Prepaid payments boost rollout of Canada’s new dental care benefit

Eligible Canadians will soon receive access to a new national dental care benefit that will give children with families who make less than $90,000 a year as much as $650 per child to care for their teeth. To qualify for the initial phase of the benefit, families will need to attest that they have booked a dental visit for their kids, that they don’t have private insurance, and that they will have out-of-pocket expenses for the appointment. Families who receive this support will also have to keep their receipts in case they are audited. If this process and record-keeping requirement sounds overly complicated and inconvenient, that’s because it is. Luckily, there’s a better solution already out there. Open-loop prepaid products are already a proven and trusted payment mechanism to make the dental care benefit a more accessible process for citizens, and a more transparent, efficient, and secure process for government. Despite the success of Canada’s rapid and unprecedented financial response to the pandemic in delivering needed support quickly, it exposed flaws in the way benefits are distributed. While most Canadians who received this financial aid chose to enrol in direct deposit, a sizeable number—including many of the most vulnerable Canadians—continued to rely on paper cheques. The drawbacks of relying on cheques is well documented: it can be difficult to deposit funds, meaning recipients need to count on costly cheque-cashing services; cheques can be lost or stolen; and cheques are more likely to result in fraud. There is also the issue of unclaimed cheques. During 2019, the Government of Canada issued more than 30 million cheques to disperse funds to citizens and business, leaving more than 800,000 unclaimed payments with an outstanding value of $370-million. These are significant issues. They raise questions of equity for marginalized people, value for taxpayer dollars, and, quite frankly, general efficacy of government benefits should the status quo continue. Prepaid alleviates these concerns. With an appeal to businesses, consumers, and governments, open-loop prepaid solutions are known for their efficiency, security, and flexibility of electronic payments without involving credit, or having to be tied to a bank account. Open-loop prepaid products have a large acceptance footprint and can be accepted online and in-store—anywhere the card network is accepted. Prepaid is also flexible, regulated, and protected by the same fraud and loss protections offered by credit card networks. Jennifer Tramontana is the executive director of the Canadian Prepaid Providers Organization, a not-for-profit organization that serves as the collective voice of the open-loop prepaid payments industry in Canada. Photograph courtesy of the CPPO It’s clear the mainstream financial sector has already embraced this shift. Since 2015, Royal Bank of Canada has supported the replacement of paper cheque disbursements within the public sector in Canada through the Right Pay government prepaid platform. From the start, the Right Pay platform was built for flexibility and limitless scalability to support the largest payment programs in Canada within the Ontario Disability Support Program and Ontario Works. The new dental care benefit presents the perfect opportunity for the Government of Canada to adopt a similar approach. The dental care benefit is a perfect example of how government should be looking to innovative, customer-centric solutions to public service delivery. Canadian companies, fintechs, and financial providers are willing and ready to assist. For those eligible for the program, prepaid products can complement direct deposit and address many of the limitations of cheques. They are particularly well suited to meet the needs of the unbanked or underbanked, who tend to be from the most vulnerable segments of society and who would see a greater benefit to receiving prepaid cards versus a cheque. Should government want to top-up the initial payment for dental care down the line, it’s also easy for funds to be directly deposited by government on an ongoing basis. The reloadable nature of prepaid eliminates the need to send out multiple cheques and would provide a more convenient and cost-effective solution for citizens. There’s also the added benefit of speed. Prepaid funds can be delivered in real-time and deposited to citizens’ accounts in seconds—with a government confirmation that payment has been received and deposited. For the consumer’s benefit, funds are loaded electronically on a reloadable card (or smartphone) without reliance on the mail. The use of prepaid payment products would also ensure that funds are spent by recipients where they were intended to go, namely for dental care. Using prepaid payments that are directed towards a single purpose like the dental care plan would allow funds to be restricted to specific merchant categories, such as health and dental services. The unused portion of dental care payments could be returned to government on expiry. All these controls cut down on the potential for fraud and misuse. The level of partnership between Canadian governments and fintech companies in the prepaid ecosystem is trailing other countries. These solutions have been in use around the world for many years and Canada’s reliance on cheques is a significant outlier. In the United States, government beneficiaries no longer receive payments via cheque. Instead, they rely on prepaid to deliver benefits, with more than 3.5 million actively used cards every month. In Europe, the use of electronic vouchers has also reached the European Union’s political agenda in the context of considering effective payment methods for vulnerable and at-risk individuals. The experience of Canadian governments leveraging prepaid technologies has been limited, but nevertheless underscores the public interest case for the broader adoption of prepaid as a part of the government’s payment disbursement toolkit. We continue to encourage the federal government to include prepaid technology among the methods used to disburse federal support payments. Such a change will provide recipients with an alternative that will allow them to avoid the costs, inconvenience and limitations associated with paper cheques. This would also address other equity and inclusion issues for vulnerable populations who rely on cheques. The Canadian government has taken the initiative towards modernizing its payment delivery mechanism, but it must do more. Given the increased concerns around fraud from issuing cheques and relying solely on traditional direct deposit methods, it is imperative we ramp up our embrace of prepaid through partnerships between the Canadian government and fintech companies. We believe prepaid solutions can quickly, securely, and equitably serve all Canadians better and more cost-effectively. Jennifer Tramontana is the executive director of the Canadian Prepaid Providers Organization, a not-for-profit organization that serves as the collective voice of the $8.7-billion open-loop prepaid payments industry in Canada. The Hill Times