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Stimulus checks: Is your institution still prepared?

woman depositing stimulus check

The distribution of stimulus payments ($1,200 in most cases) to American taxpayers already feels like ancient history amid the head-spinning news cycle of the COVID-19 pandemic. Few people realize, however, that such assistance is still in the process of being sent.

The initial batch of payments was made in mid April via ACH direct deposit to taxpayers whose bank account information was on file with the Internal Revenue Service. For this to be the case, a recipient:

  1. Had to have been owed a federal tax refund in the past two years.
  2. Had elected to receive their refund via ACH and provided bank information. Fortunately, a large percentage of Americans meet these criteria (those receiving Social Security benefits via direct deposit also qualified).

The process wasn’t perfect, of course. Some bank accounts had been closed since those earlier IRS communications. Others were seldom used, leaving recipients unaware their funds had arrived. The remittance advice looked exactly like a tax refund and given its mid-April timing stirred some confusion. Nonetheless, it was an effective means of issuing over 80 million payments in short order.

It only covered a bit less than half of Americans entitled to government stimulus, however, which is where the tried-and-true paper check comes into play. Beginning in late April, roughly 5 million stimulus checks were mailed on a weekly basis. The IRS estimates this process will take up to 20 weeks.   

Despite the IRS’s stated intent to prioritize distributions to lower income individuals, Financial Health Network research finds that Americans earning less than $30,000/year are receiving their stimulus payments later than more affluent recipients. It logically follows that those most in need of supplemental funds, including many in the unbanked population, are likely receiving paper checks. Of course, this is occurring amid a “perfect storm” in which many branches remain closed to limit the spread of COVID-19. 

Banks and credit unions have taken proactive steps to address this logistical challenge. Many have increased dollar limits for mobile check deposits, at least in part to prevent these four-figure government checks from adding to drive-through teller queues. On that front, financial institutions have a wonderful opportunity to borrow a page from the Chick Fil-A playbook. This customer service trendsetter staffs drive-through lines with tablet-wielding facilitators, turning what looks like daunting backups into a rather pleasant customer experience.

Similarly, banking customers with straightforward needs like a standard check deposit can be diverted to a parking spot and processed separately- possibly even engaged in a “teachable moment,” a hands-on demo for future use of mobile check deposit. The same logic can be applied to the most complex transactions. Why hold up a long line of cars to support a customer with a more time-consuming need?

It may be wiser to re-imagine a “curbside” banking model rather than force-fit the legacy drive-thru approach. An individual suddenly in receipt of a $1,200 check may also be a candidate for a new account opening, or could be in need of advice on how best to deploy these funds across a series of obligations. These are exactly the new and/or deeper relationship opportunities that banks and credit unions have been craving, and are now more mutually beneficial than ever.

It’s safe to assume we won’t be returning to “normal” branch operations anytime soon. Ironically, many “branch of the future” enhancements recently implemented at certain locations now run counter to social distancing guidelines. Americans’ need for banking services is greater than ever, however. Some functions- including check deposits- can be transitioned to digital channels. Others are “high touch” by their very nature- the trick will be to limit the degree of literal touch to conform with new environmental expectations.

Even if your institution has weathered the initial storm of stimulus payments- both paper check and ACH, not to mention the all-consuming Paycheck Protection Program application process- there’s no time to rest. Discussions for the next round of stimulus are already well underway.  

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