Ecount News

Blown Away

Chain Store Age

This month's topic: natural disasters and their implications for payment systems. But first, a personal note. In 1989, Hurricane Hugo devastated the island of St. Croix in the Virgin Islands, where I was a reporter for the daily newspaper. On the morning after the storm, I made my way to a basically intact Pueblo supermarket on the outskirts of Christiansted, the island's capital. With the store manager at my side, and with rumors of widespread looting sweeping the island, we looked out at a crowd growing larger by the minute in the store's parking lot. That's when I conducted an interview I'll never forget: "Have you had any looting?" I asked. Without taking his eyes off the crowd, and with very little optimism, he answered: "Not yet." Later that day the Pueblo shelves were bare. There are lessons to be drawn by disaster-preparedness officials, but this is a payment-systems column.

Following the heartbreaking devastation of Hurricane Katrina last month, news came that debit cards would be distributed by emergency relief groups to displaced victims. Paying Attention immediately applauded this move, and my faith in recovery authorities received a much-needed boost. Many of the storm victims had neither physical addresses nor bank accounts (70% were bankless, according to one survey), and a debit card would provide them almost instant access to emergency funds from the Red Cross or the Federal Emergency Management Agency (FEMA). Poor evacuees could use the Chase issued MasterCard debit cards at just about any store in the country. And they could get much needed cash from ATMs. The debit card seemed like an ideal payment application.

Then came the headlines:

• "Hurricane Victims Faced With Debit-Card Chaos"
• "Disaster Relief Debit-Card Fiasco"
• "FEMA, Red Cross Programs Confusing"

These were followed by reports of recipients using their emergency-relief debit cards to buy extravagant luxuries rather than the bare necessities. This should in no way be construed as a specific weakness of the debit-card relief program. In fact, the debit cards are designed so that purchases of alcohol, firearms and other types of nonessential transactions are automatically blocked - a safeguard that paper checks or automatic deposit cannot match. For an example of the power of a debit card to deliver payment in emergency situations, consider Stein Mart. The chain lost three stores to Katrina. Thousands of employees were displaced. Yet all of them were paid on payday morning.

How? The company implemented a payroll-debit-card solution in July that eliminated paper checks. Through a system from Ecount, Conshohocken, Pa., funds were dispersed electronically to employee's Visa-brand debit cards. Payroll debit cards have long been touted as an easier way for employees to receive wages without needing to wait for the mail or return to the work site. That's particularly true in emergencies. Paying Attention still maintains that debit cards are a good idea for displaced victims in need of assistance.