A new ADP payments card system targets young workers without traditional bank accounts, and it allows employers to pay employees without using paper paychecks or electronic deposits.
The ADP Wisely Pay card is a response to the dramatic growth in the young, contingent sector of the workforce, especially in retail, food service and manufacturing, ADP said.
Paying millennial and Gen Z workers
ADP said digital pay accounts like pay cards are particularly popular among millennial and younger workers.
According to recent research commissioned by ADP, 47% of Generation Z members -- people born from the mid-1990s to the early 2000s -- and 31% of millennials would reject a job offer if they couldn't choose the method of pay. Also, the report said 47% of millennials and 66% of Generation Z workers have used a preloaded payment card over the last year.
"ADP is correct in that multiple payment methods are needed for today's workforce," said Brian Sommer, an HR tech analyst and founder of TechVentive in Batavia, Ill. "Some of this is generation-driven, and some of it is triggered by new kinds of work and work requirements, such as greater reliance on contingent workers. What's important is that employers need to provide choices, and they need to allow workers to move from one payment method -- like a payment card -- to another, such as direct deposit, easily and on demand."
The ADP payments platform is largely built on technology developed by Global Cash Card, which the global payroll and human capital management giant bought in 2017.
The company said ADP Wisely Pay will be commercially available in September.
Mark Putman, general manager for payments at ADP, based in Roseland, N.J., said the ADP payments system upgrades and rebrands an older ADP payments card and integrates with ADP back-end payroll software processing systems.
Aiming at SMBs
ADP is targeting small and medium-sized businesses, because it recognizes that most large enterprises already have a pay card system in place, Putman said. And "the bigger opportunity is the downstream marketplace, which nobody has really solved yet."
Cliff Stevenson, principal analyst with the workforce management practice at the Brandon Hall Group in Delray Beach, Fla., said the most notable features of the ADP payments system are employees' ability to see their pay at the moment they clock out and to get paid instantly.
Mark Putmangeneral manager for payments at ADP
"This could be huge for retail and service, but how that will affect payroll costs for those companies is still unclear. Plus, smaller restaurants and small businesses would probably opt out of this, since they may not have the ability to cover these instant payments," Stevenson said.
Putman said the ADP payments system is designed particularly for younger workers hired by companies with 100 or fewer employees in the retail and manufacturing sectors, as well as in food service, where many chain franchises are small businesses.
That market is "anybody that hires younger individuals for their first job," he said.
"Our goal here is to grab the millennials in their first or second job and keep them for a long period of time," Putman said.
ADP expanded the capabilities of Global Cash Card and integrated them with ADP's various traditional payroll systems for employers that have both regular full-time employees with benefits and gig economy workers.
Functions like a bank account
The new ADP payments system functions like a bank account, and it enables employees to be paid instantly, make peer-to-peer payments via mobile devices or home computers and use cash wallet systems like Apple Pay, Samsung Pay and Android Pay.
And for the large swath of young workers who do not get employer-paid benefits or have their taxes deducted by their employers, the ADP Wisely Pay system enables employees to set aside tax money in a savings account and to choose voluntary, employee-paid benefits.
Putman said the advantage for employees is they avoid the recurring fees traditionally associated with checking accounts, even from digital banks.
The ADP payments system is financed in the same way credit cards work, with those receiving the payments paying an underlying fee.
"At the end of the day, this is a better bank account," Putman said. "If you look at traditional bank accounts out there, they're approaching $40 a month for checking. Frankly, I think that's a problem for the industry."
"This is a way for employers to get to 100% electronic pay, as well as to allow this demographic to have traditional financial institution functionality," Putman said.