digital epayroll and the future of payments 2013 and beyond · such as non-bank check cashing or...
TRANSCRIPT
Digital ePayroll and the Future
of Payments 2013 and Beyond
Name of Chapter here
Agenda
1. Audience Survey
2. Making the Case for Prepaid
3. Users of Prepaid Cards
4. Are Prepaid cards a viable alternative to a bank account?
5. Reasons Why Paycards Don’t Achieve Company Goals
6. Questions/Comments
How many more years will
CASH EXIST?
How about the Penny, All Coins, Dollar
or All Paper Money?
How many of you NEVER
produce a PAPER CHECK
out of your payroll office?
WHY?
Your explanations ARE VALID!
How many of you NEVER
produce a PAPER PAY
STUB out of your payroll
office?
WHY?
Your explanations ARE VALID!
Could the Underserved Segment be the CAUSE?
821,000 more U.S. households have become unbanked since the first survey in 2009, representing a 0.6 % point increase Other key findings of the survey include:
• 8.2 % of U.S. households are unbanked with approximately 17 million adults live in unbanked households.
• 20.1 % of U.S. households are underbanked. This represents 1 in 5 households, or 24 million households with 51 million adults.
• 29.3 % of households do not have a savings account, while about 10 % do not have a checking account.
• 25% of households have used at least one alternative financial service (AFS), such as non-bank check cashing or payday loans in the past year, and almost 1 in 10 households have used two or more types of AFS products or services.
• In all, 12 percent of households used an AFS in the past 30 days, including 4 in 10 unbanked and underbanked households.
1 Employee = Huge Savings
By switching to Direct Deposit, an individual employee, paid every two weeks, can:
• Save a pound of paper per year
• Avoid the release of 4 gallons of
wastewater into the environment
• Avoid the release of 1 pound of
greenhouse gases into the
atmosphere. This amount of
greenhouse gases is the equivalent of:
– 4 miles not driven in your car
– ½ square foot of forest preserved
Could Management be the CAUSE?
Making the Case for
Prepaid
• Payroll dominates the commercial segment
• General use is expected to have the largest potential in the
consumer vertical
US Prepaid open loop expected to reach $442B
Source: “BCG Prepaid Market Sizing Study”, May 2010. Research commissioned by MasterCard.
2017 Projected US Prepaid Open Loop by Vertical ($Billions)
Why Are Prepaid Cards a Payroll Option
• Network branded prepaid cards provide consumers, businesses
and governments with the efficiency, security and flexibility of direct
deposit.
• Most prepaid cards benefit from broad acceptance, as they can be
used anywhere the card brand (Amex, Discover, MasterCard,
Visa) credit/debit card is accepted.
• May provide a point of FREE CASH DELIVERY and EMPLOYEE
ACCESS for their payroll
Who Uses Prepaid Cards
• Millions of Americans use network branded prepaid cards for the
choice and protection they provide
• Much of today’s economy REQUIRES ELECTRONIC PAYMENT
• Who would not otherwise have a way to participate
– Employees who are seeking a non-credit payment tool, that helps the
users control their budget and offer many of the same fraud and loss
protections.
– Funds are loaded by employers for payroll, rewards/incentives and by
government for benefits
– Employees/parents of college-aged students who want a safe and
secure way to give money without the risk of running up debt
How Prepaid Cards Work
• For the consumer, the cards work like traditional debit/credit cards.
• A consumer can take a prepaid card to their favorite store or
online retailer and use it just like they would a regular credit or
debit card. They can also use the card to pay bills, book airline
tickets, rent a car, buy dinner, etc.
• Many cards allow consumers to take cash out at ATMs.
• The cards offer the same fraud and loss protections as any credit
or debit card, but with one big difference: the funds on the card are
pre-paid (by the consumer, business or government on their
behalf).
• Prepaid cards help the consumer control their budget and avoid
interest charges, running up debt and overdraft fees.
Who is the user for Prepaid
Cards?
Is it YOU?
• People might be surprised to learn that so many prepaid card customers
actually have bank accounts.
