City National Bank of Florida could see a potential problem from the traditional methods some of its business customers were using to pay their largely unbanked employees.
These payroll methods required the bank to dispatch tellers to corporate sites to personally cash payroll checks. Other problems arose from having to deal with the slew of employees of its corporate customers, which created long lines at the bank's branches as clients waited to cash their payroll checks.
Over the past year, the bank has found a solution in deploying card technology that allows the institution to "deposit" the salaries in cards that employees of corporate customers who can use corresponding ATM and POS terminals. It's a move that's removed paper, long lines and liability from the bank's radar screen.
"We were dispatching tellers to corporate sites to cash the payroll checks," says Sandy Mento, an evp at City National Bank, a $2.25 billion-asset bank serving the Miami-Dade, Broward and Palm Beach areas of South Florida. "We wanted to remove the liability of moving cash and people out to these locations."
The bank uses payroll-card technology from Metavante. Each pay period the cards are loaded with the value of the employees' wages. The employees can withdraw money from ATMs and terminals that display the appropriate network logo, which eliminates not only the people clutter on the bank's end, but also allows the employees to obtain money from sources other than check cashing stores, which can skim as much as six percent off of the top.
"It's a good program for the unbankable," Mento says. "The commercial customers love it because the cost reduction is tremendous for their employees." While the program has the unbanked population in mind, it could theoretically be used by any employee of a participating company that wishes to access cash from their paychecks quickly without having to stand in line at the bank. Mento says the bank itself was developing a similar program for its own employees that will likely be rolled out next year.
Mento says many of the bank's commercial customers are in the property management, travel and resort industries, all staples of the South Florida economy. Many of these industries' employees don't have official relationships with banks, which creates the unusual payroll need. "Every Friday, we would have a lobby full of employees wanting to cash their payroll checks," Mento says.
The bank's previous strategy of deploying additional tellers worked for the bank, and it attracted business from bank competitors that only offered a walk-up window to cash paychecks. But the sheer volume of checks and employees involved was making these "house calls" less cost-effective.
Since the rollout of the new product, the bank has attracted 15 new businesses to the card-based program. The institution would not reveal how much money or time it has saved by offering the payroll cards, but did say the per-person cost of issuing paper checks was significantly higher than using payroll cards.
According to Celent, it costs an employer $1.90 to cut a paycheck in-house, including the cost of administering the check, materials, printing and distribution. Those costs do not include the cost of shipping the paychecks to satellite offices, or the cost of reissuing checks, which varies between $10 and $12 each.
The bank has also achieved soft benefits. By limiting the number of nonbank customers cashing their checks at City National branches, the bank's customer-service staff can dedicate more time to actual bank customers. The product also addresses safety issues for employees themselves, who no longer have to carry large amounts of cash and can now carry a debit card with a personal-identification number for access.
Laws and regulations, such as the Patriot Act, create a need for careful scrutiny because there's still some question as to who is "responsible" for people cashing the checks, since they're not customers of the bank in the traditional sense of the word, yet they're not really "customers" of their employers either.
"If you think about the population that's using these cards, it could be immigrants who don't have all of the proper paperwork," Moore says, calling these cards a "high-risk" product for fraud and financing of illegal activity by users who may be operating under society's radar. "How do you verify they are who they say they are? And some may not even have drivers licenses," says Moore.
