The Prepaid Industry Is Poised To Completely Replace Cheques For Canadian Businesses

replace cheques

With an annual decline in cheque use of 7 percent across the nation, Payments Canada predicts that, by 2020, virtually every business and government office in Canada will have switched from cheques to electronic payments, including prepaid.

Consumers, businesses, and the financial system are all migrating away from the outdated cheque-based system and choosing electronic payments–particularly prepaid–because of Canada’s stable regulatory environment and the benefits of prepaid compared with credit, debit and cash.

By switching to prepaid cards, employers can save up to $223 per employee. Payroll cards can also save employees over $1,000 in payroll fees. 81% of executives believe that digital transformation is a competitive advantage.

Corporate-funded market segments are helping to drive prepaid market growth in Canada. A few of the business sectors that could see significant improvements as a result of prepaid solutions are education, insurance, and employee incentives.

Education:

Most post-secondary institutions haven’t updated their payment processes in decades. Canada has over 1.7 million students, across hundreds of colleges and universities, who spend at least $6,000 on tuition every year, and most of this is paid by cheques. In total, that is over $10 billion being sent out via a slow and outdated payment method. What’s more, these same institutions issue scholarships, grants, and bursary payments by cheque, requiring students to go to a bank or use cheque-cashing services to obtain cash to pay for books, meals and other expenses. And if a cheque is lost or stolen, it could take several months of red tape before it is replaced. Canada is a Top 10 destination for international students, with more than 300,000 students coming from abroad to attend Canadian universities and colleges each year. Those students need a fast, secure, and convenient way to pay for tuition and living expenses. They also need an efficient and easy way to receive funds from family abroad.

Prepaid accommodates all of these needs, and is the right choice for school administrators looking to reduce costs and improve the student experience. Prepaid cards make it easy to establish an effective level of control over spending and provide a great way for students to learn about the often difficult world of personal payment cards. A prepaid card will help build good financial habits and allow students to properly manage their bills and budgets. Entrusting a teenager with thousands of dollars of credit is asking for trouble, and these kinds of mistakes can take years to recover from. A prepaid card is a great alternative to regular credit cards, as it allows students to shop online and pay bills, while avoiding some of the more dire consequences. A prepaid card helps protect your student’s credit rating, making it the smart and safe option.

Convenient and easy to use, a prepaid card easily fits into the fast-paced life of a student who is constantly on the go. The card can be used for purchases both on campus and off. Transferring student loans onto the card provides students with immediate access to the funds they need. And, after graduation, payments toward the loan balance can also be made using the card.

The card also doubles as a form of student ID, especially when personalized with a picture. Even university alumni can use the card for interest-free payments, donations back to their institution (can be tied to a loyalty program), or simply to stay in touch.

Insurance Payments:

Insurance payments have traditionally been paid out by cheque by the more than 210 private property and casualty insurers across Canada. In 2013, insurers wrote $47.8 billion in direct premiums for insurance on consumers’ homes, cars and businesses, and more than half of every dollar of those premiums is paid out in claims, making for a minimum of $24 billion. That’s a lot of money wasted on cheques!

Unlike in the U.S., where insurance companies are heavily invested in the cheque business –some even running their own printing presses — Canadian insurance companies are attempting to update their entire claims operations process — especially cheque-issuance — to take advantage of electronic payments to create operational efficiencies, improve customer experience, and reduce fraud. Known as “InsurTech,” this movement seeks to modernize everything from pricing strategy to customer service, claim processing and payments.

Employee Incentives:

Benefits Canada recently reported that 60 percent of Canadians aren’t motivated by their employer’s rewards program, and that employees prefer prepaid cards 16 times more than receiving company-branded merchandise as a reward. 90 percent of business leaders believe that an effective engagement/rewards strategy could positively impact their business, but only 25 percent of them actually have a strategy in place. Disengaged workers cost the economy $300 billion or more per year, while organizations with higher than average levels of employee engagement realized 27% higher profits, 50% higher sales, 50% higher customer loyalty levels, and 38% above-average productivity.

Prepaid cards can be loaded almost instantly, and payments can be made as often as they are required. Open-loop prepaid cards can be used anywhere that MasterCard® or Visa® is accepted and don’t restrict employees to making purchases at specific merchants they don’t actually shop at or like.

Employers benefit from the flexibility of choosing a variety of prepaid solutions, depending on the need. Single-use, non-reloadable prepaid cards are great for one-time recognitions such as service anniversaries and annual bonuses. Payments to reloadable cards can be made as often as required. This is great for rewarding employees who hit ongoing sales goals. Prepaid can motivate sales staff to reach sales quotas and reward them with a prepaid card they can use to buy whatever they want. A prepaid program builds loyalty, improves employee morale, and creates a corporate culture built to succeed in the future, especially in a sales and commission-driven job like auto sales.

Prepaid can also be used to incentivize external employees, partners, and contractors. A great way to reward sales associates at a MLM company for meeting or exceeding their quota is by offering them a prepaid card. A card pre-loaded with cash is a great incentive for attending corporate sales events or for becoming a new member. In some businesses, employee-to-customer interaction is essential to success. By providing a well-liked incentive such as prepaid, businesses will ensure that employees are working hard to build solid relationships with consumers and improve sales.

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