Ron Hynes, Executive Vice President of Global Prepaid Solutions at
MasterCard : It's an emerging phenomenon. I don't think consumer
behavior has changed, necessarily. Consumers have always been
interested in control, budgeting, segmented spending, etc. In fact, I can go
back forty years and remember my mother with her Christmas Club
account. That was a very segmented system, and she was systematic in
how she put money away so that when the holidays came she had money
to go out and spend. So I don't think the consumer dynamic has changed.
What consumers are beginning to understand is the ease with which they
can accomplish some of that planned spending through prepaid products
and offerings.
Is the Prepaid Card a True Employee Benefit?
Do Any of These Cases Fit In With Your Company?
“Cashing my check every week used to cost me a lot in fees and charges and I
wasted a lot of time waiting in line. Now my pay is automatically deposited on a
prepaid card. I get free purchases and free cash back, free bill pay and I don’t
have to stand in line anymore. It means freedom to me and I have a card that
looks and works just like my friends who have checking account debit cards” –
Diane, Payroll Card
“I love using my reloadable prepaid card because it's convenient, safe and allows
me to spend only the money that's on the card. I use it to buy everything from gas
and groceries, and even pay bills for phone or utilities. When I go out to dinner
with friends and we split the bill, I can use my prepaid card just like a bank debit
card or credit card” - Chris, Reloadable Card
“My daughter is 15 and I want to teach her how to manage money. Instead of a
giving her cash or a debit card, I give her a reloadable prepaid card, which I can
reload with her allowance and other money received from babysitting or as gifts.
Knowing her card is protected if it lost or stolen gives me piece of mind. I also like
the fact that she can't overspend” - Claudia, General Purpose Reloadable Card for Teens
NBPCA
Are Prepaid Cards a Viable
Alternative to a Bank
Account?
Prepaid Card Costs vs. Traditional
Bank Account Costs 2009
For the Consumers Union transaction pattern, general purpose
reloadable (GPR) prepaid card users’ costs range from $76 to $380
annually.
The reloadable prepaid card costs would decrease after the first year by the
amount of the activation fee. With the current turnover of these cards, many
consumers will incur these costs unless they are payroll cards; therefore,
maintaining the same card will reduce the annual costs.
Bank customers pay from $218 to $314 annually for a basic checking
account with the same common usage patterns referenced above.
It should be noted that these costs include five overdrafts per year, a 17%
reduction from last year. However, recent analyses indicate that many more
consumers than anticipated are opting in for the debit card overdraft
coverage. Also, Bretton Woods’ 2009 study of overdrafts indicated that
active household users of overdrafts incur more than four overdrafts per
month, or 51 per year.
What about FREE Checking? Or
Check Cashing?
To be consistent with the reloadable prepaid card comparison, if bank
account customers meet the criteria (e.g. $1,500 average balance,
direct deposit or electronic access only) to minimize fees, these
customers would pay $127 to $250 annually. However, given that
the average deposit is $350 twice per month, the likelihood of
maintaining a $1,500 average balance is negligible.
Check cashers and cash users pay $140 to over $720 annually.
Walmart is at the low end of the scale and the company is a
formidable competitor given its presence in the United States. The
more expensive end of the scale includes Western Union and Ace
Cash Express. While most consumers will find a lower cost alternative
than this mix, we believe it is important to see the possibility of the
higher costs to consumers.
Costs Comparison – Consumers Union
Transaction Pattern
The shifting cost model is resulting in an
increased acceptance of prepaid cards
The early users of branded prepaid cards tended to be the
underbanked. With new fee structures on basic checking accounts and
fewer branch offices in low to middle income communities, the
underbanked face more obstacles to mainstream banking. Appropriate
education to these consumers will allow reloadable prepaid cards to be
a safe and cost-effective means of conducting basic financial
transactions.
Also, today more mainstream banking consumers are adopting
branded prepaid cards for unique purposes like budgeting and funding
the pending needs of children, students and parents without the risk of
overdraft. The costs are typically lower than alternative payment
methods and the convenience and security of branded prepaid cards
are on a par with checking accounts and are far superior to cash.
