PayCard and Payroll Best Practices Smartphones, Tablets and Watches in Payroll Presenter: Dallas Wilfong
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 o Employees as a way to receive wages electronically o Direct deposit wages are loaded onto the payroll card
What is a Paycard? A payroll card (cont.): • Employee use: T o 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
Paycards High-quality payroll cards carry few fees • Cardholders can generally perform basic transactions for free: o Making a purchase o Checking their account balance • Some cards also offer additional tools: o Customizable alerts o 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. o 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. Source: Aite
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 Our study offers insights to help understand Millennials’ options. 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 37% Say it would be valuable to have their pay loaded onto a paycard each payday. That is over 29 million Millennials!
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. 50% 94% 45% 40% 35% Payroll Card 30% 25% Users OWN a 20% 15% Smartphone 10% 5% 0% 18 to 24 25 to 34 35 to 65
Top US banks are shuttering branches in favor of digital banking channels as banking habits change
Big banks are beginning to scale back their brick-and-mortar branch networks in favor or digital channels. • 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.
Details from Chase's Investor Day presentation provide an explanation of why banks are shuttering branches: • 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.
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, o below the shares that cited online (65%) and o ATM (62%), o 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 over and over again. • The total cost of data breaches worldwide is projected to quadruple by 2020, o to $1.2 trillion, according to a Juniper Research study, o 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.
Conclusion • 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.
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
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