Prepaid Cards Are Essential Components of Rewards and Incentives Programs

The PaymentsJournal Podcast

When the topic is prepaid cards, the store-branded or general-purpose gift cards at grocery stores and retailers might come to mind. However, a substantial number of businesses and organizations continually use prepaid cards for a range of cases, including employee incentives and customer rebates.

In a recent PaymentsJournal podcast, Sheryl Shewman, Vice President of Business Development at U.S. Bank, and Jordan Hirschfield, Director of Prepaid at Javelin Strategy & Research, discussed the types of incentive programs and how organizations can leverage them to maximize employee engagement.

A Must-Have

More companies are offering some form of reward or incentive program. The reasons could be to improve productivity, increase engagement, or retain employees. A company might give a team member a prepaid card to recognize years of service or to show appreciation for hard work. Many organizations also give employees gift cards around the holidays.

Many businesses are increasingly giving employees health-and-wellness-oriented prepaid cards. Healthier employees are happier and more productive, and a prepaid card shows them that the employer cares about their well-being.

Even little incentives go a long way with a team. According to Hirschfield, Javelin’s data shows that roughly 83% of prepaid card recipients say an incentive increases their satisfaction with their employer.

“Over the years, rewards and incentive programs have gone from a nice-to-have to a must-have,” Shewman said. “Prepaid cards are now an integral part of those programs, but organizations are using them for many different functions. They’re being used for payroll cards, for expenses, and even for government disbursements.”

Fueling Sales

Companies are also increasingly using prepaid cards to drive sales in lieu of monetary rewards. Sales professionals are competitive by nature, and sales performance incentive funds are a great way to fuel their competitive fire.

A business could give a prepaid card as a reward for salespeople who achieve their objectives, such as when they meet their monthly quota or sell a specific product. A reward could also be given to the salesperson who cross-sells more products and services.

“Whether a company offers an incentive for perfect attendance or a sales accomplishment, there is still plenty of room to improve organizational rewards programs,” Hirschfield said. “According to Javelin’s annual prepaid survey, only 17% of all employees say they get any type of employee incentive. That’s a missed opportunity to establish a program that can benefit both employees and the organization.”

Brand Awareness

Manufacturers and dealers often give prepaid reward cards to build brand awareness and add value to their products and services. These incentives are best given as a reloadable card so the same customer can receive multiple incentives and loyalty can be built.

“At a tire store, there are multiple brands to choose from,” Shewman said. “So a tire manufacturer might give the store’s salespeople an incentive to promote their brand over another. Or it could be that the manufacturer is discontinuing a tire or launching a new product, so they offer a prepaid card to incentivize those purchases.”

Manufacturers and dealers might also offer a prepaid card as a rebate, as reimbursement for a product return, or as a reward for participating in a survey.

A Special Treat

Although there are many reasons for companies to give prepaid cards, organizations should also consider the type of card they are giving. In a small local company, the manager might want to personally deliver the reward to employees. Remote organizations, on the other hand, will have to rely on digital prepaid cards.

Rewarding employees with physical prepaid cards that can be digitized gives recipients the best of both worlds. They can use their cards in-store or load them into their Apple or Google wallets, where it can be reloadable.

Recipients also prefer open-loop cards like the Visa or MasterCard prepaid cards that can be used anywhere, as opposed to closed-loop options like branded gift cards.

“They want to use their reward for a special treat,” Hirschfield said. “They don’t want to use their incentive to pay a bill. In addition, organizations shouldn’t force employees into a gift card that doesn’t match their needs. Coffee shop cards are popular, especially when giving in lower denominations. However, only half of adults drink coffee daily, so that coffee gift card won’t exactly delight them, whereas a general-purpose card likely would.”

A Better Solution

In many businesses, managers still go to their local grocery store or retailer to buy the prepaid cards they give as incentives. That takes time and can also be more expensive—many gift cards, especially general-purpose gift cards, require a small activation fee.

There are also fraud risks. Gift card fraud is infrequent, but there is a risk that criminals might have tampered with in-store prepaid cards. There is also a chance that card-buying employees defraud their organizations by buying extra cards for themselves. Even if they are trustworthy, there is the possibility that the cards are lost or stolen after the purchase.

Purchasing rewards cards from a bank or a financial institution can mitigate those issues and add significant value for organizations.

“Financial institutions will often conduct a performance assessment to understand the rewards and incentives program at a company,” Shewman said. “That means asking how a company will use the cards and why, and who will be on the receiving end. It’s a great way to ensure that an organization has the most cost-effective and optimized program.”

Buying from a bank is typically less expensive than buying prepaid cards from a retailer. If a card is lost or stolen, it can be deactivated and replaced. Financial institutions can also deliver cards that have a company logo on them, creating a customized solution that keeps the brand top of mind.

“When managers go out to Walmart or a grocery store and buy cards off the rack, there is no way for payroll and auditing departments to report which manager got what cards from where, and who received them,” Shewman said. “When companies order cards from a financial institution, they can track and manage spending in real time. A bank can also provide detailed reporting if an organization needs to run any 1099s.”

Financial institutions can also do instant issues, in which an organization gets physical cards that have no funds on them. The business doesn’t load the prepaid cards until it is about to deliver the cards to the recipients, which adds an extra layer of security.

Incentive Expectations

An optimized reward and incentive program can keep employees engaged and maximize an organization’s productivity. The key to creating an effective incentive system is to keep the recipient in mind when the program is developed.

Companies should give themselves a variety of options to make sure they deliver maximum satisfaction to employees. However, they should also be sure that the incentive doesn’t become an expectation.

“One of my favorite stories is about a uniform company,” Shewman said. “Wire hangers are expensive, and drivers were given an incentive to pick up wire hangers after they dropped off new and cleaned uniforms. Originally, the uniform company added the incentive directly to the driver’s paycheck, but after a while, the drivers stopped picking up hangers.

“It turned out that the incentive had become part of the drivers’ compensation, and they came to expect it. Once the reward was delivered on a reloadable prepaid card, it became a true incentive for their drivers.”

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