Digital Payroll’s $55 Billion Windfall

Managing paper-based payroll systems costs check-cashing businesses around $55 billion a year. The average cost to process a paper check is $1.85, and the average cost to produce it is $1.50. Digital payroll systems help alleviate these high costs for companies, but also offer payroll cardholding, under-banked employees low fees and zero overdrafts. Mark Putman, SVP of Prepaid Solutions at First Data who oversees Money Network, told PYMNTS how and why businesses should invest in 100 percent electronic payroll.

Can you talk about the benefits of electronic payroll programs for businesses as well as their employees?

MP: A lot of people look at it one-sidedly, but I am glad you asked about both sides. From an employer perspective, it’s really simple – you’re eliminating the need to distribute the check and the expenses associated with that process, as well as eliminating fraud on the check. Overall, they’re really saving $2 per check, according to the American Payroll Association.

From an employee perspective, employees who currently don’t have a bank account and are forced to get check, cash or a money order to pay bills, it’s over $30 per month to financially live without a payroll card. Payroll cards substantially drop the expense of living, of paying the bills. It’s really helping the under-banked become financially mainstream, giving them a product that does not overdraft and offers extremely low fees. Our current average cardholders pay less than $5 per card per month, across millions of cardholders, which is a shear benefit to the consumer.

While businesses say they think about moving their payroll distribution to an electronic format instead of their paper-based process, many say they don’t know where to begin. Can you provide some helpful tips on how to get started? 

MP: They should get involved with a payroll provider or distribution service like ours that helps them maneuver their way through the process. We’ve got extremely complex marketing programs to help employers roll these out, and we offer best practices based on the location and type of pay they have, and what their general philosophies are. I would just lean on the expertise we offer – we can absolutely hold the customer’s hand and get them through the process easily.

Mark, tell us about Money Network and First Data.

MP: I actually have responsibility for all of the prepaid at First Data, so in addition to Money Network, we have the closed-loop gift program, as well as the healthcare prepaid, combined with an integrated payment systems unit for First Data. Specifically, Money Network is the largest payroll card provider in the industry. We’re focused on an extremely high-level regulatory compliant solution for employers, enabling thousands of them to deliver electronic pay to their employees, while addressing various state and regulatory laws out there.

There are a number of providers that offer electronic payroll programs. What sets Money Network apart from the competition? 

MP: First of all, the history that we have and the experience in the industry sets us apart – I founded Money Network in 2001, so we’ve been doing this a long time. People have to understand that payroll is unique – it’s the most important part of a company. If you don’t pay your employees properly, you won’t have happy employees. It’s just the shear understanding that we have in the industry is a massive differentiator because payroll is a regulated at a state level, not a federal level. Arguably, you have to have 50 different sets of understandings to properly address it. We’ve got scale unlike any other provider out there, and we understand the market because of that – we handle over 50 percent of all of the payroll cards in the marketplace at this point.

We also have the largest surcharge-free ATM network out there, including issuer support from Bank of America, and a partnership with Walmart that enables 100 percent of cash availability on the card if someone chooses to withdraw funds that way. We’ve also got software and user interface for our employers to address the various elements of getting paid. There are a lot of complexities that need to be understood in immense detail, and we have the scale and the vertical integration that others don’t have.

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