Payroll cards are designed to simplify payments for employers and provide employees access to all the benefits of the modern financial system, such as making online purchases or electronically paying bills.

Additionally, for employees who are unbanked or underbanked and historically accustomed to receiving paper paychecks, a paperless solution solves the pain points associated with paper paychecks.

Despite these benefits and the increasing number of American workers choosing to be paid via payroll card, these electronic cards have generated controversy in the political domain, prompting various state policymakers to enact payroll card statutes and regulations and the Consumer Financial Protection Bureau to pass a comprehensive consumer protection rule also applicable to payroll cards.

At the end of April, the Center for Financial Services Innovation released the “2017 Payroll Industry Scorecard: Assessing Quality in the Payroll Card Industry with CFSI’s Compass Principles.” The report, which overall gave the prepaid card industry an A-minus in its “Core Features,” a B-plus on “Stretch Features” and a C-minus on “Next Gen Features,” highlighted key aspects of payroll cards and how companies are delivering services to cardholders.

Despite the overall favorable grade, the report lacked specific examples of how prepaid payroll companies are delivering new functionality and processes that enhance cardholder experience.

Of the four key findings from the report, there are two that deserve elaboration from the payroll card provider standpoint: fee schedules and the lack of saving and budgeting tools available that promote financial health.

While some payroll card providers have always had clear fee schedules, the amount, frequency and lack of understanding about various program fees have resulted in a less than stellar experience for some cardholders. This lack of transparency has cast a shadow on the industry more broadly, causing a negative sentiment toward payroll cards, despite some payroll card providers that do maintain transparent fee schedules.

In an effort to improve the overall cardholder experience, some providers have implemented new schedules. Payroll card mobile apps provide even more flexibility to the cardholder, such as allowing cardholders to locate the nearest in-network ATMs to avoid paying any out-of-network ATM fee.

Convenient mobile apps and access to money management tools have historically only been functions that financial institutions have offered cardholders. The report highlighted, “Program managers have an opportunity to offer ‘Next Gen’ features that can help employees build long-term and lasting financial health.” Despite the overall C-minus grade, some payroll card providers have, in fact, introduced budgeting tools and transparency features to help cardholders save money and build wealth.

Through innovative apps, cardholders can track all of their expenses and have instant access to the funds available in their account. That increased transparency means consumers never have to wonder how much money is available at any time.

According to Aite, the number of active payroll cardholders will continue to rise in the next five years. Part of the increase in popularity stems from the benefits gained by access to the mainstream financial system, while much of the increase is also expected to be fueled by millennials, many of whom watched their parents struggle through the financial crisis with piles of debt. The millennial demographic approaches their finances in a different way than past generations: They are determined to only spend what they have and they also rely on nontraditional financial service providers (versus banks) for various financial solutions. As a result, they look to payroll cards for a safe, secure and convenient way to manage their money.

The CFSI report concluded that "actions of one or more program managers can have a significant impact on the quality of the market and on the lives of millions of employees.”

Innovative payroll card providers are already meeting this challenge. As consumers come to expect personalized experiences that mirror those of traditional financial institutions, the payroll card industry is also evolving, continuously assessing program features, updating fee schedules, introducing new money-saving solutions and investing resources into improving the experience for all payroll cardholders.