Hip-hop legend Russell Simmons was a man on a mission when he co-founded the prepaid RushCard 13 years ago.
Simmons was appalled that tens of millions of Americans are shut out of traditional banking services because they can’t make a minimum deposit, can’t afford the bank fees, or lack proper documentation to open an account. He wanted to create a banking alternative that was safe and convenient and would empower the disenfranchised to realize their financial goals.
RushCard debuted with a long list of firsts for prepaid cards:
• One of the first to offer direct deposit.
• One of the first to offer check-writing capabilities.
• One of the first to offer cash loading at more than 35,000 locations nationwide.
• One of the first to offer money-management tools that helped users track balances, create budgets, and analyze spending.
Glitch grinds the gears
But after more than a decade of successful operation, everything went sideways last October when a computer glitch occurred as the company moved to a new transaction-processing vendor.
Suddenly hundreds of thousands of RushCard users had no access to their cards or were told their accounts were empty. For people living on the economic margin, that was catastrophic. There were reports of RushCard users trying to fish change out of their sofa cushions to buy enough gasoline to get to work, and of not being able to buy food and medicine during the week their cards were unusable.
To make it worse, the volume of calls and emails to RushCard’s offices brought down its website and phone system, so card holders became even more frenzied as they couldn’t get information.
Rushing to make it right
The company had one big advantage, however, that outraged customers seldom encounter. Simmons was apologetic, responsive, and determined to make things right.
The company worked round the clock to fix the problems. Fees were waived during the time the cards were unusable. Simmons established a multi-million dollar fund to help compensate customers for their losses.
"I understand many people will get their money and never use us again,” Simmons said at the time. “Those who stay will be glad they did. Either way I'm so deeply sorry for this horrible experience.”
This week RushCard rolled out its revamp designed to reward those who stayed with it and to appeal to new customers. Its new mobile app, available on both Android and iOS Apple platforms, provides best-in-class security features. One such is “Pause Protection.” That feature allows a card owner to remotely disable their card if it’s misplaced or stolen. RushCard is the first major prepaid card to have such a function.
The app also features One Touch Access, which lets customers access their RushCard account through their smartphone only after it identifies their fingerprint—an added level of security and another first for a prepaid card.
In addition, the revamped RushCard includes a pharmacy e-card that gives customers access to discounts on prescription medications at Walmart.
“Our customers have told us these new features are important to them, and we’re pleased to be able to offer them safe, easy-to-use, affordable products that help them reach their financial goals,” RushCard CEO Ron Hynes told Banking Exchange about the new product’s roll-out. “These unique, innovative features will benefit our customers, providing them with enhanced levels of security and peace of mind.”
Banking on past success
RushCard was a popular pioneer in the prepaid market, offering benefits others did not. It was one of the first reloadable prepaid cards, and—particularly beneficial for the lower-income customer base it targeted—the RushCard was the first to offer customers direct-deposit that allowed them to access their paycheck or benefits two days early. It offers the convenience of being accepted everywhere Visa is, can be used fee-free at 23,000 ATMs, and has customer service available 24/7.
That history, along with consumer awareness that almost everything is subject to computer failure these days, may help make RushCards users fairly forgiving. After all, when a failed switchgear in Atlanta shut down Delta airline flights around the world this summer, customers were inconvenienced and frustrated, but the airline didn’t fall into ruin.
Even CFPB seemed reluctant to find fault with RushCard’s computer snafu, although Director Richard Cordray did express concern at the time about the “cascading financial effects” for consumers locked out of their accounts, such as late fees on unpaid bills. The bureau had proposed regulations for the prepaid card industry a year earlier, but those rules dealt with consumer protection issues such as fee disclosures and access to account information, not technical glitches.
A spokesman for RushCard said this week that “the company is thriving” as it rolls out its new product and is thrilled to be bringing these new products and services to its customers.
“We are proud of RushCard’s track record as a pioneer and innovator in the prepaid space,” Simmons said in a statement announcing the changes. “From the early days of prepaid, RushCard helped shape this industry and continues to provide innovative products that are easy to use, convenient to access and help provide financial opportunity to our customers.”
Simmons’ words from last year may prove prescient: Those who stay with RushCard and enjoy its new perks likely will be glad they did.