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© 2011 Network Branded Prepaid Card Association
Paperless PayrollATM Debit Prepaid Conference
November 4, 2011
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Descriptor: Paperless payroll is a goal for nearly every finance and payrollprofessional. Our current economic climate demands greater operational efficiency in finance and payroll administration. The regulatory environment for payroll is changing rapidly, and new products and services may alter the landscape of paperless payroll. Join this panel of payroll experts representing card providers, banks and the legal industry to discover how paperless payroll can be successfully implemented at your organization and become a win-win for employers and employees.
© 2011 Network Branded Prepaid Card Association
Outline
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Speakers: • Cathy Beyda, Paul Hastings Law, Chair American Payroll Association Payroll Card Council, Leader in NBPCA's Payroll Card Action Group•Reed Luhtanen, Director, Debit Cards, Walmart•Kirsten Trusko, President, Network Branded Prepaid Card Assoc
Agenda, by perspectiveBusiness: Payroll Card Market Overview Kirsten•NBPCA and the new Payroll Card Action Group•Bretton Wood’s Payroll Card Study•Trends and growth in Payroll Cards
Legal: Challenges and opportunities Cathy•Case studies
Employer: Walmart Reed
© 2011 Network Branded Prepaid Card Association
Legal Disclaimer
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The views of the presenters should not be attributed to their respective companies or firms, or to the NBPCA.
The content of this presentation is designed to provide practical information concerning the subject matter covered and is provided with the understanding that none of the presenters are renderinglegal advice or other professional services.
This presentation is for informational purposes only and is not a substitute for legal advice or your professional judgment.
You should review applicable law in your jurisdiction and consult experienced counsel for legal advice.
© 2011 Network Branded Prepaid Card Association
• Established 2011 to focus on the opportunities and challenges of paycards• Members representing: Issuing Banks, Program Managers, Card
Associations, Processors, Attorneys, Employers• Focus is solely on Payroll Cards
About Payroll Card Action Group
The Payroll Card Action Group Mission
• Drive payroll card positive awareness and market growth• Serve as a trusted advisor by providing a fact-based voice to government,
employers, media consumer groups and consumers • Monitor, report, and drive coordinated activities on federal & state legislative,
regulatory and law enforcement initiatives in payroll cards• Set a high industry bar by creating Leading Practices, Consumer Tips,
Employer tips, education tools, etc
NBPCA’s Payroll Card Action GroupEducate. Advocate. Protect. Promote.
Accomplishments• Voice of the consumer initiative• Payroll card studies• Leading Practices in payroll cards• “Coalition Connection”
© 2011 Network Branded Prepaid Card Association
Bretton Wood 2011 Payroll Card Study(released Oct. 4, 2011)
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ANALYSIS OF NETWORK BRANDED PAY CARDS
COMPARATIVE ANALYSIS OF PAY CARDS TO OTHER PAYMENT OPTIONS©
AUGUST 15, 2011
A few of the key findings: Payroll cards are the ‘greenest’ option, replacing paper statements, costs to produce, print, and deliver pay checks, and avoiding the transportation of employees going to cash/deposit the checks. At the same time enabling consumers to gain their key account information when and how they prefer: text, phone, online
Payroll cards are growing due to:1.A growing segment of the population that eschew traditional bank accounts due to either cultural cost or qualification issues2.Costs of issuing checks by government and corporate entities3.Political and societal needs to move from a cash based economy including costs of producing and distribution coin and currency4.Loss of tax revenue due to unreported income 5.Safety and security concerns of carrying cash
© 2011 Network Branded Prepaid Card Association 6
Bretton Wood 2011 Payroll Card Study
Released Oct. 4, 2011. Chart below: Average cost across transaction forms
The following chart compares all transaction forms and computes the average cost of each option as well as displaying the average, median, high and low cost range.
Annual averages: •Payroll card $83 • General purpose reloadable prepaid card $185•Cash based lifestyle $256• Low balance checking $273.)
© 2011 Network Branded Prepaid Card Association
Payroll Today
• Robust market growth• Increase in competition; price pressure; feature pressure• Changes in regulation• Distribution channels• Innovative technology and functionality – mobile• Still relatively low awareness = great opportunity for
growth in public and private sector
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© 2011 Network Branded Prepaid Card Association
Load-On Prepaid Payroll Cards
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Source: Aite
© 2011 Network Branded Prepaid Card Association
Number of Payroll Card Users in U.S.
