Monday, November 12, 2018

Disrupting EBT

Disrupting EBT

The world of technology is undergoing unprecedented disruption across multiple industries and has not only changed the ways we have traditionally conducted business, but how we look at business as well.  From Airbnb to Amazon, from Uber to Zelle, technology and creative thinking have disrupted the status quo and created market efficiencies.

There is a great meme on the Internet with a picture of Amazon founder Jeff Bezos in 1998 looking more than slightly nerdy and computer geeky, with his receding hairline and goofy smile, wearing an ill-fitting brown sweater and saying “I am Jeff Bezos and I sell books”; to a pic in 2017 where the same Jeff Bezos, nearly unrecognizable from the 1998 pic, with a shaved head, cool sunglasses, the requisite down vest and golf shirt showing off his biceps, seemingly channeling Vin Diesel and saying  “I am Jeff Bezos and I sell whatever I want.”

 Getting there required not only technology but vision, guts and a willingness to look at something completely differently.  The question The Lobster is exploring here is whether we can we bring these factors together to bring about a needed disruption in EBT?

Do EBT professionals have that Bezos vision, guts and willingness to disrupt established methodologies or would we rather rest on our laurels having invented a new payment system some 35 years ago.

Prior to WIC EBT, the last significant disruption in EBT was the Congressional mandate that all state EBT systems be interoperable with each other. Congress issued this directive in 1999, 16 years after the dawn of EBT technology.

The use of electronic benefits transfer for the distribution of government benefits dates back to 1983. EBT has been one of the most successful public-private partnerships in American government history. But it is clearly an industry that at times focuses on what a good job we have done at the expense of looking objectively at how we can do better.

It seems that an opportunity to look forward is before us.  Mobile payments, smart phones, big data and blockchain all seem to have elements that could be brought to bear in EBT.

 Can we challenge our assumptions?  The prevailing assumption underlying EBT has been that we measure success by the number of people on our EBT systems.  But a growing counter assumption holds that we can quantify success by a decline in those numbers as program benefits relieve economic pressure on beneficiaries and allows them to seek employment and no longer need the benefits that EBT delivers.

Along these lines, the Trump Administration has proposed plans to convert a portion of each eligible household’s monthly benefit to what it dubbed “America’s Harvest Box.” The box would contain shelf-stable food products.

Whether it is good or bad, the Harvest Box concept is a disruption in our thinking about food delivery.  Opposition to the plan was swift and strong and failed to appreciate the new and creative thinking that went into the proposal or the fact that after 35 years technology has passed us by and that EBT is a market more than ready for disruption.  The question becomes what might that disruption look like?  And, do we need to change fundamental assumptions in order to make it happen?

Monday, October 29, 2018

Families who receive benefits from the Supplemental Nutrition Assistance Program (formerly known as food stamps) use fewer discount coupons and allot more money for spending on food than they would without assistance, according to a soon-to-be-released study

Families who receive benefits from the Supplemental Nutrition Assistance Program (formerly known as food stamps) use fewer discount coupons and allot more money for spending on food than they would without assistance, according to a forthcoming study by Justine Hastings and Jesse Shapiro, professors of economics.

Why would they go through the time and trouble of couponing and shopping for the best deals when they are playing with "house money".

Hastings and Shapiro found that “every $100 in SNAP benefits leads to between $50 and $60 extra dollars of food spending each month,” Hastings wrote in an email to the Brown University Daily Herald.

According to the study, cash benefits of the same amount don't predict the same effect, Hastings added. Furthermore, the study found that SNAP beneficiaries are slightly less likely to buy less-expensive store brands and redeem discount coupons on SNAP-eligible food products.

 Understanding if “SNAP has larger effects on food spending than cash benefits would is important for understanding its effects on the economy and on the lives of recipients,” she wrote.

According to Shapiro, the authors’ ability to more accurately calculate estimates for the effect of SNAP on food spending sets this research apart from similar studies. Hastings and Shapiro analyzed over six billion data points, including POS scanner data, in their study.

 Scanner data is composed of any data collected when an individual checks out at a grocery store — including payment method and loyalty program history — and can be analyzed to compare the behaviors of SNAP recipients with other shoppers.

A key concept that the study explores is "mental accounting" a term devised by University of Chicago economics professor and Nobel Laureate Richard Thaler to describe a consumer's tendency
to budget specific amounts of money for various categories of spending.

Italicized text indicates our editorial comments.

Friday, October 12, 2018

Mobile Security in EBT

There have been many efforts to add mobile delivery of EBT services to a payment system which up to now has exclusively offered over-the-counter delivery of benefits. As with any payment system, a mobile dimension added a new layer of security concerns.

 The EBT Mobile Security Working Group of the eGovernment Payments Council has produced a white paper entitled Mobile Security in EBT. The paper is a definitive study of the security issues that would be involved if EBT beneficiaries are ever allowed to redeem their benefits via their mobile phones. The Council is a service of the Electronic Funds Transfer Association. The EBT mobile security white paper was edited and prepared for publishing by Chaddsford Planning Associates.

