PayCard and Payroll Best Practices Smartphones, Tablets and Watches - - PowerPoint PPT Presentation

PayCard and Payroll Best Practices

Presenter: Dallas Wilfong

Smartphones, Tablets and Watches in Payroll

Agenda

• PayCards today
• Millennials in the work force?
• Apps in Payroll
• Recent paycard regulation changes

Speaker

Dallas Wilfong Director of Sales, Eastern US

Dallas is the Eastern Division Director of Sales at rapid! PayCard and while growing up in a Navy family, he has lived all over the country. He now lives in Indian Rocks Beach, FL with his wife and their new baby girl. Prior to joining the PayCard industry in May of 2012 most of Dallas’ experience dealing with the unbanked and under banked segment of the population came from his long career in the staffing industry. There he held the roles of Senior Sales Executive, General Manager, and National Business Development Manager. In these roles Dallas experienced first- hand the challenges faced with the payroll and check distribution of thousands of unbanked employees working in local markets as well as per diem employees who travelled to remote jobsites both in and outside the US.

What is a Paycard?

A payroll card:

• Reloadable prepaid debit card
• Offered by employers
• Employees as a way to receive wages electronically
• Direct deposit wages are loaded onto the payroll card

A payroll card (cont.):

• Employee use:
• T
• 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?

Paycards

High-quality payroll cards carry few fees

• Cardholders can generally perform basic transactions for free:
• Making a purchase
• Checking their account balance
• Some cards also offer additional tools:
• Customizable alerts
• Saving accounts

Paycards

• What’s it like to live in a cash world today?
• What can’t you do with cash?

Industry Fact

By 2019, employers are expected to exceed $100 billion in loads onto more than 12 million payroll cards.

• reported by Aite Group

Industry Fact (cont.)

Traditionally considered a product for “un- or underbanked” employees

• 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.

Paycard - Addressable Market Trending

The paycard market has tremendous opportunity but is 4-5 years from maturity.

Paycards Lead A Payment Revolution

Jason Dorsey, Millennial expert and researcher at the Center for Generational Kinetics, commented, “The landscape of personal finance management, including pay, is shifting dramatically, and that change is being led by Millennials. In order to attract the best talent and meet the needs of this generation entering the workforce in record numbers, employers must embrace alternative payroll

• ptions.

Our study offers insights to help understand Millennials’ perspective and in essence… keep up with the change.”

New Financial Reality

More than 5 million Millennials

in the U.S. do not have a checking account

More than 1/3 of all Millennials

Say it would be valuable to have their pay loaded onto a paycard each payday. That is over 29 million Millennials!

37%

New Financial Solution

57% of ALL employees

Think that paycards should be offered by employers as a payment option. This feeling only grows with younger workers with 64% of Millennials agreeing.

Payroll Cards and Smartphones

Age Distribution of Payroll Card Users Base= Respondents whose employer puts their earnings on a prepaid card and gives it to them.

0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50% 18 to 24 25 to 34 35 to 65

Payroll Card Users OWN a Smartphone

94%

Top US banks are shuttering branches in favor of digital banking channels as banking habits change

• 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

• penings, 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.

• 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:

Net Change In The Number of Bank Branches - US

Today’s Labor Force

The Boomers Fade Away

• In the first quarter of 2015, about 45 million Baby Boomers were in

the labor force.

• The Baby Boom workforce peaked in size at nearly 66 million in

1997.

• The youngest Boomer is now 53 years old, while the oldest

Boomers are approaching age 72.

• With more Boomers retiring every year and not much immigration to

affect their size, the size of the Boomer workforce will continue to shrink

Demographic changes drive Mobile

It’s no surprise that consumer habits around mobile will continue to shape the evolution of shopping, retail and payments.

Mobile phones are prevalent among unbanked and underbanked consumers

• Nine percent of consumers were unbanked at the time of the survey.

40% of the unbanked had access to a smartphone, 28% had access to a feature phone, and 32% percent lacked access to any type of mobile phone.

• 22% of consumers were underbanked, meaning they had a bank

account and had used one or more alternative financial services (typically from a nonbank) within the past year. 70% of the underbanked were smartphone owners, and 17% owned a feature phone.

• Among the underbanked with mobile phones, 55% used mobile

banking.

The data tells a clear story that apps, which were considered a mere fad a few years ago, are completely dominating mobile, and the browser has become a single application swimming in a sea of apps

162 minutes — that’s how much time the average American spends on his or her mobile device per day .

• Most consumers with bank accounts reported using a mix of online

and offline channels to interact with their financial institution

• Among mobile banking users with smartphones,
• 54% cited the mobile channel as one of the three most important

ways they interact with their bank,

• below the shares that cited online (65%) and
• ATM (62%),
• but above the share that cited a teller at a branch (51%).

Paramount Focus on Security

• The payroll business is risky for one simple reason—it’s where the

money is.

