VISA In Discussions With CUs Regarding Using Card To Reach The Underserved

Register now

VISA said it is in negotiations with several credit unions about launching a product aimed at reaching out to the underserved.

The card association declined to identify the credit unions. But the project involves the VISA Payroll card, a reloadable, pre-paid card to which an employee's payroll can be electronically transferred, in much the same way payroll is direct deposited into a checking or savings account, according to Nizam Antoo, VISA product director.

"The demographic for this product are people who do not have a banking account or have little or no experience with a credit card," he told The Credit Union Journal. "Most of these people are receiving their pay in the form of a check and then they're going to check-cashing outlets where they have to pay big fees in order to get access to their money. With the VISA Payroll card, they can go to an ATM and get access to their cash, or they can use it like a regular credit card to make purchases wherever VISA is accepted. They can avoid the big fees and have immediate access to their pay."

VISA rolled the product out about 18 months ago and has already signed on more than 20 issuing banks and 400 nationally recognized employers, including as Blockbuster Video, UPS, FedEx, Coca-Cola, Office Max, and Loews.

"We're talking to some credit unions right now, but they haven't made that public, yet," Antoo stated, noting that the payroll card's target demographic dovetails nicely with credit union efforts to serve the underserved.

Moreover, it could also be used as a way to woo new select employee groups, he suggested. "Employers such as Honda and Boeing have approached us about this product," he commented. "These are employers who have credit unions. We've also been approached by cities like the City of Los Angeles for city employees, and we know many of these have credit unions, as well."

The payroll card is attractive to employers because it allows them to cut costs associated with the distribution of payroll checks (although employees do still receive a pay stub), lost checks, etc.

For employees, not only does it bring new convenience and lower fees, it can also mean greater security and a step along the road to financial literacy.

"In the cash-and-carry world, people go to the check-cashing outlet and cash their paychecks, and then they leave with all their money in their pockets, and if they're mugged, they lose everything," Antoo offered, adding that if they manage to get home with all that cash, that means they're stuffing it under the mattress or in some other hiding place, and the money can be stolen during any robberty.

"Now, they can just leave it on the card, and because they get a monthly a statement (which can be either paper or electronic), it helps them track how they're spending their money," he advised, noting that for many people in this demographic, it's the first time they've ever really monitored how they spend money, which allows them to create a budget, which may also be a first for many of the cardholders.

If it's not enough that the product could be a means of reaching out to the unbanked and help them learn how to handle money wisely, credit unions will also be interested in the potential for revenue the payroll card offers, Antoo suggested.

"There's a revenue opportunity from the interchange fees, and credit unions can also get the benefit of float, as well as revenue from fees to the employer or cardholder," he advised, noting that amount of fees charged to either the employer or the cardholder is up to the issuing institution. "The way most of our issuing banks are pricing this product is similar to what they would charge for a low-cost checking account."

And of course, it's an entr?e into a whole new group of potential members. "This allows the bank or credit union to market other products to a group they may not have been able to market to in the past," he said.

For reprint and licensing requests for this article, click here.