B2B Payments

Taking A Stance For The Divisive Payroll Card


MetaBank is a huge advocator for the prepaid payroll card. In its latest show of devotion, the bank announced earlier this month that it would be renewing its existing partnership with Global Cash Card, a paycard firm that specializes in helping companies end their dependence on paper paychecks and payroll distribution.

But in today’s current climate, MetaBank may meet some resistance in its support of the payroll card. The products have secured negative press in the last few months, including multiple lawsuits that have led to the discussion over whether the fees associated with payroll cards are excessive and unfair.

But MetaBank President Brad Hanson is insistent on how the tool is beneficial to both employees and their employers.

“Let’s put it this way,” he explained in a recent interview with PYMNTS. “Employers that offer payroll cards and consumers that use payroll cards are more knowledgeable about their pay. They’re more likely to save and, I think, in general, are better off than consumers that don’t have access to payroll cards.”

It’s an intriguing viewpoint, considering the typical user of a payroll card that often comes to mind is an underbanked employee. But Hanson argued that these solutions are far from limited in their applications.

“Payroll cards are for anybody,” he said, adding that spend management is one sophisticated benefit of the payroll solution on the employee side. For instance, many users decide to place only a portion of their paycheck onto the card, with the rest landing in their bank accounts. “People can use them in more flexible ways than just traditional direct deposit,” Hanson continued. “They also use it as a primary banking relationship with MetaBank and the cards and services by companies that we partner with.”

Much of the allure of payroll cards stems from being able to nix paper from at least one area of operations.

For employees, that means no longer having to worry about lost or damaged checks or the struggle to find a place to cash them. The fiscal benefits for employers are significant as well.

“It saves them money from payroll processing so they don’t have to cut as many checks — or, hopefully, you don’t have to cut checks at all, if possible,” Hanson explained.

Paper paychecks, the executive said, mean time wasted in the payroll department and in cash flow. “They take a long time for them to settle,” Hanson explained, “whereas when you make a payment to a payroll card, it’s exactly like direct deposit.”

With the funds FDIC-insured and with banks taking care of the compliance aspect of employee compensation, payroll cards can serve as a much more strategic option for businesses than initially thought.

“We think they’re safer and better than checks; they’re definitely cheaper and more efficient,” Hanson added.

Ditching the manual process of cutting paper paychecks will certainly save a company some cash. But one of the biggest controversies surrounding payroll cards are the associated fees that can bite employees when they go to make a purchase, withdraw funds from an ATM or sometimes even if the payroll card experiences a period of inactivity.

Last November, analysis from the National Consumer Law Center found that Missouri and Kansas are the two states where government employers hit their staff hardest with paycard fees.

Analysis about payroll card use from the American Payroll Association released late last year found that just 75 percent of employees actually explain the fees associated with payroll cards to their staff.

But with payments trailblazers, like Apple Pay, seeing payroll card solutions integrating into their own innovative tools, the payroll card is far from extinction. Instead, cash and spend management for employees, coupled with a paperless, faster payroll solution for employers, is helping to bolster the popularity of the card.

Hanson echoed this trend with his own sentiment on the positive value of payroll cards.

“I can’t speak for every single payroll card provider that exists out there; I can only speak to the ones we offer. I do not believe the fees are excessive,” he stated. "I believe these provide significantly more value to consumers than they cost, and I believe they’re significantly cheaper for consumers than checks, on average.”

The executive also had some frank words for the ongoing legal battles and debates surrounding the solution.

“I believe that, quite frankly, most of the parties that are complaining — whether they’re political legislators or consumer activists — I think, are not interested in a solution,” Hanson said. “They look to exploit payroll cards, to repress consumers and to limit options to their own self-interest and own benefit, because if they find a solution, there’s no reason for them to exist anymore.”

Legal and political battles are sure to continue in order for payroll cards to strike a balance between serving employees and employers and acting as a profitable solution for issuers. Hanson added that MetaBank is continually monitoring the ever-changing rules impacting the products, too.

And even with the controversy, Hanson reiterated that payroll cards can provide significant benefits unmatched by other payroll solutions.

“We see them used for multiple reasons,” he said, “and we think they’re a very important part of the financial ecosystem.”



The How We Shop Report, a PYMNTS collaboration with PayPal, aims to understand how consumers of all ages and incomes are shifting to shopping and paying online in the midst of the COVID-19 pandemic. Our research builds on a series of studies conducted since March, surveying more than 16,000 consumers on how their shopping habits and payments preferences are changing as the crisis continues. This report focuses on our latest survey of 2,163 respondents and examines how their increased appetite for online commerce and digital touchless methods, such as QR codes, contactless cards and digital wallets, is poised to shape the post-pandemic economy.