Visa U.S.A. Inc. said Thursday that it had formalized its cobranding of prepaid payroll cards with ADP Employer Services in a five-year exclusive deal.
ADP, a division of Automatic Data Processing Inc., has cobranded cards with Visa without a formal agreement since 2001, and last June it hired First Data Corp.'s Money Network for back-office operations of its TotalPay Card.
Nizam Antoon, Visa's vice president of prepaid products, said in an interview Thursday that his company's ADP deal does not extend to the latter's using Visa's Debit Processing Service (a competitor of Money Network).
The San Francisco card network said cobranding payroll cards helps it penetrate deeper into the unbanked and underserved segments, a market that Visa said comprises 80 million Americans with annual income of $1 trillion. Many of ADP's employer clients are hotels, fast-food restaurants, and convenience stores.
First Financial Credit Union in West Covina, Calif.; ADP Federal Credit Union in Roseland, N.J.; and National City Corp. in Cleveland are among current Visa issuers of ADP's TotalPay cards.
The cards are eligible to be reloaded, and it is up to the issuing bank to participate in Visa's ReadyLink reload service, Mr. Antoon said.
Tim Sloane, a research director at Mercator Advisory Group in Boston, said the networks must have competed for ADP's business. Prepaid payroll card volume grew to $10 billion last year from $6.3 billion in 2005, he estimated.
In companies with high turnover or employees whose salaries are not fixed, payroll cards are more efficient than direct deposit, Mr. Sloane said. Employers, he said, also use payroll cards to build relationships with "occasional" employees, like freelancers. In the tight labor market for temporary nurses, he said, employers use payroll cards to pay nurses immediately for their work.
"It's very effective with at-will employees because it creates a relationship between the employers and the employee and there is a bigger part of the labor market that is in that segment," he said. "It has expanded way beyond the unbanked and underbanked segment that it was originally deployed for."
ADP did not return calls by press time.
