Payroll Cards: A Direct Deposit Solution for the Unbanked

December 19, 2002

Abstract

Boston, MA, USA December 19, 2002

For the past several years, US corporations and financial institutions have focused on converting America痴 payrolls from checks to direct deposit. The motivation has been simple: money. Converting to an electronic system can result in cost savings as high as 75 percent. Today, over 55 percent of Americans are paid via direct deposit. However, many employees, especially those without transactional bank accounts, are unable to use direct deposit. They represent a missed opportunity for financial institutions and corporations.

Providers of stored value products have leveraged their platforms to develop payroll cards, which capture this missed opportunity. Stored value programs can deliver funds electronically to employees, commonly referred to as the "unbanked," who do not have a transactional bank account. Payrolls may be loaded onto these cards, which are then used to access payroll funds through ATM withdrawals, debit-card purchases and card drafts (checks written on card funds).

In a new report, Ariana-Michele Moore, analyst at Celent Communications, examines the market opportunity for payroll cards.

"Payroll cards benefit all parties in the transaction.

They reduce the cost of cutting a paycheck for the employer; reduce the hassle of paper checks for the employee and increases his access to the funds; and capture additional revenue for the banks offering the program," comments Moore. "However, they are not a fool-proof solution and a program must be carefully implemented in order for it to succeed. Yet, we do expect to see strong adoption in the years to come."

This report provides an overview of a payroll card program, evaluates the cost and benefits of using one, gives insight into the various business models associated with payroll cards, and discusses the firms providing payroll cards as well as what we can expect to see from payroll card programs going forward.

A is available online.

of Celent Communications' Retail Banking research service can download the report electronically by clicking on the icon to the left.

        

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Celent is a research and advisory firm dedicated to helping financial institutions formulate comprehensive business and technology strategies. Celent publishes reports identifying trends and best practices in financial services technology and conducts consulting engagements for financial institutions looking to use technology to enhance existing business processes or launch new business strategies. With a team of internationally based analysts, Celent is uniquely positioned to offer strategic advice and market insights on a global basis. Celent is a member of the Oliver Wyman Group, which is a wholly-owned operating unit of Marsh & McLennan Companies [NYSE: MMC].

Media Contacts

North America
Michele Pace
mpace@celent.com
Tel: +1 212 345 1366

Europe (London)
Chris Williams
cwilliams@celent.com
Tel: +44 (0)782 448 3336

Asia (Tokyo)
Yumi Nagaoka
ynagaoka@celent.com
Tel.: +81 3 3500 3023

Table of Contents

 

Boston, MA, USA December 19, 2002

Payroll Cards: A Direct  Deposit Solution for the  Unbanked

Return to report Abstract

 

EXECUTIVE SUMMARY 3
PRODUCT OVERVIEW 4
  Stored Value: The Root of Payroll Cards 4
  Payroll Card Fundamentals 5
  Features and Functionality 6
MARKET OVERVIEW 9
  The Unbanked Population 9
  Benefits to the Employees 12
  An Answer for Corporations 12
STRUCTURING A PAYROLL CARD PROGRAM 14
BANKS-GETTING A PIECE OF THE ACTION 17
  Competition 18
DETERMINING A PRICE STRUCTURE 21
THE CORE PROVIDERS 23
CURRENT STATE OF THE MARKET 27
  Employee Adoption 27
  Employer Adoption 28
FUTURE OUTLOOK 29

 

        

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