As corporations consider utilizing prepaid as a tool to increase revenue and/or decrease costs , it is imperative that they ensure the dollars sent for loading go directly to, and are protected by the issuing bank. Here are some fundamental things to consider:
- FDIC Coverage: All corporate monies need to be deposited into an account that qualifies for FDIC pass-through insurance. In the depository institution, monies shall be insured on a “pass-through” basis in the amount of $250,000 for the interest of each cardholder.
- Accounting and Recordkeeping: Essential to the issuing bank’s operation, and in response to regulatory requirements, detailed bookkeeping of debit and credit entries to all accounts should be maintained on a daily basis. This daily reconciliation of accounts is critical information for the regulators with respect to matters such as the bank’s overall financial soundness and their cash position with the Federal Reserve Bank. The debits/credits are applied to the set-up account based on file feeds (including prefunding) and are determined by number of cards issued, card balances and card transactions.
- Access: The set-up account can only be accessed via a systematic, file-feed process. There can be no manual ability to directly make debits or credits. All debits and credits must be traceable, and subject to audit reviews.
One final note: once payment is made and funds are processed, the monies become the property of the individual cardholder, and cannot be accessed by anyone but the cardholder.
Prepaid, when implemented correctly, is a powerful financial instrument that can be levered to help an organization meet its primary business objectives. Companies that intend to lever prepaid must complete the necessary due diligence in order to guarantee their monies are protected.