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A Better Approach for Unbanked Employees

More than 75% of Americans say that increasing financial stress is impacting their productivity at work. Financial insecurity has hit all-time highs in many segments of the workforce, including the restaurant, construction and agriculture sectors whose workers tend to be more underserved with less access to affordable banking services. Workers who lack access to basic financial services are subjected to paying expensive fees for things like cashing a check. We believe there is a better approach for these which reduces costs for employers and promotes financial wellness for employees.

According to a 2021 estimate by the Federal Deposit Insurance Corporation (FDIC), there are 4.5 million households in the US that are unbanked, often disproportionately people of color, with no checking or savings account at a bank or credit union. Research also identifies a large segment of the population as ‘underbanked’ — those who may have a basic bank account but are still exposed to high cost services. The combination of unbanked or underbanked households represents over 26% of the US population, according to the FDIC.

The proliferation of payroll cards has provided a lower cost alternative to issuing checks, but there are often fees and limitations that impact employees. Our review of some of the most common payroll cards show a wide variety of fees and restrictions that limit the flexibility for employees.

Not all payroll cards are the same. Fees vary with providers, ranging from

monthly maintenance fees, transaction fees, overdraft fees, and in-network ATM fees

for withdrawals, declines and inquiries. Out-of-network ATM fees are considerably more. While these charges may be considered small, they can make a big difference to someone earning a minimum wage. Many cards don’t allow ‘portability’ — accepting payments from sources other than their primary employer (second employer, government benefits, tax refunds, etc.) and cards typically become void when they leave their primary employer. We believe a payroll card should also have a free optional savings account so unbanked workers can take the first step to establish a banking relationship. Even underbanked individuals could benefit from a more cost-effective payroll card and savings option.

Another emerging issue is the accessibility of payroll cards and a basic bank account for individuals who can’t obtain a US Social Security Number. ITIN (Individual Tax Identification Number) individuals, who are often immigrants, pay US Federal taxes but are largely excluded from obtaining banking services, and thus, can’t integrate into the US financial system to save and build credit — essential steps to financial stability. Unfortunately, there are only a few payroll cards in the US that accept accounts without a Social Security Number. It took us many years to influence one of our bank partners to accept ITINs, but they recognized the importance of this growing segment and the advantage of building long-term customers.

Our decades-long involvement working with financial institutions to create

solutions for lower income communities supports our view on the changing landscape

and what we believe is a better solution for unbanked employees. It’s prudent for managers to fully understand the fees and limitations of payroll card providers because the ultimate goal is to attract and retain a workforce with benefits that promote financial wellness and stability.


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