Payday, Redefined

Editor’s note: Paper paychecks and direct deposit to a bank account are so 2010. Organizations are increasingly making payroll by issuing prepaid cards to employees. These act a lot like a credit or debit card, but with less expense involved. In the first of a series of blog posts on the prepaid phenomenon, Wendy Humphrey of Conduent explains how this trend came to be. 

First in a series

Did you know that more than a quarter of U.S. households either do not have a bank account or are under-served by traditional financial institutions? It’s true – and it doesn’t appear this will diminish drastically in years to come. Many millennials – 34 million of them, in fact – don’t have the same reliance on traditional banking as their parents and grandparents, and they’re seeing prepaid cards as a great alternative to managing their money.

Prepaid cards are a lot like the credit and debit cards that most people carry in their wallets and purses. They’re re-loadable cards that companies often use to pay employees who choose to forego traditional paper-check and direct-deposit methods to receive their wages.

Use of prepaid cards, instead of paper checks, is much cheaper when it comes to managing money and payroll. Check-cashing services can cost employees 3 to 5 percent of their pay. That means someone earning $30,000 annually could pay more than $600 in check-cashing fees. With prepaid cards, there are no incremental costs to employees. Employers save money by using prepaid cards too – as much as $6 per check not issued!

Additionally, it’s safer to carry prepaid cards than their paper-check and cash counterparts, and they can promote financial responsibility by helping people budget their expenses. For instance, we notice that millennials often load prepaid cards for different purposes – like gas money, or weekend entertainment – and simply stop spending in that category when the card is depleted. Can you imagine the credit card debts that could be avoided if more people adopted this behavior?

The future of prepaid cards

Today, prepaid cards are used mostly by businesses with a large number of temporary or migratory employees and by governments for dispersing assistance benefits. But, I believe there are plenty of programs supported by paper checks that could benefit from adopting prepaid cards. Here are three:

• Employee travel cards – an employee taking a vacation could load funds onto a prepaid card in advance, either for safety or budgetary reasons.
• Reward cards – businesses could reward a certain type of employee behavior by rewarding employees with prepaid cards.
• Customer refund cards – Instead of receiving and depositing a paper check after submitting a rebate, consumers could receive a more convenient prepaid card alternative.

Government organizations, of course, have pioneered the use of prepaid cards to deliver vital program payments such as child support. Conduent is a leader in card services of all types,  issuing more than 30 million cards annually. We process more than $86 billion in prepaid payments each year.

With the success of issuing, managing and processing prepaid cards for government organizations, we are now bringing that experience to our commercial sector with our Sense prepaid card solutions. Sense expands payment options to meet differing employee needs at a time of changing customer habits and expectations.

Prepaid cards will continue to become more popular as businesses and employees alike better understand the flexibility, security and efficiency they provide.

Wendy Humphrey is responsible for product vision and go-to-market strategy for the Commercial Prepaid sector and associated digital payment capabilities at Conduent. She previous oversaw enterprise marketing at JPM Chase for its Commercial Commerce Solutions divisions and supported the product marketing launch for ChasePay and ChaseNet.  Humphrey has also spearheaded digital/contactless payment programs at Bank of America and First Data.