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Government prepaid cards could save Australia nearly $1 billion over next four years


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Sydney, 23 April 2012: New economic analysis by Deloitte Access Economics suggests that switching from current payment methods to prepaid cards for select government payments could provide annual benefits in excess of $240 million per year – or nearly $1 billion over a four-year budget cycle – for Australian consumers and governments, a significant amount in tight fiscal times.

The report, Efficient and Modern Payments: Benefits of Government Prepaid Cards, commissioned by Visa, assessed the efficiency impacts on government-to-citizen payments and the wider community of the greater use of prepaid cards, both at the Federal and State levels.

The results show that while electronic payments are already providing benefits to consumers and governments worth billions of dollars, there is significant scope for further efficiency gains in moving to new prepaid card-based payment instruments and away from existing paper-based approaches.

Deloitte Access Economics Director, Dr Ric Simes, said the analysis showed that by using electronic payments, Australian governments could make substantial additional savings.

“The distribution of hundreds of billions of dollars to individuals and businesses by Federal and State governments each year incurs significant administrative costs,” Dr Simes said.

“Government departments remain, for example, among the highest users of cheques. While the way targeted payments are processed has become more efficient in in recent years, the increased adoption of technology and measures such as prepaid cards have the potential to deliver even greater savings.”

Visa’s Country Manager Australia, Vipin Kalra, said the report highlighted how consumers could benefit through the increased use of prepaid cards at times of most need.

“The report also shows how these prepaid solutions can help during times of great stress, like during natural disasters when timely and effective emergency payments are most critical, or for foster parents managing the expenses of their important role,” Mr Kalra said.

“Equally, everyday payments like Medicare refunds and tax return refunds could benefit by going electronic through prepaid cards.

“Governments are realising that there are significant costs attached to cash and cheques.  As a result of the rapid adoption of new payment technologies in all sectors we’re seeing a fundamental shift in the way people think about payments here in Australia. We’re moving away from paper-based and expensive payments such as cheques and toward the convenience and accessibility of electronic payments,” Mr Kalra said.

The Deloitte Access Economics analysis also found prepaid cards have several key advantages over current government payment options:

  • Time-critical payments can be transferred the same day, which is particularly useful for emergency and disaster relief situations where payment delays associated with electronic transfers can cause significant hardship.  
  • Prepaid cards can replace government payments currently made by cheque and cash. Although cheques are a costly payment option for both governments and recipients, there are currently limited alternatives where a recipient is unbanked or their account details are not known. Prepaid cards offer a cost effective and convenient alternative to cheques.
  • Prepaid cards can be used to limit the use of payments. This is particularly useful for situations where citizens are eligible for expense reimbursements – for example foster carers and emergency services volunteers. Payments can be managed more effectively and recipients are not left out of pocket while waiting for reimbursement.
  • There are potentially significant administrative and compliance benefits associated with the shift to prepaid cards for key government agencies.

“At a time of significant fiscal pressure on all levels of government and across the community, the efficiencies found in this report present an excellent example of innovative technology adding to productivity. As one of the most advanced ePayment countries in Asia, Australia is best placed to maximise the benefits and efficiencies that ePayments bring,” Mr Kalra said.

The scope of the report did not consider prepaid card benefits such as the reduced likelihood of fraud and the ability to more closely monitor program spending.

Visa commissioned the report as part of its Currency of Progress platform (www.currencyofprogress.com), which is dedicated to discussing the benefits of digital currency around the world.

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