance with flexibility: While Conduent complies with all government and banking industry regulations, our operations have more flexibility since we are not subject to the additional regulations that banks must meet, such as those imposed by the FDIC and FRB.
• Client-centric focus: Unlike banks, which are often more transactional and focus on consumer and commercial business, Conduent is dedicated to the human services aspects of government clients, prioritizing their unique needs.

For state agencies, industry changes provide various opportunities to enhance service delivery contracts. As complexities increase, so do the possibilities for finding partners who can provide specialized solutions that are better aligned with the unique needs of government clients. By understanding these alternatives, agencies can not only navigate the changing environment but also leverage it to deliver more effective, efficient, and responsive services to the communities they serve.
Ready to accelerate your agency's ability to provide accurate, convenient and secure payments to the individuals who need them? Learn more or contact an expert today at https://www.conduent.com/government-solutions/government-payment-solutions/.

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