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Source: Aite
© 2011 Network Branded Prepaid Card Association
Changes in Industry
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Source: Citi Prepaid
© 2011 Network Branded Prepaid Card Association
Future of Payroll…
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• Competition continues to increase• Expand target market • Change in use cases –unemployment, catastrophe• Evolving distribution channels• Impact of Durbin• Fraud management and AML issues• New features and technology – mobile, load capabilities
© 2011 Network Branded Prepaid Card Association
• Convenience• No more special trips to pick up a check or time wasted to cash
paychecks• Use card for everyday purchases – groceries, gas, online purchases• Mobile banking – Account balance/transaction alerts• Online banking – View account information 24/7• Security• Peace of mind – Keep money safe until ready to use • Less risk of theft and financial loss
• Affordability• Save on service fees
• Control• Budgeting tools• Self-service options – Account info via automated phone system or
customer service
Employee Benefits of a Payroll Card
© 2011 Network Branded Prepaid Card Association
Obstacles to Implementing Paperless Pay
• Misunderstandings about payroll cards– Employees are forced to accept payroll cards against their will– Payroll cards are unregulated– Employees will incur significant fees
• Outdated wage payment statutes– Federal law plays a limited role governing method of wage
payment– Until 2003, state law did not address payroll cards– Today, 20 states have updated their statutes and/or regulations
to specifically address payroll cards
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© 2011 Network Branded Prepaid Card Association
Federal Regulation of Payroll Cards
• The Fair Labor Standards Act (FLSA)– Regulates minimum wage and overtime compensation– Unclear whether method of wage payment is regulated
• The Electronic Funds Transfer Act (EFTA) and Regulation E– Governs electronic funds transfers, including payroll cards– Requires that employees select the financial institution– Provides a number of consumer protections
• FDIC Act and General Counsel No. 8– The funds underlying a payroll card are FDIC insured
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© 2011 Network Branded Prepaid Card Association
State Law Overview
• Every state permits direct deposit, at least on a voluntary basis
• 20 states now address payroll cards in their statutes and/or regulations, or in an Attorney General’s Opinion
• Virtually every state has addressed payroll cards at least informally
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© 2011 Network Branded Prepaid Card Association
States with Payroll Card Statutes, Regulations or
Attorney General Opinions
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• Arizona (eff. 7/20/11)• Colorado• Delaware• Florida• Kansas• Maine• Maryland• Michigan• Minnesota• Nevada
• New Hampshire• New Jersey• North Dakota• Oklahoma• Oregon• Tennessee • Utah• Vermont• Virginia• West Virginia
© 2011 Network Branded Prepaid Card Association
AK
HI
OH
WA
CAVA
MI
GA
KS
IA PA
WV DE
MS
ORSD
MO
WI
MN
KY
SC
FL
NC
UT
AZ
ND
NM OKTN
NE
WY
LA
IL IN
AR
VT
NY
CO
AL
MT
ID
NV
TX
MD
ME
NJ
DC
MARI
CT
NH
█ Paperless Pay Permitted Unclear Treatment of Payroll Cards
█ Partial Paperless Pay █ Must Be Voluntary3
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State Approach to Paperless Pay(Please see appendix for list)
© 2011 Network Branded Prepaid Card Association
The Green States
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• Alabama• Arizona (eff. 7/20/2011)• Colorado• Delaware• Indiana• Kansas• Kentucky• Louisiana• Maine• Massachusetts• Michigan• Mississippi
• Missouri• Nebraska• North Carolina• North Dakota• Ohio• Oklahoma• South Carolina• South Dakota• Tennessee • Texas• Utah• Washington• Wisconsin
© 2011 Network Branded Prepaid Card Association
Common Requirements for Paperless Pay
• At least one means of accessing full wages each pay period at no cost (i.e., payment at par)
• Employee consent• Training or distribution of educational materials regarding
the program• Disclosure of potential fees• Employee ownership of funds• Compliance with state law pay stub requirements
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© 2011 Network Branded Prepaid Card Association
Case Studies: Employer # 1
• State Employer– Size: 11,000+ employees– Motivation: Printing and deliver paychecks was an
inefficient use of time and other resources– Implementation Strategy: Employees had 30 days
to enroll in direct deposit or they would be issued a payroll card
– Current Participation Rate: 99%.
