Jul 25, 2013 Dave King
The unbanked and underbanked populations in the United States and abroad continue to expand, especially as more households have decided to avoid traditional financial services following the economic crisis. As a result, more companies and financial institutions are beginning to offer ACH cards in place of debit and credit accounts.
Data from the Federal Deposit Insurance Corporation shows that the unbanked population has increasingly preferred alternative financial services, as well as prepaid cards, and will continue to boost adoption rates in the coming years. Though prepaid cards have been scrutinized by some parties in recent months, experts maintain that these products are a strong method of reaching unbanked and underbanked households.
American Banker recently reported that many companies have started shifting payroll services away from traditional accounts and toward prepaid ACH cards, which some lawmakers have pushed back on in 2013. ACH cards work very similarly to checking accounts and can be automatically loaded at the end of each pay period and used for virtually any type of purchase.
This is an especially useful tool for companies that employ unbanked and underbanked individuals, as it is one of the best ways to ensure these staff members do not have to go through a lot of red tape to cash their checks. The source asserted that ACH cards are currently the best alternative to traditional payroll function, and a more reasonable option has yet to hit the market.
According to the news provider, prepaid payroll cards help employees who do not have a checking account avoid the inconveniences of traditional paychecks, while the company also enjoys benefits such as automation and fewer expenditures on paper checks. Studies indicate that consumers - and thus staff members - are increasingly interested in electronic payment processing capabilities and, as such, ACH cards can help attract new talent and retain existing employees.
One of the greatest utilities of making the jump from paper checks to ACH cards is improved security, especially for employees who do not have traditional bank accounts. The source suggested that prepaid cards bring all of the security and documentation advantages of traditional accounts to employees without the need to set up a checking account.
American Banker added that while prepaid payroll cards have not become perfect quite yet, companies will get better at optimizing the process with time.
Proof is in the pudding
Bank Credit News recently reported that the latest study from Card Hub revealed that consumers, even those who do have checking accounts, are increasingly using prepaid cards instead of their traditional banking products. According to the news provider, the number of active cards increased from 3.4 million in 2009 to more than 7 million in 2012, and this was only for the two largest providers of the services.
The total number of active accounts and volume of funds loaded to the prepaid cards continue to grow exponentially, providing companies with various opportunities to capitalize. Those firms that have not yet considered a prepaid card or other electronic payment strategy should do so soon.