Breaktime, a nonprofit in Boston that provides homeless teens with jobs, housing and temporary financial support, had a problem: Homeless people couldn't get much value from the paper checks it gave out.
After a year in the Breaktime program, teens are eligible to move into the self-sufficiency phase of the program, when Breaktime provides an ongoing stipend for up to three years. It recently shifted from checks to a reloadable debit card from GiveCard. The card enables Breaktime to load the cards with specific amounts each month accessible to users wherever they are.
"Previously we had to offer these payments as checks, and participants had to come into our office to pick them up, which was a headache for all involved and people weren't getting money when they needed it," said April Tate, manager of training and recruitment at Breaktime.
Lurein Perera, the Malawi-born CEO of GiveCard, saw this problem evolving several years ago when he tried to help a homeless man but he had no cash and the man had no phone to accept a Venmo donation.
Gift cards appeared to solve the problem, and Perera began GiveCard, which is also based in Boston, by gathering donations to hand out prepaid Visa-branded cards to hungry and distressed people so they could buy food and other necessities.
But as GiveCard's program gained momentum, it was difficult to replenish users' funds when they needed money. And gift cards provided no visibility into how recipients were spending the donated funds.
To gain more control over the program and add utility for end users, GiveCard has announced a more versatile, reloadable debit cards in partnership with Highnote, a San Francisco-based digital card-issuing platform.
"It's the next step in our journey to get money out quickly to needy people, and regardless of whether they have a bank account or a phone, they can use this card to make purchases and get cash," Perera said.
Following a recent pilot, GiveCard this month is rolling the program out widely to its base of nonprofits that serve a broad range of needy recipients.
In addition to Breaktime, the Uplift Foundation, a nonprofit in Stevens Point, Wisconsin, is also adopting GiveCard's debit card for its "agile giving" model designed to quickly get varying amounts of money out to women in crisis.
"GiveCard lets us support women and children across the country who are in crisis by quickly disbursing financial resources directly into their hands at a time when they need it most," said Angie Heuck, Uplift's founder and executive director.
Founder Jason Gardner plans to drop CEO duties for a new role at the payment technology firm, which is expanding its focus to larger financial institutions as some existing clients slump.
While reloadable debit cards aren't a new concept, Highnote's platform, which went live last year, offers a different twist by linking its credit and debit card to a client's general ledger, to simplify fund flows and reporting, according to Highnote CEO John MacIlwaine.
"Building our platform around the general ledger allows funds to flow more seamlessly and transparently than a lot of legacy methods that require more steps," MacIlwaine said. Highnote issues Visa and Mastercard debit and credit cards for a variety of organizations with bank partners including Sutton Bank in Attica, Ohio.
Through an API sandbox, organizations can create and test their own card programs and set up controls in a user dashboard to reload cards on demand, as well as track end users' spending patterns, MacIlwaine said.
"Organizations can add their own innovations based on unique features they want," he said.
In most cases, nonprofits using GiveCard set up cards for needy recipients to work at any retailer and to enable cash withdrawals through surcharge-free ATMs.
"People still want cash for a lot of things and with these debit cards they can get it when they need it," Perera said.
While Highnote can also issue virtual debit cards, nonprofits serving needy populations typically opt for a physical debit card that is reloadable and contactless, and may feature the sponsoring nonprofit organization's name on the card.
Highnote's platform also generates spending data about GiveCard's debit cards, which is critical for proving the program's value to charitable organizations and funders, according to Perera.
"They can see what categories the money is going toward — like food or apparel — and how quickly the funds are being used, which wasn't possible with gift cards or even giving people handfuls of actual cash," Perera said.
Because the cards are prepaid and the amounts are capped at relatively low funding levels, fraud is not a major concern, he said.
"We perform due diligence on the nonprofits we work with, and through a dashboard they can turn debit card funding on and off as needed," Perera said.
Highnote's platform competes in an increasingly crowded sphere of digital card issuers with players like
"There has been a lot of demand from challenger banks and others for debit card solutions, and although there are quite a few providers, Highnote's ledger capabilities are a differentiator from many competitors," Shipper said.
The challenge for companies providing debit card issuing is the cards' relatively slim profit margins, according to Shipper.
Debit card programs generate lower revenue than credit due to credit cards' higher interchange rates, so a successful program must scale quickly to become profitable, he said.
"A one-size-fits-all approach will be lost in this competitive market," Shipper said, "which is why we see so many innovations among debit card issuers looking to create new use cases for cards that solve a problem no one else is solving."
