Some groups of claimants should get their benefits in the form of prepaid cards, a think-tank report has argued. The Demos report says this would increase financial inclusion, encourage 'responsible money management', and reward savings behaviour.

Key points

• Prepaid cards are increasingly used by local authorities: 25 per cent currently use them, and another 30 per cent plan to do so in the next year. The cards are used to make a range of funding transfers to residents, including personal budgets for social care.
• Prepaid cards would be a secure way of paying universal credit to claimants without a bank account, as well as those who are 'underbanked' (suffering from poor access to mainstream financial services).
• Claimants would be lifted out of the expensive and inconvenient cash economy, allowing them to shop online and set up direct debits, and improving their credit ratings.
• The cards could also help people to save and budget more effectively.
• A further advantage of prepaid cards, the authors say, is that they open up the potential for greater control by the state over how benefits are spent.

Work on the report was supported by Mastercard.

Source: Claudia Wood and Jo Salter, The Power of Prepaid, Demos
Links: Report | Summary | Demos press release | Guardian report (1) | Guardian report (2)