paycard and payroll best practices · 2016-09-30 · paycard and payroll best practices | 16 •...
TRANSCRIPT
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PayCard and Payroll Best PracticesPresenter: Steve McDonald – Director of Sales
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Agenda
• The Paycard Industry
• The Compass Principles and Guiding Values- CFSI
• Compass Guidelines to Payroll Cards- CFSI
• NBPCA Letter to the CFPB- Consumer Financial Protection
Bureau
• Questions and Comments
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What is a Paycard?
• A payroll card:
o Reloadable prepaid debit card
o Offered by employers
Employees as a way to receive wages electronically
Direct deposit wages are loaded onto the payroll card
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• A payroll card (cont.):
o Employee use:
To make purchases in stores or online
Pay bills
Withdraw cash from ATMs, bank branches, or through cash
back at retail locations
Some cards have additional features:
Savings accounts
Personal financial management tools
What is a Paycard?
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• Employees:
o Those who work in low-paying or hourly jobs
Important tool for building long-term financial health
o According to the Consumer Federation of America
¼ of the lowest-income workers receive their wages via
direct deposit into a bank account
Who uses Paycards?
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• Employees (cont.):
o Low-income employees without a bank account
Payday arrives:
Cash, which can easily be lost or stolen
Paper check, which requires a costly and often time-
consuming visit to a check casher
Who uses Paycards?
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Paycards
• High-quality payroll cards carry few fees
o Cardholders can generally perform basic transactions for free:
Making a purchase
Checking their account balance
o Some cards also offer additional tools:
• Customizable alerts
• Saving accounts
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Industry Fact
• In 2014, employers loaded $32.6 billion onto more than 5 million
payroll cards
o This number is expected to continue to grow significantly
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Industry Fact (cont.)
• Traditionally considered a product for “un- or underbanked”employees
o Payroll cards are becoming increasingly mainstream.
Mercator Advisory Group:
86% of workers who receive their wages on a payroll
card also have a checking or savings account at a
bank.
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Paycard - Addressable Market Trending
The paycard market has tremendous opportunity but is 4-5 years from maturity.
Source: Aite
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Top US banks are shuttering branches in favor of digital
banking channels
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• JPMorgan Chase is planning to cut 5%, or 300, bank branches by the
end of 2016, the company announced in an Investor Day
2015 presentation.
• Bank of America, a close competitor with a similarly massive branch
network, has cut its branch network by nearly 15% since 2011.
• The number of bank branches has been falling nationwide. Nearly 2,900
branches closed last year, according to an advance copy of the latest
FDIC quarterly report provided by Finextra. Compared against the 1,229
openings, this nets to 1,657 bank branches lost in 2014.
Big banks are beginning to scale back their brick-and-mortar
branch networks in favor or digital channels.
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• Customers are going digital: A majority of consumer bank deposits are
now processed using ATMs and QuickDeposit, the firm’s mobile check
deposit service. By comparison, 90% of JP Morgan’s consumer banking
deposits were processed though a teller in 2007.
• Reduced costs: Digital banking activities are less costly for Chase. For
example, depositing a check via mobile costs 2,067% less than depositing a
check in-branch with a teller. By reducing branch density, Chase customers
will be further incentivized to use digital channels, which will push activity
towards these low-cost channels.
• Investment in innovation: Cost savings from having a leaner branch
network can be invested in technology that will be better service digital-
savvy customers such as enhanced ATMs and better mobile banking
products.
Details from Chase's Investor Day presentation provide an
explanation of why banks are shuttering branches:
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Net Change In The Number of Bank Branches - US
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Industry Overview
• Payroll cards:
o Become more sophisticated financial tools
Employees are likely to continue to turn to payroll cards
to:
Access
Spend
Save
Manage their money
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Industry Overview
• Payroll cards (cont.):
o Financial health is achieved when
An individual’s day-to-day financial system functions well
Increases the likelihood of long-term financial resilience
and opportunity.
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Industry Overview
• Payroll cards (cont.):
o Foundational elements to financial health:
1. A well functioning day-to-day financial life
2. The ability to be resilient in the face of inevitable ups
and downs
3. The potential to seize opportunities and achieve
financial mobility over time
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Industry Overview
• Payroll cards (cont.):
o Paycard employees receiving wages:
Safe
Efficient
Cost-effective
Allow hard-working Americans to plan and budget.
o High-quality products
Design and delivery is not uniform
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Compass Principles and
Guiding Values
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• The Compass Principles:
o Guidelines to assure quality innovation and execution in the
financial services marketplace.
o Reflect the belief that the U.S. financial services industry can
actively contribute to:
Improving peoples lives
Delivering sustainable value to consumers and providers
alike.