© 2011 Network Branded Prepaid Card Association
Employer # 1 - Outcome
• Benefits Realized– Increased direct deposit participation– Cost savings– Financial literacy and empowerment– Certainty of wage delivery
• General Observations– Many participants have bank accounts– Employees use the cards in many different ways– Employee response was mostly positive
© 2011 Network Branded Prepaid Card Association
Case Studies: Employer # 2
• Retail Employer– Size: 100,000+ employees– Location: Every state but Hawaii– Motivation: Difficulty complying with final wage
payment requirements, and a concern regarding the cost of issuing pay checks
– Implementation Strategy: Initially, employees were asked to support the employer’s initiative; now employees are enrolled during the new hire process
– Current Participation Rate: 90% direct deposit, 9% payroll cards
© 2011 Network Branded Prepaid Card Association
Employer #2: Outcome
• Benefits Realized– Significant cost savings once paper pay stubs were
eliminated– Certainty of wage delivery– No lost payrolls
• General Observations– Some banked employees prefer payroll cards– Trying to increase participation by mailing paychecks
was unsuccessful– Keys to success were education, management
participation and vendor support
© 2011 Network Branded Prepaid Card Association
Case Studies: Employer # 3
• Staffing Agency– Size: 40,000 employees– Location: 300 locations in 30 states– Motivation: Cost savings, reliability of wage delivery
and environmental concerns– Implementation Strategy: Initial rollout was
unsuccessful. Employer negotiated lower fees and switched to a branded card; Program is voluntary
– Current Participation Rate: 49% direct deposit; 33% payroll cards
© 2011 Network Branded Prepaid Card Association
Employer #3: Outcome
• Benefits Realized– Tremendous cost savings – Reliability of wage delivery even during severe
weather• General Observations
– Participation rates are higher in states where severe weather conditions are common
– Banked employees use payroll cards in a number of different ways
– Employee education is crucial
© 2011 Network Branded Prepaid Card Association
• 3,804 stores
• $258.2 billion in sales
• Walmart.com
• Other formats: 1-800 Contacts; Vudu; Mail order pharmacy
U.S.
• 609 clubs• $46.7 billion in sales
International
• 4,556 stores and clubs• 53 retail banners• 15 countries• $100.1 billion in sales
Unit counts as of January 31, 2011; FYE10 Sales
© 2011 Network Branded Prepaid Card Association
“If we work together, we’ll lower the cost of living for everyone…we’ll give the world an opportunity to see
what it’s like to save and have a better life. – Sam Walton
Total Units Worldwide: 8,969
Canada325 Units
China328 Units
United Kingdom 385 Units
Japan413 Units
India5 Units
Mexico1,730 Units
Brazil 479 Units
Argentina63 Units
Central America 549 Units
Chile 279 Units
As of January 31, 2011
US4,413 Units
© 2011 Network Branded Prepaid Card Association Walmart / Sam’s Club: Electronic Pay Program
Overview of the Payroll Function at Walmart
• Process payroll for associates in 50 states in US, and Puerto Rico
• Duties includes electronic payroll advice distribution, termination pay, W-2 administration, other
• Currently paying 1.4M associates – 92% paperless
• Pay frequency is both bi-weekly and weekly
• Associate base is in both rural and urban environments.
© 2011 Network Branded Prepaid Card Association Walmart / Sam’s Club: Electronic Pay Program
Historic Challenges with Pay Delivery
• Costly to produce and deliver paper checks
• Labor intensive
• Delivery disruptions
• Unbanked or under-banked associates
• Cost to associates
• Cash on-hand requirements
• Need for increased control and tracking
• Not environmentally friendly
© 2011 Network Branded Prepaid Card Association
• Expense Reduction– Payroll processing costs
– Bank service charges
– Reduction of cash in store
– Reduction in check distribution labor
– Decrease time at register for check cashing
• Increased Controls– Consistent delivery of pay
– Addresses disaster /emergency pay
– Solution for delivery of termination pay
– Resolution of escheatment opportunities
– Ability to meet individual state requirements Walmart / Sam’s Club: Electronic Pay Program
Benefits of Electronic Pay Program
Sustainability• Saves 4,500 trees
• Eliminates 13T of Waste Water
• Reduces 490,000 kg of carbon
© 2011 Network Branded Prepaid Card Association Walmart / Sam’s Club: Electronic Pay Program
Associate Benefits of Electronic
Pay Program
• Free Access to Cash
– Unlimited free cash access at our registers
– 1 Free ATM transaction per pay period at any
location
– Money Network checks
– Bank Teller unloads
– ACH to additional accounts transfers
– Cash over with purchase at thousands of
merchants
• Free Access to Information
– Daily text or email message providing card
balance
– Balance inquiries at POS
– Free IVR and live customer service
– IVR, text and online access for paystubs
• Free Additional Services
– No NSF or overdraft fees
– Additional fund loading
– Signature, PIN, and online
purchases
– ATM inquiries
– FDIC insured account
© 2011 Network Branded Prepaid Card Association
Q & A
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