CURRENC SF NEWS  

A recent Pew report focuses on the emergence of prepaid cards, surveying cardholders to ask why and how they use these new products. Why is this important? And what does it say about payroll cards as a promising direct deposit alternative for employers and employees?

For starters, we think this is an important study because of the astronomical rise in the use of prepaid cards. As the Pew report notes, the amount of money loaded onto prepaid cards has more than doubled in just three years, to approximately $65 billion in 2012. And according to projections from Mercator Advisory Group, this amount will increase to $167 billion by 2014. While prepaid transactions still represent a small portion of overall noncash payments, it is the fastest growing product in this segment.

More important are the insights about who is using prepaid cards – and why:

  • 5% of adults (~12 million people) use prepaid cards at least once a month; the average customer reports household income of around $30,000 per year.
  • The customer base is diverse, and the majority are current or past users of other “mainstream” financial products, like checking accounts and credit cards.
  • Cardholders would welcome features making it easier to save – 42% have no emergency savings.

But the most important takeaway is this: for most customers, the primary motivation is to gain control over their finances, and many have bad experiences with overdraft in the past.

“They have turned to prepaid cards as a safe haven to avoid the risk of overdraft fees and as a commitment device, or a tool to restrict their ability to overspend or to incur interest charges. For most customers, prepaid cards are a mechanism to avoid the temptations and problems of the past.”

So listen up banks, financial service providers, and other interested parties: millions of people are seeking new products that allow them to control their spending, avoid debt, and eliminate risk of overdraft!

What does this new information say for those interested specifically in payroll cards? Well, although payroll cards are also prepaid products, they are different from the general purpose reloadable (GPR) prepaid cards that Pew is interested in for this study. The good news: payroll cards are generally a better deal for consumers than most of the prepaid cards that are generally available to the public. They have more consistent and stronger consumer protections – for example, Regulation E of the federal Electronic Funds Transfer Act (which among other things protects against errors and limits consumer liability) applies to all payroll cards, but not to GPR cards. And payroll cards tend to have lower fees – often much lower – than other prepaid products.

Nonetheless, not all cards are the same, whether you are considering a GPR prepaid card or a payroll card. As an employer, you should recognize that not all consumers understand how these products work. You should also know that you have the ability – if not the responsibility! – to protect your employees’ earnings by selecting the best possible payroll card.

Here’s where we can help. Check out our CurrenC-approved payroll cards, take a few minutes to join us as a participating employer (no strings attached, we’re just here to help you), or send us a note at info@currencsf.org.

 

 

San Francisco Partners With Hotel Council to Increase Financial Security for Workers

Public-Private Initiative Focuses on Financial Access and Capability

San Francisco, CA—San Francisco Treasurer José Cisneros announced today the launch of a joint financial empowerment campaign by the City and the San Francisco Hotel Council for working families in the hotel industry.  The campaign is part of the City’s ongoing CurrenC SF electronic payroll initiative.  He was joined by leaders from the San Francisco Hotel Council, member hotels, the Financial Industry Regulatory Authority (FINRA) Investor Education Foundation, Visa, Citi Community Development, the Mission Economic Development Agency (MEDA) and other partners in an event at the Marriott Marquis Hotel.  The yearlong campaign will improve financial security for hotel employees and their families by focusing on safe financial access and workplace-based financial education.

“It is vitally important to protect the earnings of San Francisco’s workers by helping them access their pay safely and conveniently through direct deposit or a payroll card,” said Mayor Edwin M. Lee.  “I thank Treasurer José Cisneros for creating this partnership with local hotels, which is another example of how the City is working with employers to support quality jobs and make sure workers keep their hard-earned money.”

“My Office of Financial Empowerment’s CurrenC SF initiative provides a framework to build financial stability for working families, and I applaud the Hotel Council and its members for their leadership and dedication to expanding financial access and capability in the workplace,” said Treasurer Cisneros.  “All businesses and nonprofits in San Francisco can join this initiative; they should go to www.currencsf.org to get more information.”

“This campaign brings valuable resources to our hotels, and we are proud to support safe financial access for hotel employees,” said Kevin Carroll, Executive Director of the Hotel Council.  “Our member hotels are dedicated to safeguarding the financial wellbeing of their employees, the majority of whom both live and work in San Francisco.”

