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?9q0 : Q_glqlef: W99_K_olqSto,b,eQ,-fQ0-0,: J.n_p_ep_t[:Financial& Ir]ylgllenlg
E[ Prinlalle version El Emaitstorv E
InDepth:Financial& Investments
) Fromthe September29, 2000 print edition
Paycardspayoff for firms
targetingthe' underbanked'
AnneMelfi ContributingWriter
Paycardscould be a passportfor 30 million U.S.consumers
who don'thavebank accountsto participatein the financial
system.
ThreeAtlanta-basedcompaniessmelledoppornrniryand are
offeringa cardfor the underbanked.It lookslike a credit
card,actslike a debit card,allowsthe customerto receive
electronicdeposits,but is not tied to a conventionalbank
account.In the first three yearsof the industry'sexistence,
eachcompanyhasbeenshapingits productandfee
structuresdifferently for a variety of markets.
"Wewant to eliminatethe embarrassmentat the bank -- of
standingin a long line to casha paycheck,havingto be
fingerprinted-- and the dangerof carryingcash,"saidPaul
Clanton,vicepresidentof salesand marketingat Skylight
Corp.,which won the American StaffingAssociation
endorsement.
Skylightmarketsto employersand to individualsby mail and
TV adsthat flash an 800 number, attractingmainly
minoritiesof all economiclevelswho arenew to the United
Statesand a few Americanswith bad credit who want a new
start.
Employerspay nothing to providethe cardto underbanked
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offeringonlineoptions
Y2K favorablefor Georgia
firms seekingIPos
Milichbuildson earlv lessons
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Georqiabankssubjectto new
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Dot-comsfuel activitv in
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Bankinqis boominq in
growing HenrvCounty
aeprJ_Prjn erica p,lans
worldwideexpansion
1 Pay cards pav off for firms
tagellns-tbe--lun4erbanked-l
Moneymanagershelp new
millionairesolan for future
Ste,cho_V,la'S-_eXees]ike ly,tS
maintaindual headouarters
Analysts sav effect of new
SECrule uncertain
FREEPHONES

2. employees,soeventransientworkersgetpaidbyelectronic
deposit.Theemployeepaysnothingto opentheaccount.
Skylightmakesits moneyon the monthlyfee,whichthe
employeepaysalongwith a dollar for everyATM
transaction.
The first four transactionsare free and Skylightinstructs
customersto gettheircashwhen theymakepurchases,so
there'sno charge.
"Wemakeour moneyon volumeand service,"Clantonsaid.
"If a customerusestheATM 50 timesa month.we callhim
up and teachhim how to save."
Themain challengefacingall companiesis not the language
barrier.
"Certainnationalitiesdistrustbanks,basedon experiencein
their own countries,"saidRhenCain,CEOof DirectoInc.,
which chieflytargetsthe Hispaniccommuniry.
Directois educatingthe underbankedon how the cardcan
protectthem from high fringebankingfees,suchasthe 6
percentchargeat CheckCashers,and promotethe card's
convenienceand prestige.Bearingthe Visaor MasterCard
logoincreasesits functionalityand helpsemployeesbuild a
creditrating.Theycanuseit asa phonecardor to wire
moneysafelyby phone.
Directomarketsdirectlyto employers.CEOStephenJohnson
broughtLewisMasseyaboardDirectopaftly becauseof his
connectionwith Hispaniccommunitiesin Gainesville,where
poultry processorshaveattracted50,000Hispanics,and in
Daltoncarpetfactoryterritory,with its 40,000Hispanics.
Directo'sclient,CitizensTrustBank,servesAfrican-American
communitiesin Atlanta.
"Thesecommunitiesgenerallyhavea 30 to 40 percentturn-
do'urmrate for checkingaccountapplicants,"Cainsaid.The
bank can give turn-downs a form for their employerto
completeand, if they employeroffersdirect deposit,the bank
issuesthe card.Directopaysthe bank a feeand getsa
percentageof the monthlyfeethe bank chargesthe
customer.
"Our primaryrevenuesourceis userfeesof 75 centsat point
of saleand a $1 to $1.75at theATM,"Cainsaid.Directoalso
chargesa $5 start-upfeeper employee,usuallypaidby the
employer.
Companiesall overthe United Stateshavecards-- Citigroup
edgefrom exclusive
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3. Inc.,Bankof AmericaCorp.,BankOneCorp.,ePacificInc.,a
varietyof payrollcompaniesandWesternUnion,a subsidiary
of Atlanta-basedFirstDataCorp.
"We'reofferingthe productto the teenmarket,"saidLanny
Byers,vicepresidentat Colorado-basedWesternUnion."The
youngergeneration,who haveelectednot to bank.In the last
threeto fiveyears,bankshaveincreasedthe feesthey hit on
people."Parentscanloadthe cardwith fundsandknow it's
not carteblanche,becausekidscanonly spendwhat'son the
card.Thechargeis $1 for everyATM transactionand 1.4
percenton purchases.
"Peoplecanusethe cashcardasan alternativeto transferring
moneyanywherein the world," Byerssaid.
He would not commenton the class-actionlawsuitagainst
WesternUnion chargingunfair exchangeratesfor 25 million
wire transferssentto MexicothroughWesternUnion and
MoneyGramoverfive years.The suit wassettledout of court
in Chicagoin May of 1999,with the companyoffering
couponsfor future transfers.The settlementraisedthe ire of
the Hispaniccommuniryand inspiredthe Mexican
governmentto launcha campaignto educateHispanicson
the bestvehiclesfor moneytransfers.
Byershashis eyeson new horizons.He plansa pilot project
offeringa cardto individualsin a limited launchat a few
WesternUnion locations,and he'sco-brandeda cardwith
RevelationAmericaAfricanAmericanBaptistchurches,
which addedprescriptiondrug and other discountsto the
card.
"We'rethe enginebehindPriceline.com,"Byerssaid.lVhen
you win a grocerybid, enteryour creditcardnumberto pay
it and receivea WesternUnion cardthat says"Priceline
Webhouse"to taketo your grocerystore.The priceyou're
paylngis secret-- the cashierdoesn'tknow what you paid.
"Pricelinepaysus for servicingthe plasticand processing,"
Byerssaid.
TheWesternUnion payroll cardcostsemployersthe sameas
it would to setup a checkingaccount.It's cheaperin the long
run, becauseit reducesinfrastructure,Byerssaid.
The industry still is too young to generatehard data on
results,especiallysincethe underbankedleaveno datatrail.
"Webelieveit'sbeenvery successful,"Byerssaid."People
haveshowna needand demand."