Banks Have Tough Competitors for Unbanked
When it comes to appealing to the nation's 22 million unbanked people, banks have some stiff competition. One of those competitors is a fairly new source - plastic payroll cards. According to Celent Communications, a research firm out of Boston, payroll cards will be used for 3.8 million workers by 2006 and more than half of those will be for people without bank accounts.
The reasons the cards appeal to employees - and especially the unbanked - are mostly practical. For example, here are some of the benefits that the new ethos Visa Debit Card Account from Affinity Card Systems, Inc., lists for receiving payroll via its card:
- Employees receive direct deposit onto the card without paying for the transaction so they don't have to pay for check cashing, and funds are available on payday. The Office of the Comptroller of the Currency says that the typical unbanked consumer pays $170 a year at check cashing services to cash two $400 paychecks a month and pay five monthly bills via money orders.
- Employees don't have the "hassle of visiting a bank" (a quote from Visa) since they can get account information 24 hours a day through a toll-free, automated telephone system or online.
- Accountholders enjoy fraud prevention tools such as an ability to turn the card on and off from a touch-tone phone and to receive text messaging alerts for deposits, withdrawals and purchases. The cards are also protected against loss or theft via Visa's Zero Liability Policy.
The cards are accepted at 32 million retail locations worldwide, and the accounts, which are issued by West Coast Bank are individually insured by the FDIC.
As if payroll cards weren't tough enough competition, the Financial Services Centers of America (FiSCA), whose members cash checks and provide other financial services for many of the nation's unbanked, have come up with an innovative savings program that has seen significant success in the six months it has been in existence.
The program has resulted in 20,000 account openings and brought in $5 million in deposits, exceeding FiSCA's expectations. The All-Access National Savings Program allows consumers who don't have traditional bank accounts to tie an existing prepaid debit card program to a savings account that currently pays .75 percent interest. Account holders don't have to maintain a minimum monthly balance and pay no monthly service fee. They can set up recurring transfers from their debit cards, and transfers are free. They can access the debit card and savings account via telephone, the Internet or by visiting FiSCA centers, which are mostly located in neighborhoods where the unbanked or underbanked live.
Copyright © 2005 Bankers' Hotline. Originally appeared in Bankers' Hotline, Vol. 15, No. 12, 12/05
First published on 12/01/2005