Alliance & Leicester has introduced a prepaid card payments solution for local councils in the wake of the government’s scheme to transfer payment of housing benefit to claimants, rather than their landlords.

A prepaid card scheme will allow councils to save up to 75 per cent of their processing costs for the payment of housing benefits, as well as remove the average 10 per cent charge to the recipients when converting cheques to cash.

The prepaid card solution is aimed at the 800,000 UK citizens who receive housing benefit, while being classified as “unbanked”, that is without access to a deposit or current account. The prepaid card works in the same way as a Visa debit card, allowing claimants to access funds from ATMs, banks and building society branches, as well as providing live account balance information, and online and telephone access for account servicing.

The prepaid card scheme does not require any major IT system developments for the council. Councils can also make use of the card for internal purposes such as staff expenses and as a flexible payment solution for temporary workers.

The government hopes that paying housing benefit to claimants will promote personal responsibility and empower them to budget for themselves and that it will help workless tenants to develop the skills they will need when they move into paid work.