Payroll Cards Seen Having an Acceptance Mountain to Climb

By Jackson, Ben | American Banker, August 29, 2008 | Go to article overview
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Payroll Cards Seen Having an Acceptance Mountain to Climb


Jackson, Ben, American Banker


Byline: Ben Jackson, Prepaid Trends

Prepaid card providers are eager to see wider use of payroll cards but will have to overcome deeply ingrained habits among consumers and employers, according to recent research.

A survey by Mintel International Group Ltd. said that 77% of online consumers have no interest in receiving their pay on a payroll card. Thirty-nine percent said using their standard debit and credit cards is more convenient; 31% said they prefer using cash or checks for purchases; and 28% said they would be afraid of losing the card. The survey of 2,000 U.S. adults with Internet access was done in April.

Still, companies offering the cards say they have made progress on persuading employers and consumers to use their products.

After a year-long test, the credit union service organization The Members Group began in July to provide payroll cards that credit unions can offer to their business customers.

The Des Moines company began testing the cards in July 2007 at a single credit union, which it would not name, that issued more than 40,000 cards.

Jeff Falk, its director of product development, is promoting the cards as an alternative to payroll checks. It offers promotional materials for credit unions to use when selling the cards to business customers and other materials for these companies to use with employees.

"The marketing that the credit union does to their employer groups is critical to help the employers understand that there is an alternative" to checks," he said.

Companies can save $2 to $20 per check by using payroll cards, he said, and credit unions make money on the cards through interchange fees, cardholder fees, and the float earned on deposits.

The Members Group earns revenue from transaction fees, by sharing interchange, or through a flat fee per card, depending on the type of program, he said. The cards are Visa-branded, and the credit union offering them is the issuer.

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Payroll Cards Seen Having an Acceptance Mountain to Climb
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