I heard that prepaid cards are unregulated
and I would be safer carrying a debit or
credit card. Is this true?
• All network branded prepaid cards are issued by highly regulated
financial institutions and are subject to examination, review and
oversight by federal agencies such as the Federal Reserve Board,
the United States Treasury, the Office of Thrift Supervision and/or
the Office of the Comptroller of the Currency. They are processed
through an online system that tracks and records every use: both
the cardholder purchase and the merchant where the purchase is
taking place.
• Network branded prepaid cards are subject to the same zero
liability protection offered by the brand mark on the card
(American Express, Discover, MasterCard or Visa). If a prepaid
card is lost, stolen or used for purchases without authorization,
report it to the customer service number immediately and the card
may be reissued and the funds replaced.
But My Employees Like to
Cash Checks!
Payroll Card Compliance Map State Sized by Population Size
ATM Networks
Prepaid Card Satisfaction
GPR Cardholders: Who are they really? Dispelling the myths., The Aite Group, March, 2012. Aite Group’s Survey of 500 U.S. consumers who
use alternative financial services, Q1, 2011
Cardholders: Who are they really? Dispelling the myths indicates that
prepaid cards are not just a tool for the underbanked.
• 43% are Gen Y’ers
• 1/3 earn more than $45,000
• 34% have a college degree or higher
• There is high consumer satisfaction
Q. How satisfied are you with using a prepaid debit card?
(n=250)
Not: It’s not particularly helpful
6%
Extremely: It’s even more
helpful than I thought it
would be
29%
Very: It’s as helpful as I
thought it would be
44%
Somewhat: It’s helpful, but
not as much as I’d expected
22%
The National Urban League -
Reason to use a prepaid card
Other
Easier to manage my money than what I
Cheaper than a bank account
Saves me time
Like having a card with a Discover/Visa/
Cheaper than using a check casher
Can have direct deposit
Easier to pay my bills
Easier and Safer than carrying cash
Can't overspend/overdraft
What Prepaid Users Liked Most
Direct Deposit Will Lead
My Employees to Free
Banking
PAY CARD ANALYSIS
AUGUST, 2011
BRETTON WOODS, INC.
PIN vs Signature Transaction ratio
On a percentage basis, the cost of the pay card to the pay card consumer is
only 1% of their total earnings. This is much more favorable than other
available options.
The PIN versus Signature transaction ratio for pay cards is 56% for Signature
and 44% for PIN transaction compared to the 2010 Federal Reserve Payments
Study of 62% for Signature and 38% for PIN:
2006 2009
15.7
(63%)
9.4
(37%)
14.5
(38%)
23.4
(62%)
14.8%
37.9
25.0
Signature
PIN
Debit Card
billions
Q. For what do you use a prepaid debit card most frequently?
(n=250)
At stores and
restaurants
Source: Aite Group’s survey of 500 U.S. consumers who use alternative financial services, Q1 2011
For online
shopping
To pay bills At ATMs
40%
27% 24%
9%
Reasons Why Paycards
Don’t Achieve Company
Goals
Hurdles to Successful Payroll Card Adoption
and Enrollment
Payroll
Card
Inadequate Employee Training
A PayCard company without a STRONG client
education and training system is WEAK.
PayCard Providers must offer…
• PayCard Education
• Training on Use
• An Employee Satisfaction
guide
PayCard programs with inadequate client training will have
LOW satisfaction and program success will be MINIMAL.
Client training is Critical!
Overdrafts: What to look for?
Some payroll debit cards can be overdrawn and the card programs
charge “Overlimit or NSF fees”
• The primary reason the unbanked are unbanked is largely due to
past exposure to and their desire to avoid overdraft fees.
• Why put your employees back in the same position.
• If overdraft is possible – what is the opt-in process?
Look for Instant Issue Branded-Visa, MasterCard, Discover:
• Be aware that some paycards offer an upgraded, embossed VISA
or MasterCard branded card for a fee.
