Companies are increasingly looking to alternative solutions to reduce costs associated with both internal and external payments.
Prepaid payroll cards are one option that businesses can use to streamline and help automate payroll processes, pay employees faster—thus making for happier staff—and significantly reduce costs and staffing resources dedicated to payroll management.
With regulatory changes making it easier for companies to make use of these cards, it makes sense for those who have not done so to take a look at the advantages offered by cards for payroll management.
Prepaid payroll cards come from a number of different sources, including independent suppliers, banks, and other vendors that offer other business services—such as Western Union’s money transfers or HR Block’s tax preparation services. Plus, a number of vendors offer payroll cards alongside outsourced payroll management services.
The advantage of using a bank-supplied system—which will often be provided to the bank by an independent vendor—is that it makes for easier integration of payroll processes with other banking solutions and easier information transfer.
From a cost perspective, prepaid payroll offerings completely abolish the cost of mailing cheques, which can be quite expensive over the long term, and reduce the number of hours spent on payroll processing and back-end integration of payroll with other finance operations.
From a regulatory perspective, a number of states are enacting legislation to make it simpler for businesses to use such solutions, which is good news. But under changes to the prepaid card market enacted within Dodd-Frank, companies and their staff will see some benefits and some disadvantages.
Under the legislation, vendors with less than $10 billion in assets will be exempted from regulatory control of interchange fee limits. This will create a market separation between big banks offering a payroll card program and independent smaller vendors. A number of offerings were pulled during the crisis and this may lead to further consolidation within the prepaid payroll card space.
As such, companies must evaluate vendors very carefully to ensure that they are not only getting the best cost structure but also that their vendor—be it bank-associated or independent—will be around for the long term and will not be affected by market consolidation.