• So, fraudsters and cybercriminals are going to attack it over and
• ver and over again.
• The total cost of data breaches worldwide is projected to quadruple

by 2020,

• to $1.2 trillion, according to a Juniper Research study,
• with the average cost per breach exceeding $150 million.

Paramount Focus on Security

• T
• arget. Home Depot. JPMorgan Chase. Major data breaches in

these organizations have elevated consumer awareness and concern for the security of private or personal information.

• Daily processes and habits that are the norm today will soon open

practices to sizable risks. For example, delivering PII Personally Identifiable Information via email is still common practice in payroll.

• This practice clearly exposes your department and company to

unnecessary risk and the potential for costly fines.

• The growing influences of connectivity, mobility and security present

a unique challenge for today’s payroll practitioners.

• If you ignore them, your department could suffer. However, if you

meet them head-on, you will have a healthy department tomorrow – and beyond.

• T

ake the time to review your current processes and technology to ensure you are set to meet and address these undeniable trends.

Conclusion

REGULATORY CHANGES FOR PAYCARDS

Nationwide Compliance

www.rapidpaycard.com/compliance-map

Recent Paycard Regulatory Changes

States with regulatory changes regarding pay cards:

• Pennsylvania
• New York
• Iowa
• Massachusetts
• Connecticut
• Rhode Island
• Illinois

Pennsylvania

• Effective: May 3, 2017
• State officially permits payroll card use upon employee written
• r electronic request.

 Prior to obtaining the employee’s authorization, the

employer must provide its employee with clear and conspicuous notice in writing or electronically of:

• All wage payment options, T&C of the payroll card

account; including the fees that may be deducted from the account by the card issuer.

• Notice that third parties may assess fees, and the

methods available to the employee for accessing wages without fees.

• Among other things, employers are prohibited from making the

payment of wages via payroll card account a condition of employment.

Iowa

• Introduced January 2017
• Senate File 141

 Allows payroll cards:

• Employee must agree in writing.
• No fees for withdrawals once per pay period.
• Employee can have name put on card.

New York

• ???: March 7, 2017
• An employer must provide its employee with information about

their payment options and obtain the employees’ voluntary consent prior to paying wages using a payroll debit card.

 The notice and consent must be provide in English and in

the employee’s primary language when a template is available from the NYSDOL.

 After providing notice and obtaining consent, the

employer must wait 7 business days before taking action to pay the employee using the payroll debit card.

• The rules also include strict cash access requirements,

prohibits kick backs, prohibit linking payroll debit cards to any form of credit, and require advance notice of changes in T&C.

Massachusetts

• Introduced January 2017
• Senate Docket 1052

 Allows payroll cards:

• Employee must agree in writing.
• Waiting period of 7 days after employee after written

consent.

• No fees for withdrawals once per pay period.
• “local access” to one or more ATM at no cost.
• Among other things, employers are prohibited from making the

payment of wages via payroll card account a condition of employment.

Connecticut

• Effective: October 1, 2016
• Last state to expressly authorize paycards as a viable method
• f wage payment as long as employer receives employee’s

consent.

 The statute does not preempt or override an existing

collective bargaining agreement with respect to methods

• f wage payment.
• Among other things, the statute sets forth specific

requirements for providing employees with access to cash wages and account information without cost.

• Requires disclosures and alternative payment options,

includes a number of fee restrictions, and prohibits linking payroll cards to any form of credit.

Rhode Island

• Effective: July 15, 2015
• General Laws authorizes the payment of wages by credit to a

payroll card account upon written or electronic request of the employee.

• Among other things, the statute defines “payroll card account”

and requires that employees be able to make at least one withdrawal from the payroll card account each pay period without charge.

Illinois

• Effective: January 1, 2015
• Wage Payment and Collection Act mended to authorize the payment of

wages and final compensation by payroll cards.

• Adds section 14.5 to the Act to specify the conditions under which

payroll cards may be used.

 Among other things, this section requires that payroll cards be

• ffered on a voluntary basis.

 Another method(s) of payment be offered in compliance with the

Act.

 Certain Disclosures be made and consent obtrained before wages

are paid by electronic fund transfer to a payroll card account.

• Section 14.5 also addresses methods of accessing full net wages and

account information without cost.

• Prohibits specific fees and the use of payroll cards linked to credit and

identifies post employment responsibilities

 Within 30 days of termination of employment, an employer must

notify the employee that the T&C of the card account may change if the employee continues a relationship with the pay card issuer.

Innovation is the Key Flexible Tools are Required

Leading Providers must provide tools to meet all of these challenges

• Provide value to employees
• Enable cost savings and efficiency for employers
• Provide tools to enable compliance

Conclusion

State Level Fee Modification

44

• One fee schedule does not meet all state requirements
• Providers must know and react to the employment state
• Dynamic pricing is required
• Old processing systems will fall behind

 Providers will not support service in some states; or  Require different cardstock by state  The administrative burden may fall to the employer

Onboarding Tools to Track Employee Consent Innovation is required to meet the complexity of the changing consent and disclosure requirements.

Thank you!

Questions?