• The unbranded instant issue Card is simply an ATM card.
• This ATM only card brings into question an employee’s ability to
gain access to their “pay to the penny”. Access to “pay to the
penny” is a requirement in many states for a paycard to be legally
compliant to the “letter” of the law.
Reasons Why Paycards Don’t Achieve
Company Goals
Evaluate the Issuing Bank:
• The issuing bank is IMPORTANT!, You should evaluate if the relationship is
new to the paycard provider.
• If it is new, why?
• Is it due to a Bank Failure? With the environment today, it is important to ask
the question.
Take Caution with a bank that has been through FDIC acquisition due
to the FDIC Acquiring Bank being new to the prepaid business.
This represents future risk to your cardholders and additional work for
your company.
Prepaid issuing banks are specialized and require depth of knowledge
for BSA and AML program underwriting.
Without experience or understanding the NEW bank may simply
discontinue their participation in the card program.
• Don’t assume that a major bank houses the accounts and system – most
outsource the entire system.
Reasons Why Paycards Don’t Achieve Company
Goals
What is Card linking?:
Historically lost and stolen cards can be a huge issue for a
company with unbanked workers.
• Not all paycard providers handle the process of lost or
stolen card replacement the same way and they may
inevitably lead to a negative cardholder experience.
• Be aware that employees may not have access to all
features of program with a PIN only replacement card,
there may be a period of time without account access and
transfer fees to bring over balances.
Reasons Why Paycards Don’t Achieve
Company Goals
You want reports! Lots and lots of reports!
• Beware – the requested report may be a violation of the Gramm-
Leach-Bliley Act.
• While there are many reports available to paycard clients, you don’t
want to access to information on employee spend.
o This is for one very important reason… The Account is Private
and Owned by the Employee. Having access to this “spend”
information puts your company and employees at risk.
• Select a paycard team that stays current with this dynamic area of
regulation through participation in the Visa-sponsored Paycard
Roundtable, which is a group focused on creating a legislative
environment favorable to paycards and The Network Branded
Prepaid Card Association ’ s (NBPCA) Government Relations
Committee.
Reasons Why Paycards Don’t Achieve
Company Goals
If you have any questions please contact rapid! PayCard:
Brian Slowik
(727) 828-1635
If you have any questions please contact rapid! PayCard:
Chris Ruppel
(727) 828-1634
If you have any questions please contact rapid! PayCard:
Leeann Uridge
(630) 953-9331
If you have any questions please contact rapid! PayCard:
Dallas Wilfong
(813) 344-3139
Review of Prepaid
Terms, Definitions and
Resources
What defines “Open Loop”?
There are two general categories of Prepaid Cards: Retailer Branded
(often called Closed Loop), typically issued by a Retailer and redeemable
only at the issuing Retailer and Network Branded (often called Open
Loop), typically redeemable wherever the Card Brand is accepted.
Some consider Restricted Authorization Network (RAN) Cards a third
category of Prepaid Cards. These cards typically are accepted for
payment at multiple retailers (such as those in a mall or a certain
geographic location) but are not universally accepted like Network
Branded Prepaid Cards. Often, RAN Cards “run” on the rails of the Card
Brands, meaning they make use of the Card Brand processing and
financial settlement infrastructure but do not include a Card Brand
Acceptance Mark.
Prepaid Cards may be Consumer Funded, Corporate Funded or
Government Funded.
What Defines “Closed-Loop”?
One of the two major categories of Prepaid Cards. Closed-Loop
Prepaid Cards are typically issued by a Retailer and redeemable only
at the issuing Retailer (in a store and/or online). Characteristics of
Closed-Loop Prepaid Cards include:
•Plastic version of a paper gift certificate
•Issuer is the Retailer that accepts the card
•Cards useable only at the issuing Retailer ’ s locations (which
sometimes includes the Retailer’s Website) or at approved multiple,
affiliated merchant locations, such as Merchants owned by the same
parent company
•Usually non-reloadable, but some permit reloads
•Runs on the Retailer’s POS system (Clerks know the outstanding
balance and often can provide a receipt with the remaining balance to
Cardholders)
What is a Payroll Card
A Prepaid Card that is directly or indirectly established through an
employer and to which electronic fund transfers of the Cardholder’s
wages, salary or other employee compensation (such as commissions)
are made on a recurring basis, whether the account is operated or
managed by the employer, a third-party payroll processor, a depository
institution or any other person.
