Blog: Building the Next Generation of Payroll Cards
2014 wasn’t the best year for payroll cards. In the wake of a June 2013 class-action lawsuit against a McDonald’s franchise, state legislators from Hawaii to New York introduced legislation curtailing providers’ ability to offer payroll cards. In some cases, the proposed legislation was so onerous that, if passed, it would have effectively eliminated payroll card providers’ ability to offer the cards at all.
While the actions alleged in the McDonald’s case are certainly concerning, the media and legislative backlash has not been constructive. Payroll cards are fundamentally high-quality products that provide great value, security and convenience to employees without checking accounts. But their design and delivery is not uniform across the industry, and any industry worth its salt should always be looking for ways to improve.
Enter CFSI’s Compass Guide to Payroll Cards
The Compass Guide to Payroll Cards released this week defines a set of industry-wide best practices for the design and delivery of high-quality payroll cards. It was developed in conjunction with a range of industry stakeholders, including payroll card program managers, issuing banks, payments networks, processors, employer associations, consumer advocates and industry research groups.
The guide provides recommendations that promote choice, safety, affordability, transparency and convenience. Each recommendation is accompanied by an example illustrating how a company might apply this guideline to its product or service. The recommendations in the guide are rooted in CFSI’s Compass Principles, a set of aspirational guidelines designed to ensure quality innovation and execution in the financial services marketplace.
As providers seek a competitive advantage through customer-focused design and innovation, companies will implement these practices in their own ways. There is no one-size-fits-all approach to a high-quality payroll card and there is inherent value to choice, diversity and innovation in the marketplace. The most successful payroll card programs will align provider profitability and employer benefits with cardholder success.
So, as the industry sifts through the CFPB’s proposed rules for prepaid, stakeholders from across the payroll card value chain should be working together to ensure that payroll cards provide the most value to employees. Program managers can see how their products stack up against the guide, make tweaks where necessary or design new features. Employers can evaluate potential payroll programs and ensure they are providing a top-notch experience to their employees. Issuing banks, processors and payments networks can use the guide to determine which features and functionalities to develop and offer to their partners.
MasterCard and Visa already have committed to using the guide to ensure the quality of the payroll cards bearing their brands. MasterCard will be incorporating CFSI’s recommendations into its existing Payroll Card Standards, to promote choice, transparency and education. Visa has committed to developing an educational course for employers, incorporating recommendations from the guide to ensure they offer payroll card programs in a high-quality way.
Whatever your role in the industry, we invite you to join us as we work to ensure that payroll cards can continue to help hardworking Americans receive their wages in a safe, timely and affordable manner.
Thea Garon is a senior analyst on CFSI’s insights and analytics team. She conducts research to monitor and analyze emerging trends in the financial services industry and shares CFSI’s expertise with internal and external stakeholders in the sector. Her areas of expertise include prepaid cards, payroll cards, and other payments products and services. Thea can be reached at Tgaron@cfsinnovation.com.
In Blogs & Viewpoints, prepaid and emerging payments professionals share their perspectives on the industry. Paybefore endeavors to present many points of view to offer readers new insights and information. The opinions expressed in Viewpoints are not necessarily those of Paybefore.