More than one in five people in the UK live in poverty. This number is expected to rise by a further 1.3 million by 2023 as the cost of living continues to skyrocket. Now, increasing numbers of the population view emergency welfare funds as necessities. Lifelines they need, simply to help make ends meet.
Multiple governmental schemes have been introduced to help people get through these difficult times. The Covid Winter Grant ran from December 2020 to March 2021 and the Household Support Fund is continuing until the end of March 2023, while Free School Meals support is an ongoing initiative. Each one has been administered by local authorities in a bid to make disbursement of funds as quick and efficient as possible.
But authorities have struggled to keep up with demand. A large part of this is simply the logistics of ensuring that those in need receive the necessary funds in a timely manner, but ease of claiming, choice, and ease of spending have also emerged as critical considerations. As such, Blackhawk Network conducted research and released a report on the views surrounding vouchers and prepaid cards as alternatives to traditional payment methods for effective emergency fund disbursement.
Finding ways to help more quickly
Cheques take too long to mail out, while BACS payments need a minimum of three working days to clear – and with recipients, by definition, needing these funds in an emergency, this was simply too long. Both also incur significant admin fees when totalled, which included the additional hurdle of local authorities not being able to store recipients’ bank details, resulting in a large amount of repeated back-and-forth. These admin costs were taken from the overall funds that should have been helping people to pay their bills.
And all this before even taking into consideration the unbanked population who would be unable to receive either method of payment, which most recently was estimated to be over a million people up and down the country. Clearly, alternative methods of payment were necessary. Desperate to help their constituents, local authorities turned to third-party providers such as Blackhawk Network to help distribute funds through alternative methods, finding success with a mix of prepaid card and voucher schemes.
People prefer vouchers and prepaid cards
Ease of claiming
Alternative payments, such as prepaid cards and vouchers, remove much administrative work to help funds reach the people in need. They can be administered quickly, not only cutting out the time needed to negotiate financial details, but completely removing the need for them. Research from Blackhawk Network also uncovered that 71% of those surveyed found vouchers to be an easier way to claim support, compared to pre-loaded bank cards. It was also comparable to the 74% who preferred direct or cash transfer and cheque.
Both pre-paid cards and vouchers come with administrative costs, but in neither case are these massive impediments. In the case of alternative payments such as vouchers, local authorities need to work with specialist providers, so that costs of the voucher scheme can be absorbed by them and aren’t passed onto the local authorities. There are minimal fees to establish prepaid cards, however these compare favourably when put up against providing cash or making BACS payments.
Speed of receiving funds
This same research also found that vouchers provided the best overall experience for recipients – 30% received their money within two days and only 11% were waiting more than two weeks. In contrast, 17% who received payments through cash were still waiting after two weeks.
Range of spending options
Simply put, there is no point quickly receiving vouchers if you are unable to use them. While cash is universally accepted, alternative forms of payment are not. Fortunately, most big supermarkets, and many other vendors like hardware and clothing stores, have signed up to these schemes – meaning that most of the in-store purchases people need to make are available to be made with vouchers.
Meanwhile, prepaid cards are well placed to sidestep any issues regarding spending options. While there are some limitations in comparison to cash, prepaid cards can be used anywhere that debit or credit cards are accepted as payment.
Interestingly, a key concern for 84% of those surveyed was that they wanted to see some level of control over what the support is spent on. And while there is no requirement for spending reports to be sent to central government, the auditability of vouchers also provides a range of data to help refine their services.
Choice
According to the results of our survey, 84% appreciate the support that vouchers give in terms of choice. Unsurprisingly, this includes help with utility bills (82%), food (67%), and rent (44%) rank highest, followed by transport costs (23%) and household items (19%).
The future for alternative payments
Predictions are that we are only just entering the cost-of-living crisis. Over the coming years, it is very possible that more emergency welfare funds will have to be made available. However, since 2020 when the uptick began, local authorities have learned that alternative methods of payment are ideal for both themselves and the recipients. They have reduced costs and admin burdens, while creating a better experience for the beneficiaries to the point where voucher and, to a lesser degree prepaid card, schemes are now the go-to methods of payment for many local authorities. In fact, local authorities claimed it significantly helped alleviate many challenges when using a third-party provider to disburse payments via vouchers.
As a leader in this field, Blackhawk Network is in prime position to continue facilitating the disbursement of funds to those in need. In 2021 alone, we actively provided pandemic emergency relief support and helped to issue over £2 billion. While local authorities may not have the resources or tools in place to manage fund distribution effectively, alternative payment solutions should certainly be considered, and vouchers are an option that ticks all the boxes.
