Millions of prepaid card users will soon be able to deposit paper checks to a reloadable Visa prepaid card using remote deposit capture on a mobile phone. Cardholders will have immediate access to funds deposited in this way.
Visa Inc. and Chexar Networks Inc. announced today the launch of a network platform — including Chexar remote deposit capture technology — to digitize traditional banking services for prepaid consumers. The service will be made available later this year to new and existing RushCard, AccountNow and Plastyc cardholders, and to select FSV Payment Systems cardholders.
Initially, the platform will support check deposits to Visa cards, funds transfers between direct deposit accounts and payment cards, person-to-person payments and bill payment services whether in-person, online, on a mobile device or at an ATM. Transactions will originate and terminate with a financial institution partner and consumer funds will sit within an FDIC-insured account.
Chexar predicts that 11 percent (770 million) of consumer checks will be deposited using a mobile device by 2016.
"We see this network utility as more than a technology, it's an evolution in the way people deposit and move funds and our goal is to make that process frictionless and immediate for consumers," said Drew W. Edwards, Chexar founder and CEO. "It's no secret that reloadable prepaid cards are growing in popularity, and we are happy to provide consumers with a secure and convenient way to deposit funds and have immediate access to their money. Our agreement with Visa represents an inflection point for the prepaid industry, and will only grow as mobile devices become more ubiquitous."
A study by Visa found that nearly 35 million consumers receive wages and government disbursements via paper check and that for 34 percent of them, direct deposit was not an option offered by their employer. A separate study by McKinsey & Company estimated that $1.18 trillion in person-to-person payments were made by check in 2009.
According to the Federal Deposit Insurance Corporation, more than 28 percent of U.S. households in 2011 weren't connected to the traditional banking system and many were turning to prepaid. In 2011, prepaid card use rose by 18 percent according to Javelin Strategy and Research.
"Consumers are choosing reloadable prepaid cards at an increasing rate," said Hyung Choi, head of U.S. prepaid at Visa Inc. "Mobile technology and other payment innovations are enabling us to enhance Visa's prepaid experience and bring all the conveniences of traditional banking options to consumers who choose to use prepaid."
For more on this topic, visit the mobile banking research center.