How prepaid solutions can drive impactful and inclusive government disbursements

When it comes to public spending, European governments are facing the dual challenge of managing increasingly tight budgets and satisfying taxpayers demands for greater efficiency and transparency.

Social welfare disbursements, which cover a wide range of benefits such as pensions, housing, family, and disability aid, represent a large part of government spending. The European Union’s social protection benefits expenditure surpassed €4.3 billion in 2022 ^[1].

Getting disbursements right is crucial. The U.K.’s 2022 Energy Bills Support Scheme highlighted the importance of efficient delivery methods. The initiative aimed to mitigate the impact of rising energy costs by granting £400 via vouchers to each household. While the initiative was largely successful, it faced challenges as two million homes with prepaid meters experienced issues, with a fifth failing to redeem their vouchers manually. This case highlights the necessity for disbursement plans to be tailored to the diverse needs of recipients.

Prepaid card solutions provide a gateway to significantly improve the inclusivity of government disbursements. They offer a flexible approach that both enhance the impact of social programmes and empower greater financial inclusion. Prepaid card solutions can also increase the reach and utilisation of disbursements, enabling controlled and targeted use of funds, and providing the government a deeper look at spending patterns.

Prepaid card solutions allow recipients, often vulnerable people such as refugees and the elderly, to receive and spend funds without needing a bank account. With a notable portion of individuals remaining unbanked in Europe, access to digital and online services that prepaid solutions facilitate can serve as vital entry point into the digital economy for many. Unlike paper vouchers, prepaid cards allow for discreet transactions, protecting users from potential bias.

It's also not just recipients who benefit. Prepaid cards can help governments ensure that social disbursements are spent as intended, reassuring taxpayers, and helping to drive and meet specific economic or policy goals. These cards can be programmed for use in physical stores, thus boosting local economies and supporting small businesses. For example, Spain´s Bono Cultural Joven (Youth Culture Voucher), a Mastercard prepaid card issued by Correos, provides 18-year-olds with a €400 grant to spend on cultural products and activities, significantly boosting their spending in these areas.*

Taking this a step further, prepaid solutions also offer secure payment methods and the ability to monitor how, when and where funds are spent, protecting individual data by not sharing purchase details. The analysis of this anonymised data can reveal spending patterns and identify frequent spending locations, providing valuable insights for programme design.

Mastercard, with decades of experience helping governments across the globe, delivers effective disbursement schemes by using our expertise, technology and scale, helping governments establish efficient disbursement infrastructure, unlocking growth and inclusion in a digital age. Whether is beneficiaries, issuers, acquirers, card schemes, or merchants – prepaid card solutions harness the unique advantages of each partner to create powerful and efficient solutions.

^{* Up to March 2023, the Bono Cultural Joven card facilitated 911,267 transactions, an increase of 24.82% compared to the previous month. Since October 2022, total purchases in nearly 3,000 participating establishments throughout Spain reached €32,907,584, an 18.56% increase compared to March figures.}

^{[1] Eurostat, “Social protection expenditure up in 2022,” November 2023.}