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By Pamela Jordan, EFT Strategy Division

The Department of the Treasury's Financial Management Service (FMS) is poised to launch a new debit card program in Spring 2008 with a national rollout to be completed by the end of summer. FMS selected Comerica Bank as its financial agent to issue the debit cards to Social Security Administration (SSA) and Supplemental Security Income (SSI) recipients. Treasury plans to expand the program to include additional benefit payments in the future. The Direct Express card will offer social security beneficiaries the opportunity to receive their payments electronically even if they do not have a bank account. Cardholders will have 24/7 access to their money at automated teller machines (ATMs) and will be able to make purchases at any retailer that accepts Mastercard. Cardholders can access their account information by telephone and internet, make purchases over the internet, and receive cash back with no fee at retail locations.

FMS selected Comerica Bank as its financial agent to issue Direct Express cards due in part to its years of experience with prepaid card services for state government benefit recipients. Based in Dallas, Texas, Comerica Bank is among the 20 largest banking companies with locations in 7 of the largest 11 cities. Teaming with Comerica Bank is ACS State and Local Government, Inc., a wholly owned subsidiary of Affiliated Computer Services, Inc. (ACS), who will process the MasterCard branded cards.

Debit cards eliminate the cost of cashing a check and are a safe and reliable means of receiving a payment. The Federal Reserve Bank (FRB) 2005 payments study published in the Spring 2005 Federal Reserve Bulletin titled, "Trends in the Use of Payment Instruments in the United States," validated the growing popularity of debit cards. According to the study, "Among electronic payments, debit card transactions grew the most in terms of number, from 8.3 billion in 2000 to 15.6 billion in 2003. The growth in debit card payments accounted for more than half the growth in electronic payments over the period." The goal is to reach all Federal check recipients with the Direct Express debit card. By converting every unbanked Federal check recipient, Treasury estimates savings of $48 million annually, making Direct Express a more efficient payment option for Treasury than checks, which cost $.88 more to issue.

During 2007, FMS sponsored a one-year debit card pilot with its financial agent, JP Morgan Chase (Chase), to SSA and SSI recipients in Chicago and rural Illinois. In the pilot, as will be the case in the national rollout, Treasury incurred no bank fees beyond the costs to make the ACH payment to the bank to fund the card, except for minimal Treasury costs such as for direct mail, materials and other marketing. The average cost to beneficiaries to obtain cash using the Direct Express card during the pilot was $3.87 and the average cost to use the debit card was $5.27 but it is expected that with lower cardholder fees offered by Comerica Bank and a comprehensive education campaign on how to avoid fees, these average costs should decline dramatically. In contrast, SSA and SSI recipients, on average, pay approximately $6.00 to cash their checks, while some pay $20.00 or more according to research recently conducted by FMS.

A telephone customer satisfaction survey of pilot card-holders conducted by Convergys Customer Intelligence Services, a market research firm, revealed that 85% of customers surveyed were satisfied with the debit card and 88% would recommend it to a family member or friend. The respondents who said they enrolled to avoid concerns about lost or stolen checks were 35%. Reasons for satisfaction with the card varied, with 42% saying that they were satisfied with the ease/convenience of the debit card, 72% with the speed of gaining access to their money, and 26% with the safety/security of the card.

A cardholder's benefit payments will be sent to the cardholder's Direct Express card account monthly on the recipient's payment day, providing the recipient with immediate access to his or her funds. The funds deposited to a Direct Express card account are FDIC-insured and protected by Federal consumer protection regulations, such as Regulation E. The card will allow cardholders to make both personal identification number (PIN)-based and signature-based transactions. Cardholders may use their cards to make purchases and get cash back at retail locations, as well as at automated teller machines (ATMs) or from bank tellers. Direct Express boasts other features, including live or interactive voice response (IVR) customer service to access balance and transaction history, optional paper statements, funds transfer to a bank account, and PIN changes.

Cardholders are allowed one free ATM cash withdrawal per deposit per month, and may carry over any unused ATM withdrawals to the following calendar month. Comerica Bank will assess a cardholder a fee of $.90 for each additional withdrawal. Cardholders may be charged an additional "surcharge fee" by ATM owners outside of the extensive surcharge-free network established by Comerica Bank. Through a national financial education campaign, Treasury will encourage cardholders to use point-of-sale (POS) and bank teller transactions to avoid these fees.

ATM balance inquiries, monthly account maintenance, and overdraft fees are free. In addition, Comerica Bank, at no charge to Direct Express cardholders and at the option of the cardholder, will email, text to cell phones, or call cardholders with account balance information, providing notice when their balance drops below a certain threshold amount which the cardholder designates.

In Spring 2008, some SSA and SSI recipients in Texas, Oklahoma, Louisiana, and Arkansas will receive inserts with their benefit checks introducing the Direct Express card. The program will begin with these states because a high number of their residents are unbanked check recipients. Before fall, Treasury expects Direct Express to be offered nationwide through enrollment phases across the country.

Marketing and education is critical in the nationwide rollout. To ensure success, FMS will partner with all interested parties to educate cardholders about the features, fees, and use of their new Direct Express debit card.

For information about the Direct Express card, contact project lead, Nevelyn Jones, at 202-874-9602 or Pamela Jordan, at 202-874-7143.