Payroll cards have gotten a lot of bad press over the past year, but the product is nevertheless a bright opportunity, says Rick Savard, CEO of UniRush, the company behind the RushCard prepaid cards.
"Are there fees associated with the cards? Sure there is a fee structure. Nothing is free. But the fee structure relative to the value the cardholder receives is phenomenal," says Savard, who became UniRush's CEO in January.
UniRush is planning to offer more prepaid cards spun off of the RushCard brand. UniRush's 11 years in the prepaid card market positions it well to expand beyond general purpose reloadable cards, Savard says.
"Look at the assets that we have as a company. We have significant experience in this space, the most recognized brand and a critical mass of cardholders. That gives us insight into what cardholders want, what works and what doesn't work," Savard says. UniRush did not disclose the number of RushCard holders, or what percentage of its customers it considers to be unbanked.
Savard also did not say when the company plans to launch its next products, but he's bullish on payroll cards being part of the mix. RushCards already function as unofficial payroll cards when consumers use them to directly deposit their salaries, Savard says.
But payroll cards also open up a new range of financial capabilities that would not be available to workers in a cash-only world, Savard says.
"You can book a hotel room, transfer money to another person, shop online, etc. The applications for prepaid card payments are exploding. Its the opposite for paper [payments]," says Savard, who has a history with prepaid cards and payroll cards. From 2004 to 2008, Savard was CEO of prepaid card company NetSpenda company that is now boosting payroll card processing share for its corporate parent TSYS. Savard has also served as UniRush's chairman since June 2013.
Savard did not say what fees UniRush would apply to payroll cards, though many payroll cards provide access to a full paycheck for free at least once per pay period. UniRush's fees for its general-purpose cards vary based on the user's plan, and the company has pushed to steadily reduce its fees.
UniRush is expanding its card line as prepaid card user demographics shift to include more consumers with bank accounts who choose prepaid cards for specific purposes, such as to avoid credit cards. For this audience, UniRush developed a new Web interface and other services that position the card as a broader financial services tool.
"A number of years ago, prepaid cards were more about the general purpose reloadable card and gift cards. Now, its about a single payment type with multiple products," Savard says. "Prepaid is the real thing in the payments industry. The product has won wide-spread acceptance."
As younger market segments mature, prepaid card providers will be required to improve their positioning and product lines to keep up, says Madeline Aufseeser, a senior analyst at Aite Group.
"There's a different generation coming up and they don't have the affinity towards banks," she says, adding 33% of "Generation Y" has a prepaid card compared to 28% of "Generation X," 15% of Baby Boomers and 7% of senior citizens. "The incomes for prepaid cards are skewing higher," Aufseeser says.
The evolution of prepaid cards is also being driven by regulatory action, Savard says. The Credit Card Act made it harder for people to obtain credit cards, thus attracting more consumers to a growing number of prepaid card providers, he says.
"More users are aware of prepaid cards, and the benefits of being able to load money in a number of ways and use the card for a variety of purposes without the risks of credit banks dont call and reduce your credit line if you are using a prepaid card," Savard says.
Savard also explained how UniRush's use of hip hop mogul Russell Simmons, who founded the company, is different from how other companies have used celebrities such as Justin Bieber and the Kardashian sisters to market prepaid cards.
Although Simmons appears in ads, he also plays an active role in its management.
"I have known Russell Simmons since 2008, and I believe in his passion for this business and for what we do here. Thats why this opportunity was so appealing to me," Savard says. "Russell is not only the founder of the business, he saw the potential first and he cares deeply about the financially underserved. In many ways, he is the patriarch."