SHARE   |  

Rising Cost of Banking May Increase Cost to Pay Employees

In a recent article, the Huffington Post reported that “Free Checking Accounts Inch Toward Extinction As Cost of Banking Rises.” According to a survey by cited in the article, only 39% of U.S. banks offer non-interest checking accounts on a stand-alone basis. That’s down from 45% last year and 76% in 2009.

Costs that can be associated with checking accounts such as monthly maintenance fees, ATM fees and overdraft fees can make traditional banking relationships difficult for some employees. This may mean an increasing cost burden to obtain or maintain a checking account to receive their pay electronically through direct deposit.

For employers, this could result in fewer employees maintaining traditional checking accounts and a resulting lower adoption rate of direct. The cost of printing and distributing paper paychecks to employees adds financial burden and increases risk for employers.

In addition, due to cost and complexity, “retirement” of check payments is a growing trend amongst businesses and government agencies. Last year, the U.S. Department of the Treasury announced (U.S. Treasury to “Retire” Paper Check for New Recipients of Social Security and Other Federal Benefits, Saving Taxpayers $1 Billion, April 26, 2011) that it was going to retire distribution of paper checks to recipients of Social Security and other federal benefits. In the announcement, the Treasury Department estimated this move will save taxpayers $1 billion during the next 10 years.

But what of those employees and recipients of government benefits that must bear a potentially rising cost to maintain checking accounts to receive direct deposit? The electronic pay card option for unbanked or underbanked employees is also on the rise. Electronic pay cards, give both employers and employees an alternative to direct deposit. Electronic pay card adoption is on the rise. In fact, Bloomberg reported on data from The Aite Group, a leading independent research firm in the financial services industry, that estimates payroll card users will grow from 1.7 million in 2009 to 5.4 million in 2014 (Weise, Karen, Prepaid Cards Help Banks Replace Lost Debit, Credit Fee Revenue, May 25, 2011).

But, for employers to offer multiple payment options, including electronic pay cards, cost and complexity can be daunting. Juggling multiple vendors, maintaining compliance with multiple state regulations and integration with in-house payroll systems can pose costly and risky challenges. Employees are seeking multiple options to receive their pay as bank fees rise and employers want to reduce the cost of payroll. So, it’s important for payroll professionals to consider driving toward 100% adoption of electronic payroll via a solution that provides multiple payment methods and addresses diverse employee needs.

Learn more about comprehensive electronic pay options from ADP that work with your existing payroll system.


Sign Up for
Email Updates

featured webinar