Payroll Cards are a smart and safe alternative to checks and direct
deposit for unbanked employees, who use the cards to access cash,
pay bills and make purchases. Payroll Cards also are useful for banked
employees in a variety of situations such as per diem workers.
Customer Identification Program (CIP) (U.S.)
In the United States, an established process used by financial institutions to
establish a reasonable belief that they know the true identity of their customers.
A CIP must include new account opening procedures that specify the identifying
information (such as name, address, date of birth, taxpayer ID number or Social
Security Number for individuals, or other government-issued ID) that will be
obtained from each customer and reasonable and practical risk-based procedures
for verifying their identities.
CIP is required by the USA PATRIOT Act. The law, implemented by regulation in
2003, requires financial institutions to develop a CIP appropriate to the size and
type of its business. The CIP must be incorporated into the financial institution’s
BSA/AML compliance program, which is subject to approval by the financial
institution’s board of directors.
See http://www.nbpca.com/en/Government-Affairs.aspx for the NBPCA ’ s
Recommended Practices document.
Debit Card
A plastic card, embossed or printed with the Cardholder’s name,
which is used by the Cardholder to access funds held by a financial
institution in a demand deposit (checking, share draft or current),
savings or other asset account established individually for or by the
Cardholder. Debit Cards that display a MasterCard or Visa
Acceptance Mark “ride the rails” of the credit card networks and,
therefore, require a signature for card-present purchases.
Debit Cards that display an EFT Network brand (such as NYCE, Star,
PULSE, Interlink or Maestro) ride the rails of the ATM Networks and,
therefore, require a PIN for card present purchases.
General Purpose Reloadable Prepaid Card
(GPR)
A type of Consumer-Funded Prepaid Card, purchased by a
consumer for his/her personal use, to use to pay for purchases, pay
bills and/or access cash at ATMs. Approximately half of GPR Cards
are purchased by those who don’t want or don’t qualify for a bank
checking account or a credit card.
GPR Cards may be purchased online and in retail locations from a
variety of providers. Reloads (the addition of funds to the Prepaid
Card) may be accomplished through Reload Networks sponsored by
the Card Brands and Program Managers or via Direct Deposit from
by employers or government. Consumers pay various fees for GPR
Cards, typically including an upfront purchase fee, monthly fees and
transaction fees (for ATM transactions, for example).
Instant Issue Card
A Prepaid Card that is issued “on the spot,” in contrast to
one that is mailed, delivered or received by the Cardholder
at a later time. Instant issue cards are not personalized with
the Cardholder’s name—although they may be.
Network Branded Prepaid Card
A Prepaid Card displaying the logo of a Card Brand (e.g.,
American Express, Discover, MasterCard, Visa, NYCE,
PULSE, Star) that can be used at unrelated Merchants to pay
for goods and services and for ATM cash access.
Interchange (Reimbursement) Fee
A fee paid from one financial institution participant to the
other financial institution participant in a transaction.
Typically, it is a fee assessed by a Card Brand, which
requires the Acquiring (Merchant) Bank to pay the Issuing
(Cardholder) Bank. Fees vary by Card Brand, transaction
category and payment instrument type.
Types of Cards and uses for Prepaid Cards
This increasingly popular financial product comes in many forms. Take a look at
these examples to understand how they are used.
Card Type/Purpose
• General Purpose Reloadable: A type of prepaid card typically
purchased by a consumer for his/her personal use to pay for purchases,
pay bills and/or access cash at ATMs. GPR cards may be purchased
online and in retail locations from a variety of providers. Funds may be
loaded onto the card by direct deposit of wages or benefits or at retail
locations offering prepaid card reload services.
