The Assets and Transaction Account

Over the past two decades, policymakers, academics, and others have pursued an array of policies and strategies to help lower and middle income households to build savings and assets and access reasonably-priced financial products at mainstream institutions.  While some progress has been made, there have been few advances to delivering a high-value, affordable financial product at scale.

Over the last five years, however, technological developments, new entrants into the financial services market, and new insights into consumer demand, particularly the financial behavior of lower income consumers, have boosted the creation of innovative financial products. Prepaid products–accounts that are pre-funded and accessible using network branded cards–represent an important development in the evolving financial services industry.  While similar to debit cards connected to a checking account, prepaid products are not explicitly linked to a typical demand-deposit account.  As such, these products can meet many of the transaction functions that checking and savings accounts offer, but without the limitations of credit checks and ChexSystems.  Plus, they can offer remittance and money order functions that are valued among lower income consumers.

To build on the financial innovations offered by prepaid products, leverage the billions of dollars in annual tax refunds, and harness the bargaining power of the federal government, this paper proposes the delivery of an Assets and Transaction Account–or ATA–at tax time.  Each year, tax refunds would be electronically deposited into individual ATAs for tax filers who do not direct deposit their refund into another account or who do not opt out of the ATA.  The refund would be bifurcated between a transaction and a savings account, with five percent automatically deposited into an interest bearing savings account. 

The ATA, which would be issued, delivered, and serviced by financial institutions on behalf of the U.S. Department of Treasury, would be accessible with a network branded card and could be used for point of sale transactions, to access cash, to make web-based or telephone bill payments and retail purchases, and possibly to make remittances and secure money orders.  The savings component would help to meet short-term expenses and savings goals. And with enactment of federal legislation, the ATA could serve as the “plumbing” for large-scale asset policy targeted at lower income families. 

The full report is available below, in PDF format.