FleetBoston Financial will be among the member banks issuing Visa’s new payroll card.
With a 60 percent market share and more than 1 billion cards in circulation, Visa is by far the market leader when it comes to plastic. But now it’s looking to increase those numbers in the United States with the introduction of a new product.
Visa recently unveiled a new type of card aimed precisely at the population that, historically, abhors both banks and cards.
The idea is simple: The employer issues the payroll card to an employee. Each payday, instead of a paper check or direct-deposit slip being handed out to the worker, the payroll amount is loaded onto the card.
“It’s designed to serve a different sect of consumers,” said Kenny Thomas, director of corporate relations for Visa USA in San Francisco. In this case, the card targets consumers who don’t have a traditional banking relationship such as a checking account. The card is part of Visa’s prepaid card category, along with debit cards.
“We see great opportunity for the prepaid card category. When you look at our overall business strategy here at Visa, it’s really to displace cash or checks for transactions. It allows us to do that in a way that a check card or credit card can’t, in that we can serve those who don’t have a banking relationship and allow them to get out of the cash-and-carry world,” he said.
Besides alleviating printing and paper costs to employers, the new card would benefit those who usually cash their paychecks every week and keep the money with them. Visa cites safety as a motivating factor for employee participation in the program; the card is qualified for all of Visa’s customer protections against lost or stolen cards and identity theft.
The card is distributed through Visa member banks, and the largest banks already have signed on. FleetBoston Financial, Bank of America, Bank One Corp., First Tennessee National Corp. and U.S. Bancorp will be issuing the cards to their commercial customers for employee payroll cards.
According to an April 2000 survey by the U.S. Department of the Treasury, about 9.5 percent of Americans don’t have a traditional bank account. Those Americans generally frequent check cashing centers.
Rick Lyke, spokesman for the Financial Service Centers of America, a trade association for check cashing centers, said there’s no doubt that the payroll card will have an effect on the check cashing business, but he doubts it will have enough of an impact to put anyone out of business. Currently, there are 11,000 licensed check cashing businesses in the United States.
“Obviously, I don’t know how much marketing muscle Visa is planning to put behind the card. They’ve got some very large players behind them,” said Lyke in reference to the banks already enlisted.
Ironically, those are the same banks that are involved in what Lyke termed “bank discontinuance.” Lyke said the banks have been systematically canceling the business accounts of check cashers. “If you’re a small business and you’ve been working with a bank for 10 years, to suddenly be put in a position where you have to go out and find a new partner in a market where there is a lot of consolidation, it’s a difficult process,” said Lyke.
FleetBoston was unavailable for comment and Bank of America did not respond by press time.
‘A Kind of Coach’
Thomas admits the group Visa is targeting has been reluctant to establish any ties to a bank. “We see this as an opportunity to do so, and for our banks to establish a relationship with them that is less intimidating than walking into a branch and opening an account,” he said. “We envision that eventually, through that relationship with the Visa payroll account, they will open a checking account and a savings account and have access to a much broader array of financial services than they have already.”
Lyke expects that if Visa or the employer using the card takes the time to inform people how to use the ATMs, the card will be successful because his industry has a product that is similar but less well-known.
FiSCA, along with Citibank, sponsors the Preferred Card. “The Preferred Card is a rechargeable debit card very similar to the payroll card. You could have your paycheck direct deposited to this card. You could deposit money yourself into this card. It’s a debit card just like the Visa card,” said Lyke.
“One of the things we found in locations that are doing well with this card is that they have assigned a member of their staff to be a kind of coach,” said Lyke. A person will show them how to enter their personal identification number and how to insert the card. “All those types of steps that, for a lot of Americans, seems a little bit basic right now. But if you think back 15 or 20 years ago when ATMs first started appearing at bank branches, the banks had service reps out with the machines, showing people how to use them,” said Lyke.
It will be up to employers to show employees how to use the cards after being supplied with educational materials from participating institutions. But Thomas is optimistic the cards are the first step in winning people over to a more enhanced banking relationship.
Many people new to the United States may not trust banks because of their experience with mismanaged or insolvency of the banks in their own countries, said Thomas. Additionally, language barriers may play a part or the person may simply feel intimidated by walking into the grand foyers many banks have.
The acquisition costs for banks that want to offer the product are significantly lower than other Visa programs, said Thomas, because of reduced marketing costs.
Pricing and fees are left up to the individual institution.
While banks continue to sign up for the product, Thomas expects cards to be in employees’ hands by the middle of next month. Already, some companies in Tennessee have signed up for the program.
