Prepaid Payroll Cards

In my previous blog entry, I wrote about the exciting opportunities within the prepaid space and used four MasterCard partnerships to demonstrate what appear to be the biggest opportunities. 

Among those areas are prepaid payroll cards, particularly to un- or underbanked employees.  These employees are restricted to alternative financial services, which are much more expensive than traditional services.

The primary benefits to employees are:

• Cost Savings: reduce transaction costs associated with handling cash or check.  Additionally, migrant workers will also get access to cheaper remittance options
• Faster Access to their Pay: eliminates possible admin or mail delays
• Safety: no need to carry large quantities of cash
• Protection: the major networks all protect cardholders against unauthorized purchases
• Pay Anyone: access to an online bill pay service enables cardholders to pay bills to anyone

For companies prepaid payroll cards provide:

• Cost Savings: electronic payroll delivery eliminates the expense of issuing, delivering and reconciling cash or paper checks
• Optimize Payment Process: avoids production, handling and distribution of checks; eliminates the time constraints and fees associated with lost and stolen checks
• Security: electronic delivery of funds eliminates risks of physically distributing cash or checks
• Environmental: eliminates paper checks

There already is a sea of new entrants to the cards space that are looking to benefit from this opportunity.  However, it is probably the established commercial banks and card issuers that are best placed to capitalise, particularly in the larger segments. 

Citibank demonstrates this through their recent partnership with Voltas, a global engineering group, to provide prepaid payroll cards in the United Arab Emirates.  However, in general, commercial card players do not consider this part of their core business and do not appear to have fully woken up to this opportunity.

Non-bank card providers are clearly at the disadvantage of not having a customer base to tap.  Yet, they appear to be more aggressively pursuing the opportunity and could grow through distribution partnerships.  They are searching out  B2B players in industries with high usage of migrant workers and striking up distribution partnerships before the commercial banks get a grip on the market.