Small Businesses Not Sold on Direct Deposit of Payroll

by Mercator Advisory Group 0

Small businesses continue to lag in the adoption of potentially labor-saving financial services solutions. In Austin this week, NACHA released a study which found:

“Two-thirds of small businesses in the United States don’t offer Direct Deposit to their employees…. That is just over three million companies that are still issuing payroll by check and 18 million employees who don’t have the option to be paid electronically.”

Typically, a small business owner has his hands full on a day-to-day basis. Taking the time to explore options and select a provider for a new service is difficult for small businesses. Yet the study findings suggest that financial services firms are not succeeding in outreach, taking solutions directly to small businesses.

“Though awareness of Direct Deposit is high among small businesses, lack of communication is another major reason why Direct Deposit falls short of broader penetration. One-half of non-users have not been contacted by anyone about payroll Direct Deposit.”

While NACHA clearly has an interest in the opportunity to provide direct deposit, their findings also highlight a strong correlation with the use (or lack of use) of payroll service providers. According to the study,

“….more than 80 percent of small businesses that outsource their payroll to a third-party processor, like ADP, offer Direct Deposit to their employees. Only 40 percent of small businesses that manage their payroll internally offer Direct Deposit.”

If banks want to significantly increase their small business customers’ adoption of Direct Deposit, they will have to start with effectively selling affordable payroll processing services.

Click here to read more: http://www.nacha.org/news/newsDetail.cfm/RecentBusinessNewsID/230

Featured Content