The FINRA Foundation, in partnership with United Way Worldwide, also announced a $150,000 grant to create a financial capability program at several local hotels through MEDA, bringing financial education into the workplace.  The grant will support workshops and individualized coaching for hotel employees, improving financial knowledge, confidence, and capability.

The campaign launch showcased an innovative new advertising campaign supported by Visa to build awareness about the high cost of check cashing and the resources available to employers through CurrenC SF. “By working with employers to make 100% electronic pay a reality, CurrenC SF and the San Francisco Office of Financial Empowerment are helping workers take home more of their pay,” said Brian Triplett, SVP, head of North America prepaid products for Visa.  “Through Visa’s support of CurrenCSF, we are helping the City of San Francisco work toward our common goals of building financial access and security through electronic payroll.”

Partners at the launch highlighted how the campaign brings together diverse partners in order to achieve shared goals. “Citi Community Development has been a thought leader and supporter of CurrenC SF and the Office of Financial Empowerment from day one.  Expanding access to safe and affordable financial products and services through innovative partnerships reflects Citi’s broader commitment to financial inclusion and economic empowerment,” said Vicki Joseph, Northern California Regional Manager of Citi Community Development.

About CurrenC SF

CurrenC SF helps to bring working households into the financial mainstream through direct deposit and electronic payroll, reducing reliance on high-cost check cashing services by the nearly 70% of working class San Franciscans that get paid by paper paycheck.  CurrenC SF is an initiative from the City and County of San Francisco’s Office of Financial Empowerment (OFE), in partnership with the San Francisco Chamber of Commerce, and the United Way of the Bay Area. CurrenC SF receives generous support from Citi Community Development, Visa, and the Levi Strauss Foundation.

Throughout 2014, CurrenC SF will support a hotel financial access campaign, increasing electronic payroll participation and connecting workers with affordable mainstream financial products and services.  CurrenC SF will also collaborate with MEDA on a workplace-based financial education project, assisting with outreach and coordinating services with participating hotels. In addition, CurrenC SF will connect both employers and workers to a range of resources from the Office of Financial Empowerment, including Bank on San Francisco, which helps unbanked individuals get accounts, and the SF Smart Money Network, a directory of financial education services and resources.

For more information go to www.currencsf.org

At CurrenC SF, we want employers to understand the true cost of check cashing, and how we can help improve the financial security of their employees. So we’ve partnered with Visa to build awareness about the downside of paper paychecks, and illustrate the benefits of joining CurrenC SF and bringing electronic pay to all your employees.

So what’s the cost? At a conservative estimate, we find that an average unbanked worker pays $711 a year just to cash their paycheck and get access to their hard-earned pay. And for workers in San Francisco, we think it’s very likely you are paying much more to check cashing stores. When you add up the cost of a 3% fee subtracted from every paycheck (and an even higher percentage if it’s a personal check, as is likely for small business and home healthcare workers), plus the cost of money orders, remittances, and other services, it’s likely that working families pay well over $1,000 each year just to use the money that they have already earned!

Keep an eye out for our ads: they’re on buses and muni, on posters around the city, in magazines, and digital format. We’ve included one example below. What are some other things you could buy with the $711 (or more!) you save by switching to direct deposit or a payroll card?

  • 325 muni rides
  • 14.5 tanks of gas
  • 12 asthma inhalers for yourself or your child
  • 237 school lunches

Spread the word: CurrenC SF and electronic pay protect the earnings of your workers! Sign up today

Cost of Check Cashing - School Lunches

Yesterday on Huffington Post, Javier Palomarez (President & CEO of the US Hispanic Chamber of Commerce) posted an article in support of payroll debit cards. Mr. Palomarez calls payroll cards “a valuable option for those in financial need.” And we at the SF Office of Financial Empowerment agree. Through our CurrenC SF initiative, selecting a payroll card is one of the key steps we advise employers to take in order to better protect the earnings of their workers. You can read more about our advice on payroll cards here.

But let’s talk a bit more about payroll cards, because it’s important to get more educated on this topic as an employer (or an employee) who is considering using one. The longer name you can use for these products is prepaid payroll debit card, though this is mostly shortened to payroll card, or paycard. This name gives you a start – these are prepaid products, meaning you draw down only on the value loaded onto the card (no credit, and generally no overdraft, which is important). And they are a type of debit card, so they should be familiar to many of us – you can use them at the ATM, you can swipe them at the cash register to pay for things (and get cash back where possible), you can use them for online purchases etc.

