The U.S prepaid payroll card market has been growing significantly over the past few years and should continue this trajectory, despite short term gating factors such as regulation and compliance rulings, public relations issues and complex state wage and hour laws.
A new report from Aite Group titled “U.S. Payroll Card Overview — The State of Pay” forecasts that the number of active payroll cards will increase from 5.9 million in 2017 to 8.4 million in 2022. Correspondingly, the value loaded to these cards will jump from $42 billion to $60 billion over the same timeframe.
One of the most significant motivating factors for this growth is efforts to eradicate paper checks to disburse wages. According to the report, approximately $250 billion to $300 billion are distributed annually via paper check to an unbanked population.
This offers a significant opportunity for employers to save money by transitioning to more efficient electronic means of wage disbursement. With the adoption of e-sign and biometrics, Aite forecasts that the paper check will eventually become a thing of the past, along with its close relatives the paper loan application and the paper statement.
However, it is expected that over the next six to eight quarters, growth will be flattened by regulatory and compliance uncertainty. There is a regulatory holding pattern occurring due to the
“The regulatory environment will continue to slowly come to resolution”, says Kevin Morrison, senior analyst at Aite. “States will work through the process with input from industry leaders and employers, which will result in a product that best meets the needs of the employee. The natural compression of the digital age will eventually eliminate the paper check.”
