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Financial institutions looking for low-cost sources of non-interest income (and what financial institution isn’t) should consider payroll card programs. A well-run payroll card program will drive financial benefits to businesses, their employees, and financial institutions. 

Banks and credit unions are uniquely positioned to take advantage of the opportunities payroll card programs present at little to no cost. New income-generating opportunities are significant with payroll cards and include interchange, electronic couponing, and mobile check deposit with instant good funds. Best of all, banks and credit unions can accomplish this by leveraging relationships with existing commercial customers and working with processors and solutions providers to create enhanced payroll offerings. Cachet, for example, has developed a payroll card platform that leverages our proven track record in mobile financial services. We offer prepaid card, mobile app, program management and strategic marketing support – all in one affordable software-as-a-service solution. That’s the Select Mobile Money-Payroll card program.

Select Mobile Money-Payroll can help banks and credit unions boost customer engagement as well as revenues, and compete more effectively, whether with cross-town institutions or large national brands. It’s a market proven, affordable, end-to-end solution. 

Payroll is a necessary part of business that drives absolutely no value to a company’s bottom line. Financial institutions that offer ways to drive down those costs for business clients will benefit from stickier relationships. Payroll cards are an inexpensive, secure, electronic alternative to paychecks that are especially attractive to workers who don’t have bank accounts and the companies that employ them. 

There are nearly 17 million “unbanked” adults in the United States, according to the Federal Deposit Insurance Corporation. Not having a bank account or credit card is an expensive way to live. It can cost 3% or more of a worker’s take home pay just to convert one paycheck to cash. That’s a whopping $600 a year for someone whose weekly gross totals $26,000 a year. These same individuals also shell out hundreds of dollars per year for money orders and bill-payment services. 

Payroll cards are a better, safer, cheaper option than checks. Cardholders use them just like they would any other Visa, MasterCard, American Express or Discover cards, without the need for credit checks or minimum balances. On average it costs cardholders about $83 to use payroll cards, says the American Payroll Association.

The savings to employers who pay employees using the cards are equally significant. Mercator Advisory Group estimates that it costs about $2 just for a company to create a check. Delivering those checks to employees, along with associated activities drives the cost even higher, as do the inevitable lost and stolen checks. MasterCard calculates that the all-in average cost for a large company to issue paychecks is about $203 per employee per year; for a smaller company the total is about $255 per employee per year. On the other hand, transferring funds to a payroll card costs about 50 cents per transaction, or about $26 per year for each employee.

Select Mobile Money-Payroll is a market-ready solution tailor made for banks and credit unions targeting today’s mobile workforce and cost-conscious business owners. Nearly 95% of adult Americans have mobile phones. More than two-thirds own smartphones, and a growing share of these individuals are “smartphone-dependent,” according to the Pew Research Center. Low-income individuals (who make up a large share of the unbanked) and the coveted millennial generation are among those most likely to be tethered to their smartphones. 

“[Y]oung adults have deeply embedded mobile devices into the daily contours of their lives,” Pew’s Aaron Smith wrote in a recent report. From face time with friends and comparison shopping, to navigating traffic and finding work, young adults are doing it with their mobiles. Pew research reveals that nearly 6 in 10 smartphone owners use the devices to perform online banking. The only activity more commonly done (at 62%) was researching information about health conditions.

The key to success in this market is getting workers to use payroll cards as though the cards are checking accounts, Mercator notes in a new report, Payroll Cards: Strategic Opportunities for Financial Institutions. Must-have features include online and mobile access and real-time push notification capabilities. For example, Select Mobile Money-Payroll is mentioned in the report for a couponing service we’ve added to the mobile app that provides incentive to cardholders to move spending to their payroll cards. 

Banks and credit unions that are considering adding a payroll card program to their product lines can click here to request a link to the complimentary report.