The US obsession with prepaid cards has led to this bizarre world where providing prepaid cards to the unbanked population is hurting them through a pletora of unregulated fees. While PPC have helped SMEs to lower admin costs and streamline the back office processes, they have now passed new costs and inefficiencies to the weakest link of the chain through payroll PPC. These people are worse-off than when paid through paper cheques due to the high costs of usage fees. This is absurd!
The Fed had come a long way in regulating debit cards fees but PPC regulation now seems more urgent. The US should look at other countries (including their own neighbour to the south, Mexico) which have issued laws requiring a fee-free bank account for payroll deposits. It is ludicrous to think that in the US employers will force employees to accept deposits to PPC even when they have their own bank account!
This is the perfect example of how not to implement policies for the unbanked, by expanding a banking instrument. Plus this sets the stage for what is to come to induce real competition to retail payments through mobile. If consumers are granted a fee-free account, new schemes may try to compete with credit card payments by performing electronic transfers between accounts in real or near real time. Regulators must step up to protect a basic bank account as a first step to achieve these goals.