Understanding Payroll Cards

1
Understanding Payroll Cards

• We all know -- or think we know -- the benefits
• FOR EMPLOYERS, the cards reduce costs for
  employer by REDUCING
• Check processing and distribution costs
• Exception and special payment processing
• Opportunities for fraud
• Need to reissue lost or stolen checks

2
Benefits for Employees

• Conveniently eliminate need to go to the bank
• Eliminate check cashing costs
• Some can be used like debit cards, so worker
  doesnt have to handle cash
• May provide an introduction to a bank

3
And These Things Work HOW?

• There are two types of payroll card arrangements
• Cards that work like a debit card, most commonly
  issued by Visa and can be used either for
  purchases, like a debit card or to receive money
  at at ATM
• Cards that work only like an ATM card

4
About the Visa Card

• KEEP IN MIND Regardless of type of card, e.g.,
  Visa or ATM-type, employers relationship is
  with the bank.
• Establish a relationship with a participating
  bank
• For the Visa card, there are currently seven
  banks offering the program with 10 or so more
  phasing it in. Main banks are First Tennessee,
  FleetBoston, USBank, Chase, BankOne AmSouth and
  Bank of America
• Employer calls one of these banks and sets up
  relationship. (Another 10 or so expected to come
  on board)
• For contact info, or to find out about other
  banks, call Visa Payroll Card Hotline at (800)
  442-1084.

5
How Do We Fund the Cards?

• Depending on the card or vendor you choose, may
  be able to fund via
• Direct Deposit
• ACH
• Wire Transfer

6
Who Is Using the Cards?

• Particularly popular among retail and hospitality
  industries. Major employers using them include
  America On-line, McDonalds, Lowes Hardware,
  Manpower, FedEx, Choice Hotels and Paychex.

7
ATM-like Card

• Employer establishes the relationship with the
  bank in the same way as a direct deposit account.
  In most instances, employee will only be able to
  access money via an ATM machine. This card will
  not carry a credit card brand on it.

8
Costs for Either Type of Card

• Employer costs - You will have to work out an
  arrangement with your bank. Some banks may charge
  a set-up fee, per account, e.g., per employee.
• Employee costs Transaction fees

9
So How Is the Bank Making Money?

• There are several revenue streams
• bank gets a small transaction fee on
  point-of-purchase transactions.
• traditional float
• employer is providing an introduction to banking
  that may result in future relationship

10
Some Research Findings

• From Nov. 2000 Visa focus groups
• Card had strongest appeal to full-time workers
  earning less than 25K who currently dont have a
  checking account.
• Unbanked were particularly receptive, with 63
  percent indicating a strong inclination to
  acquire the card.
• Of Hispanic workers surveyed, 72 indicated same
  inclination

11
Payroll Cards vs. Direct Deposit

• Among a general market, employees preferred
  payroll cards to direct deposit 54 to 46
• Among Hispanic workers, difference was more
  pronounced. When asked to choose, 64 preferred
  payroll cards, compared to 36 preferring direct
  deposit.

12
Reasons for Preferring Payroll Cards Over Direct
Deposit

• More convenient
• Easier to use
• Saves time/faster
• Can get money faster
• Instant access to money
• Dont have to have checking account
• Easily accessible