• Payroll: A Prepaid Card that is directly or indirectly established through
an employer and to which electronic fund transfers of the cardholder's
wages, salary, or other employee compensation (such as commissions),
are made on a recurring basis.
• Incentive Cards: Payment made to a consumer as a reward for
purchasing a product or by a company to an employee as an incentive
bonus.
Types of Cards and uses for Prepaid Cards (continued)
• Health Care: Pre-tax Benefit cards linked to Health Savings
Accounts (HSA), Flexible Spending Accounts (FSA) or Healthcare
Reimbursement Accounts (HRA); funds can be used to pay for
current or future medical expenses.
• Government Disbursement Cards: Prepaid cards used for the
purpose of disbursing government payments such as Social
Security payments, disability payments, disaster relief payments,
WIC or Food Stamp disbursements or government payroll.
• Gift Cards: A prepaid card that is purchased by a gift giver to be
given to a gift recipient
Societal Benefits of Prepaid Card
Prepaid cards provide consumers, businesses and governments with
the efficiency, security and flexibility of digital payments through a non-
credit payment option.
Benefits:
• Open The Doors to Economic Participation
An estimated 100 million Americans are considered unbanked or
underbanked. These are individuals who have no bank account or
have limited or no access to credit. Many of these Americans are
forced to rely on a combination of cash, money orders and pay-day
loans. Network branded prepaid cards allow these Americans, many
of whom are minorities, access to our increasingly card-based
economy and provide an improved sense of control and
empowerment.
• Promote Financial Responsibility.
For many Americans, prepaid cards serve as a tool with which to more
effectively budget their spending. With a prepaid card, consumers avoid
the risk of over-spending or overdraft, thus avoiding the interest, fees
and potential negative credit score implications of traditional credit
cards. And for parents, prepaid cards provide tools to maintain control
over their teens' or college students' spending.
• Provide Cost-Effective Convenience to Governments, Businesses
and Consumers.
Many US households have used a prepaid card in one of its forms.
Today businesses use prepaid cards to deliver payroll, provide and track
health benefits and as a reward or incentive to employees and
customers. Governments use network branded prepaid cards to deliver
benefits to those who are eligible, as well as to disperse disaster relief
funds in a more easily tracked, cost-effective and expeditious manner.
Societal Benefits of Prepaid Card (continued)
• Provide a Safe and Regulated Alternative to Credit or Cash
Network branded prepaid cards are issued by highly regulated
financial institutions, each having to comply with federal regulations
from the Federal Reserve Board, the United States Treasury, the
Office of Thrift Supervision and the Office of the Comptroller of the
Currency, among other regulators.
• These benefits result in strong consumer satisfaction.
NBPCA research shows that more than 80 percent of consumers
are satisfied with their prepaid card experience, and direct
interviews show a high frequency of cardholders who would
recommend the product to their friends and relatives.
Societal Benefits of Prepaid Card (continued)
Is having a prepaid card cheaper than having a
bank account?
• Prepaid cards can be a good alternative to a bank account for a
growing number of people.
• A recent study by Bretton Woods showed that an average
consumer could spend as little as $76 per year using a prepaid
card (and even less with direct deposit) versus $218 to use a bank
account for the same services and average balance.
• Consumers can often avoid fees by using direct deposit and fee-
free cash options like in-network ATMs, surcharge-free ATMs and
cash back at the point-of-sale. Consumers appreciate that many
cards offer free texting of your balance and transactions, online or
phone balance inquiry, free cash back with purchase, free
purchases and free electronic bill pay.
