Pre-paid cards are already making an impact on the high street where they are rapidly replacing paper gift vouchers. But card suppliers are now hoping to make in-roads into the corporate world, marketing pre-paid cards as a way to provide employees with incentives and bonuses, to manage expense accounts and even to deliver wages.
Figures from the US suggest there is great potential for the use of these cards, which employers can charge with financial value to be accessed by employees via ATMs, or through everyday transactions in the same way as debit cards.
Unlike debit cards, pre-paid cards do not require a bank account in order to operate and, depending on the network used by the card provider, they can be used across international boundaries.
According to a report from international strategy consultancy Celent, 1.87 million pre-paid cards were in use for payroll purposes in the US last year. The firm predicts that figure will almost double every year until 2008, when more than 14 million pre-paid payroll cards will be in circulation.
In another report, Mercator Research Group estimates the US spent almost $9bn (£4.8bn) on pre-paid payroll last year, and $2bn (£1.06bn) on benefits. It predicts that by 2008, more than $109bn (£58bn) of payroll will be paid through pre-paid cards alone.
Andy Simmonds, director of pre-paid supplier eFunds Prepaid Solutions, believes the UK market could see similar expansion when it realises the efficiencies the system can bring. “Pre-paid cards can take care of several parts of the payment process,” he says. “Some of the challenges of staff turnover and geographic spread are easily met by this technology.”
However, eFunds has its work cut out. Its own research shows about 55% of HR managers don’t know when pre-paid cards might be rolled out, and as many as a quarter don’t believe the system will ever be used for payroll. “There is quite an education process to be done on what pre-paid has to offer both for the general consumer and for the corporate customer,” admits Simmonds.
David Evans, founder and chairman of performance improvement consultancy Grass Roots, says the introduction of their own pre-paid reward card for clients, operating through the Maestro network, came in response to demand from international organisations.
“Our increasingly international client base needs us to provide services which operate across borders and appeal to all, regardless of nationality, location or culture,” he says. “The card is a powerful way of saying ‘thank you’ in any language.”
Pre-paid’s foothold in the domestic market may have to wait for the next generation of workers to enter the workplace and accept new forms of payment. Research from eFunds found that while 76% of the wider UK population felt unfamiliar with pre-paid cards, 21% of 18 to 24-year-olds said they were familiar with the concept.
Current workers may insist on payslips and bank accounts, but the increased use of pre-paid travel and phone cards may yet lead the way for new methods of paying employees’ salary.