Ecount News
No bank account required: Stored-value cards extend direct deposit to all employees
National Post
A new method of direct deposit that allows employers to pay their workers on a stored-value plastic card is helping companies move from paper to electronic payroll -- even if their employees don't have bank accounts.
Last year Ecount, a Pennsylvania based company, introduced the Payroll Direct card, which allows businesses to direct deposit paycheques and compensation onto a MasterCard or Visa® debit card. The card can then be used at ATM machines and wherever MasterCard or VISA is accepted.
Ecount's payroll card targets companies that rely on employees who don't have bank accounts or have special budgeting needs -- usually young, low-income workers living paycheque to paycheque.
In a study conducted with MasterCard, Ecount found many low- income workers feared bounced cheque or insufficient fund fees and chose not to open a bank account. Ecount estimates between 12 to 15 million households in the U.S. are unbanked.
The payroll card took off in the automotive industry with clients such as Mazda Motor Corp., Suzuki Motor Corp. and Hyundai Corp. making large amounts of incentive payments on to the cards. Ecount's client list has since grown to include Pilgrim's Pride Corp., EB Games and 43 Burger King Restaurants.
By making compensation and incentive payments on to the card businesses can begin to move 100% of employees to direct deposit, something impossible a few years ago, saving the company money and time, said Matthew Gillin, chief executive of Ecount."The net result of that is they reduce the administrative hassles associated with lost or stolen cheques, mailing cheques by a certain time and the cost associated with paper versus electronic delivery. In a nutshell they can deliver the payments quicker, with a lower cost and less hassle," he said.
Mr. Gillin said the card also benefits employees because they are compensated faster, can track their commission earnings online and better manage spending. Users cannot overspend on the card because it acts as a debit or Interac card but not a credit card. Ecount has also issued cheques that draws funds from the card so users can pay bills.
"The core benefit is that it allows these people who don't have bank accounts to participate in the electronic payments world," he said. "Being a cash only person out there is difficult today."
EB Games, which has over 1,000 stores across the U.S. and 150 stores in Canada, began offering its employees the Ecount payroll card in fall 2003 and the experiment has so far been successful.
Debra Maher, director of benefits and compensation for EB Games, said the card appeals the company's young staff, many between 19 and 25 years old. Workers can save money with the card because of low account fees and a number of free ATM uses a month, she said.
After a few months, 10% of EB Games U.S. employees who don't have direct deposit are using the payroll card. Ms. Maher said the company has not introduced the card in Canada because of higher ATM fees, but may consider it in the future.
Founded in 1997, Ecount has over 1.5 million holders of various stored-value debit cards across the U.S., 450 corporate clients and a strategic relationship with VISA and MasterCard.
- Mitch Moxley