The Consumers Union Report released in September, 2010 used the same
transaction profile as their August, 2009 report:
• 3 ATM withdrawals
• 3 bill payments (rent, utilities and phone)
• 8 point of sale purchases (groceries and meals once a week)
• 4 balance inquiries
• 2 deposits/loads
Based on confidential interviews within the prepaid industry, actual transaction
patterns may more closely resemble the following:
• 2 ATM withdrawals
• 1 ATM declined withdrawal
• 1 bill payment
• 8 point of sale purchases
• 1 ATM balance inquiry
• 3 call center inquiries
• 2 deposits/loads
Analysis of Reloadable Prepaid Cards in an
Environment of Rising Consumer Banking Fees
Prepaid Cards VS Alternative Payments
As it did in 2009, Bretton Woods compared the costs of the largest
reloadable prepaid card programs versus alternative payments tools
for similar transaction activity. The 2011 report adds analysis on the
“sea change” that is occurring in consumer banking due to new
regulations. Some key findings include:
• Check cashing and paying bills with money orders are the most
expensive payments options available to consumers of the options
compared
• Traditional checking account costs are rising with additional
restrictions on account activity, this is affecting the underbanked
demographic the most
• Reloadable prepaid card prices are falling while features of the
cards have become more robust
Community banks, especially under $1 billion in assets, struggle to
devise a 21st century business model that accounts for changing
consumer behavior, legacy cost structures, continued interest margin
squeeze, loss of fee income sources and technology drivers. To meet
consumer demands, the Alternative Financial Services industry is
moving forward to develop products and services outside of the
traditional banking model.
Bretton Woods’ analysis of research indicates the following:
• The top 50 banks in the United States (0.65% of the total number
of banks) control 65% of all deposits. These banks, by and large,
do not offer free checking. Many banks have either a recurring
direct deposit or a daily minimum balance requirement of $1,500 to
avoid service charges.
• It costs a bank around $300 to provide a checking account. For
the past 15 years, banks have subsidized these costs with
overdraft and debit card interchange fees. Banks are now
charging monthly fees to re-coup the lost revenue due to
regulatory changes.
• A growing segment of the population that eschew traditional bank accounts
due to either cultural, cost or qualification issues
• Costs of issuing checks by government and corporate entities
• Political and societal needs to move from a cash based economy including
Costs of producing and distributing coin and currency
Loss of tax revenue due to unreported income
Safety concerns of carrying cash
Why are PayCards Growing?
Q. How satisfied are you with using a prepaid debit card?
(n=250)
Not: It’s not particularly helpful
6%
Extremely: It’s
even more
helpful than I
thought it
would be
29%
Very: It’s as helpful as I
thought it would be
44%
Somewhat: It’s helpful,
but not as much as I’d
expected 22%
Source: Aite Group’s survey of 500 U.S. consumers who use alternative financial services, Q1 2011
Market Innovation
Payments generated by mobile devices
What’s happening at the POS: 53% of
locations will be enabled to take mobile
transactions by 2015
U.S. Pentration Schedule for NFC, P2PE,
and EMV POS Locations, 2010 to e2015
(In millions of locations/percentage of
locations)
2010
6.7
e2011 e2012 e2013 e2014 e2015
3.9 1.9
0.8 0.2 0.1
1% 3%
8%
18%
33%
53%
Major supply-side changes in the
market, with demand-side support
Supply-side changes Demand-side support
Standardization of NFC in new devices October, 2015 Liability shift for counterfeit
Card transactions when dual-interface
(EMV/NFC) terminals are in place
POS Device Replacements
At current sales volumes, the most rapid pace possible is 4.6 years:
2.5M devices sold per year -> to replace 11.5M devices in force
2006 2007 2008 2009 2010 e2011 e2012 e2013 e2014 e2015
1.9 2.0 1.5 2.0 1.6 1.7 1.8 2.0 2.3 2.6
0.8 0.6 1.0 0.4 0.5 0.8 0.8 0.9 0.9 1.0
4.3 4.4
6.4 5.0
6.5 6.7 6.9 6.6 6.3 6.0
8.1 8.8
9.8 10.1 10.7 11.6
12.5 13.4
14.5 15.6
Replacement device sales
(in millions)
New device sales
(in millions)
Devices inforce
(in millions)
Time to replace all devices
(in years)
Device Replacement Cycle, 2006 to e2015