With store closures and many people working from home, businesses are looking more toward prepaid and payroll cards to reduce touchpoints and ensure employees get paid on time. Some are also using it as a tool to reward employees and customers.
Globally, payroll and prepaid cards are seeing an uptick in demand as the world increasingly favors cards over cash during the COVID-19 pandemic. A study estimates that the prepaid card market in the U.S. will grow at an average annual rate of 6 percent from 2020 to 2024. Additionally, 25 percent of U.S. households are either unbanked or underbanked; of that 25 percent, more than half of the households cited not having enough money as a reason for not opening a bank account. For the roughly 14.1 million Americans without a bank account, payroll and prepaid cards are the next best solution.
A payroll card allows employees to access their paychecks without having to set up a bank account. With similar functions to a debit card, payroll cards can be loaded with a paycheck for every pay period and be used to withdraw cash or make purchases. For small businesses, it’s an advantageous tool, especially if they have employees who may not have many banking options at their location.
“Those without bank accounts are often limited to using cash, which is inconvenient. And in today’s world, it becomes really hard to operate on that model,” says Disha Lal, first vice president and e-commerce and cards product manager at East West Bank. “The payroll card addresses this and makes it easier for employers, employees and customers to send and receive money.”
And prepaid payroll cards are no longer just for the underbanked and unbanked, Lal says: “A payroll card is a unique product that can save its users money, which means that it can help a large number of people.”
For example, a prepaid card can be issued for a variety of purposes, whether as part of a loyalty rewards program for customers or to reward an employee for their work performance. A predefined amount is loaded onto a prepaid card, either for a one-time use or reloadable purpose, and can be used like a regular debit or credit card.
“The goal with payroll and prepaid cards, especially during the pandemic, is to ensure that people have access to funds and manage them in a safe, flexible and convenient way,” says Lal. To help the unbanked mitigate financial hardships, even Los Angeles mayor, Eric Garcetti, announced the launch of a prepaid debit card program for low-income residents struggling from the weight of COVID-19.
“It just makes sense, now more than ever, to use these cards enabling contactless payments, instant access to funds and online payments,” says Lal.
One global payments company that has been leading the way in both payroll and prepaid cards is Netspend. “It goes beyond just the physical card,” says Lal. “It comes with a lot of other benefits, with some unique features like flexible enrollment, electronic reporting and an online portal for employees to view their deposits and the ability to set up a pin to protect your money.”
“The goal with payroll and prepaid cards, especially during the pandemic, is to ensure that people have access to funds and manage them in a safe, flexible and convenient way”
Using these cards reduces the dependency on depositing checks, which often requires a processing fee or having to use tender cash. In addition to no minimum required to receive a card and hold an account, there are also no overdraft fees with Netspend. Users have a straightforward relationship with their funds, while still having the benefits of a debit card.
“As we look to the future, we believe there will be a good mix of traditional banking accounts along with the non-traditional accounts such as prepaid,” says Carrie Staut, director of business development at Netspend. “We've all learned to compartmentalize our money, and for some, having a separate prepaid account is a way to keep monies separate. For individuals who have a hard time getting the traditional bank account, prepaid will continue to be a solution for them.”
Netspend has partnered with major card brands such as Visa and Mastercard to ensure that their prepaid cards can be used ubiquitously. Through their Payback Rewards program, users can also earn rewards and cash back with certain vendors and merchants.
For employers with workers who don’t have bank accounts, the payroll card offers a simple solution. The Skylight PayOptions program helps employers improve their record keeping, lower costs, streamline the payroll process and simplify disbursement. Once a payroll card has been given to an employee, the employer can simply add funds to it electronically, without having to issue a new card each time.
Employees can receive their paychecks without any delays or hassles and check their account balance online. “The top feature of our card has always been that it’s an efficient way to get paid quickly,” says Staut. “The employee doesn't have to drive to work to pick up a paper check, and they also avoid having to pay check cashing fees.” Users can also sign up for email and text alerts to receive notifications when a deposit has been made and how much money is left in their account after each purchase or ATM withdrawal. Funds from the card are protected, and users can report missing prepaid cards without losing their balance.
Prepaid award cards can also be used to award outstanding employees. “Employees are on edge working during a pandemic, and using a prepaid card to recognize their hard work can really go a long way,” says Staut. Whether the goal is to hit a certain quota or to make a certain amount of sales, giving employees an incentive can also motivate workers on the job.
During the pandemic, many restaurants and bars have also started to use prepaid cards to disburse tips in an attempt to protect their establishments and employees from exposure to cash, which tends to carry more germs than a household toilet. With an increasing amount of restaurant patrons paying with card, establishments are also finding that prepaid cards work more efficiently, especially when there’s a cash shortage.
One specific type of business that started to rapidly issue these prepaid cards are pizza joints. With the threat of COVID-19 forcing more people to stay at home, the demand for pizza delivery has skyrocketed over the last few months.
“Pizza places are doing more deliveries, and of course people are paying with credit/debit cards, so the tips that are captured need to be paid to the employees at the end of each day, along with mileage reimbursement,” says Staut. “We offer the ability to pay those tips daily and help the restaurants avoid cash.” With prepaid cards, employers can simply calculate the tip amount that needs to be distributed to each delivery person and add it to the cards.
With fewer consumers spending money during these uncertain times, businesses are fighting to retain loyal customers, and prepaid award cards can incentivize purchases. “You can get creative with how you want to reward your customers,” says Lal. “For example, if your business has a rebate program that’s being rolled out, you can issue credits through the prepaid cards.”
Cards are also customizable, adding to a business’ brand value when issuing the cards. Whether as part of a welcome gift, loyalty program or an incentive to upsell to customers, business owners can use prepaid cards as a positive communication tool. With the ability to sync with digital payment platforms such as mobile wallets, customers can enjoy a completely contactless form of payment.
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