Plus, the money on a payroll card should come with consumer protections like FDIC Insurance and so-called “Reg E” coverage, which protects consumers who engage in electronic funds transfers (but make sure to ask providers about these). So employees can feel comfortable storing money on their payroll card and using it as a budgeting tool, rather than converting their pay into cash (which is inherently riskier and makes it harder to save).

So yes, these are all good things for lower-income employees who may not have another form of financial access, and have to rely on expensive check cashers to convert their pay to cash – or for any employee who wants the benefits of direct deposit but for whatever reason decides not to utilize a checking or savings account. But make sure you are seeing the whole picture:

  • Direct deposit into a bank or credit union account is still our preferred choice for employees. With a bank account you can build your credit and move up the financial ladder; unfortunately many people don’t think they will quality for an account. Not true! With our Bank on San Francisco program, you CAN get a bank or credit union account – even if you’ve had trouble with banking in the past, or or not a U.S. citizen. Learn more about this program, and share it with your employees.
  • Not all payroll cards are the same – and many are not good for your employees. Mr. Palomarez doesn’t really speak about this, but it’s important. He mentions “discretionary services that may incur fees,” but that’s it. If you’re considering rolling a payroll card out for your employees, you want to make sure it is safe and affordable, and has the kind of features your workers deserve. Some cards will charge money to withdraw money from ATMs, to use the card for point-of-sale purchases, to check balances, and more. Stay away from the bad products!
  • We can help you find the right payroll card! Thankfully, we’ve done the homework for you. We have identified the most important features that paycards should have, and which fees should be eliminated. Based on this, we offer a limited list of best-in-class payroll card providers, and you can connect to them from our website!

So let us help you figure out the right payroll card, and then add this great direct deposit alternative for your employees today!

Remember that scene in It’s A Wonderful Life where Uncle Billy loses the $8,000 in cash he was ready to deposit into the Building and Loan account? In today’s world of credit and debit cards, mobile banking apps, and electronic transfers, Mr. Potter never would have had a chance to end up with that money.

No, the days of waiting in line for a teller or an ATM are changing – and some see them coming to an end completely. The SF Business Times points out that “it took smartphones just five years to eclipse the transaction volume that ATMs needed 20 years to reach.” So, with mobile banking continuing its meteoric rise, and the ubiquitous smartphone in everyone’s pocket, what does this mean for the future of the brick and mortar bank branch? Executives have already seen an opportunity to cut costs, trimming the number of branches. Bank of America has closed 183 branches over the past year, and the square footage of Wells Fargo’s branch network has declined from 116 million square feet in 2008 to about 93 million square feet today.

So, just as direct deposit (mostly) put an end to crowded lines in bank lobbies on payday, and ATMs allowed many customers to avoid talking to a bank teller at all, are smartphones and mobile banking applications putting an end to the bank branch?

Not necessarily. After all, BofA alone still operates more than 5,300 branches nationwide. And other banks and credit unions see potential for branches – albeit maybe smaller branches – to draw people in, marketing services and making a connection with neighborhoods. The problem is, who is most affected by these changing times, and the response of banks? It looks like low-income customers – those who don’t necessarily have smartphones or know about mobile banking apps, and those who don’t live in wealthier neighborhoods that will always attract some branch presence – are the people facing the most difficult adjustment.

It’s not necessarily surprising in this environment to see fringe services – pawnshops, payday lenders, check cashers, etc – gaining some steam. After all, they can be more conveniently located to low-income families, have better hours, and speak a language the customer understands (to say nothing of the lack of the dreaded “hidden fees” that are a huge downside for many to mainstream banks). The NY Times has covered the growing use and trust in these fringe operators of late. And here is a real downside: as soon as a consumer gets pulled away from mainstream banking services and into the fringe, they are subject to miseducation and exorbitant fees, which can easily pull a household into a spiral of recurring debt.

We’re not doomsayers over here at CurrenC SF – we think there can be a bright future in mobile banking and electronic transactions. That’s why we think it’s so important to get all working families paid safely and conveniently by direct deposit, and into safe, mainstream bank accounts. Financial education is going to be important as well – plus greater attention paid to who gets to have access to services like mobile banking. We also think that the workplace can be a great place to overcome some of these hurdles, helping employees make simple choices that will get them on the path to financial stability.

So join us, and tell your friends!