The Disaster Banking Account

Disaster Banking Account Product Design

For banks looking to help their communities plus expand their relationship with their local county municipality, the Disaster Account Set (DAS) is an underutilized product with a strong and growing need. For any given disaster, be it a hurricane, earthquake, tornado or other event that displaces a material section of the population, there is an outpouring of support and donations. The problem is that most counties are not set up to be able to handle incoming payments or make outgoing disbursements for a disaster-specific purpose. As a result, most municipalities never get a chance to help the people in need outside of basic public safety.


While it is true that there are many worthy organizations that do collect and disperse money such as the American Red Cross, the problem is that the American Red Cross and other non-profits are restricted on what they can use the funds for. In addition, donations to these organizations most likely cannot be earmarked to target a particular community. In other words, your donated funds might help the victims that you intended, but might not. A Disaster Account Set allows the county to be ready to go at a moment’s notice in order to receive funds and then target the money to where it can best serve the community such as for providing extended shelter, food, clothing, transportation, private debris removal or mental health support.


A DAS is comprised of multiple operating accounts that are set up ahead of time with at least one handling incoming payments. In addition to setting up the account, banks must establish specific accounts with multiple payment companies such as Dwolla, Paypal, Square, Stripe and others in order to be able to handle electronic payments as well as ACH, checks and even cash. To the extent the bank can work with the county to establish a pre-staged website and social media sites where multiple forms of payments can be received, so much the better. In addition, a basic marketing plan and materials are also helpful. It is likely that your local county doesn’t have these banking, marketing and technology skills, so this is an excellent way to add value.


In addition, a companion account or accounts are then set up to handle the various stages of disbursements.  Here, and this is critical, banks must either establish or work with an existing “fund administrator” that approves the disbursement of funds. Banks can take on this liability, but the reputational and operational risk of potentially dispersing funds to fraudulent entities or being criticized for the misalignment of priorities is the pitfall for the DAS. To mitigate this risk, banks need to make sure the partner county has a list of preapproved organizations and a list of clear priorities that normally begin with food and shelter. To the extent that the county wants to take on this risk or assign the responsibility to a trained volunteer also largely mitigates the risk for the bank.


To set up a DAS, banks should inquire with the law enforcement side of their county and see who is responsible for their “emergency operational center.” From there, see if they have a “donations management unit” or finance arm in which to coordinate. Chances are, they have not thought about setting up such a structure, so the inquiry will likely be met with strong appreciation.


If your bank is thinking of going down this path, feel free to contact us as we have some expertise in this field and can help your bank navigate county politics, establish a memorandum of understanding  assist with indemnification language and discuss an operational blueprint of what needs to be established. Relief efforts after a catastrophic event are chaotic by their very nature and banks can take an active leadership role in helping their communities prepare for the worst. By giving your county the ability to aggregate and distribute funds post-disaster, you will be providing a valuable service.