The Compass Principles
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• The Compass Principles (cont.):
o There are 4 Compass principles:
1. Embrace Inclusion:
Responsibly expand access
2. Build Trust:
Develop Mutually beneficial products that deliver clear
and consistent value.
The Compass Principles
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• The Compass Principles (cont.):
o There are 4 Compass principles:
3. Promote Success:
Drive positive consumer behavior through smart
design and communication
4. Create Opportunity:
Provide options for upward mobility
The Compass Principles
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The Compass Principles values:
1. Profitability and Scalability
2. Deep Customer Knowledge
3. Safety
4. Variation and Choice
5. Relationships
6. Cross Sector Participation
The Compass Principles
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Compass Guidelines to
Payroll Cards
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• The Compass Guide to Payroll Cards outlines guidelines across
three levels:
1. Core practices
o Standards for a high-quality payroll card.
Program should not be considered high quality
unless it meets these practices.
2. Stretch practices
o Additional best practices for providers looking to move
beyond the Core practices.
Structure of the Guide
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• The Compass Guide to Payroll Cards outlines guidelines across
three levels (cont.):
3. Next Generation practices
o Have met the minimum standards for quality
o Have challenged themselves to stretch beyond those
standards
o Are considering the next step in high-quality product
design
Structure of the Guide
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Core Practices
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• Choice
• Safety
• Affordability
• Access
• Transparency
• Information and Support
• Personalization
Core Practices
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• Choice
o Employees are offered a choice
How they would like to receive their wages.
o Employees are provided clear information that enables them to
make an informed decision
o How they would like to receive their wages prior to
enrollment.
Core Practices
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• Safety
o Cardholders funds are insured
FDIC
NCUSIF pass-thru Insurance
o Lost or stolen card or unauthorized charges, errors, or disputes
Cardholder’s liability is limited and cardholder has effective
procedures to resolve disputes
Core Practices
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• Affordability
o Cardholders able to access their full wages each pay period
without cost.
o Cardholders can perform basic functions without incurring
unreasonable fees.
Core Practices
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• Access
o Cardholders can make purchases from, and payments to, a
variety of merchants and billers
o Wages that are loaded onto the card are available for
immediate use
o Cardholders can make withdrawals at locations that are
accessible and convenient
Core Practices
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• Transparency
o Before enrolling in a payroll card program
Employees receive communications that allow them to
understand the card’s fees and account terms.
o Upon enrolling in a payroll card program
Cardholders are provided with a clear and understandable
set of Terms and Conditions.
Core Practices
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• Information and Support
o Cardholders
Are presented ways to conveniently access their account
balance and transaction histories.
Can easily obtain customer service assistance.
Core Practices
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• Personalization
o If an employer offers instant issue cards
o A personalized permanent card is also available to
cardholders
o As an option, or
o Issued automatically
Core Practices
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www.rapidpaycard.com
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Stretch Practices
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Convenience
• Cardholders:
o Can send money to other cardholders from their card.
o Can register for secondary cards to provide to friends or family.
o Are offered the option to split their wages:
Payroll card
Another form of electronic disbursement.
o Sub-accounts allow cardholders to set aside funds for
budgeting or saving purposes.
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Mobile
• Mobile application or a mobile-enabled website
o Allows cardholders to perform basic transactions
o Access important account information on the go.
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Education
• Advice is provided to cardholders
o Ensure they derive the most value from their cards.
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Portability
• Cardholders can choose to receive multiple sources of funds on
their cards.
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Next Generation Practices
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Budgeting
• Personal financial management (PFM) tools enable cardholders
o Plan
o Budget
o Track their expenses.
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Savings
• Cardholders have the option
o Store
o Accumulate funds
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Credit
• If a credit service is offered in conjunction with a payroll card
o Providers exercise caution
o Only offer affordable and high-quality options that cardholders can
repay without incurring a cycle of debt.
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Thank you!
Questions?
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STEVE MCDONALD
Director of Sales, rapid! PayCard
503.720.1187