Topics covered in Mobile Security in EBT include the challenges of securing EBT digital identities, the challenges of establishing proof of digital identity in EBT, adopting 2 factor authentication for mobile EBT, regulatory issues surrounding mobile digital EBT, controlling data access, security while making the transition to mobile ID, the value proposition for secure mobile digital EBT. Mobile Security in EBT also includes 3 use cases for secure mobile program delivery.

Wednesday, September 19, 2018

USDA uses "common-sense flexibility" in authorizing the purchase of hot and prepared foods by SNAP beneficiaries who were victims of Hurricane Florence

The deprivation and pain caused by the recent Hurricane Florence flooding almost exceeds our ability to comprehend.

One group that has comprehended it and is doing something about it is the Food and Nutrition Service of USDA. FNS runs an assortment of food programs that include SNAP (formerly known as Food Stamps)

Because of the Hurricane Florence-induced hardships inflicted on North Carolina, including disruption in power supplies which limits the ability to cook during the recovery phase of the hurricane, FNS is allowing SNAP participants to use their electronic benefits to purchase hot and prepared foods.

FNS’s waiver of its regulation against using SNAP benefits to buy previously heated and prepared food will be in effect in North Carolina (where the hurricane first came ashore) until October 31 of this year.

In announcing the waiver, USDA Secretary Sonny Perdue took into account that SNAP beneficiaries who have been evacuated to shelters lack the ability to store fresh food and probably lack access to cooking facilities.

In a news release, Secretary Purdue called the policy “common-sense flexibility”

Under ordinary circumstance,beneficiaries are forbidden from using their electronic benefits for pre-heated and food prepared for immediate consumption.

USDA notes that food stores authorized to accept SNAP benefits may requirer a day or two to prepare for accepting the electronic SNAP benefit in exchange for hot and prepared food.

On September 16, USDA also approved another waiver that extends the time period that North Carolina SNAP beneficiaries have to submit reimbursement claims for food spoiled or otherwise lost due to Hurricane Florence. That deadline to report food loss is now October 15.

USDA may consider additional policy waivers or procedural changes to ease the burden of North Carolina SNAP participants adversely affected by Hurricane Florence. For up-to-date information on FNS assistance, visit

Monday, September 10, 2018

States as the incubators of fraud-fighting policy in safety net programs

States because of their proximity to people served have the ability to act as incubators of proposed public policy.

This is the case when tackling the thorny issue of fraud in the Supplemental Nutrition Assistance Program (formerly known as food stamps).

The federal agency charged with managing SNAP, the Food and Nutrition Service, is partnering with 10 states on what it calls the SNAP Fraud Framework which combines analytics with innovative electronic-payments industry fraud-fighting concepts and techniques to defeat potential SNAP fraudsters.

The Framework provides states with fraud-fighting tools that include analytics and data management, fraud detection, performance measurement, and investigation tools.

This collaborative effort, combining Federal resources with state knowledge  is a good example of the concept of federalism the Framers intended in the Constitute.

Another cooperative fraud-fighting area has been the Food and Nutrition Service’s long campaign to replace the paper food stamp benefit with electronic-benefits transfer systems which use plastic electronic cards with personal identification numbers, similar to bank cards. It is more difficult to scam the system with EBT cards than it was with paper food coupons.

FNS sets guidelines for EBT technology and the states are responsible for running the systems. In another cooperative action, Congress funds the ability of state EBT systems to be interoperable, so that EBT cardholders in one state can use their cards in another state. Cooperatively, the federal agency and the states share the administrative costs of these electronic systems.

The topic of waste, fraud and abuse in the nation’s safety net for poorer Americans has been a never-ending debate among lawmakers and the public for decades, but no program has garnered more attention in this area than SNAP. Anecdotes of program misuse true or not abound in the media.

This much we know is true, the program provides essential nutrition to over 40 million Americans each year at a cost of some 70 billion dollars. SNAP has attracted attention because its cost has almost doubled over the last decade, a period that has seen significant economic turmoil.

That is not to say that abuse doesn’t occur. As the program’s expenditures have grown for legitimate reasons, so too has fraud as criminals have tried to capitalize on the nation’s goodness. Nevertheless law enforcement pursues the fraudsters. In the early 1980s the work of a federal task force of 900 G men led to almost 1400 indictments. From that time to now the rate of fraud has dropped from about 4 cents on the dollar in the early 1990s to about 1 cent in the mid-2000s. Today, the fraud rate is less than 1.5 today.

However, that 1.5 fraud rate represents a lot of money. In 2012 the cost of fraud was estimated at nearly 370 million dollars, a sum that a short 4 years later was estimated to have risen to almost 600 million.

During this 4 year span the number of fraud investigations rose by some 30%. almost half of those investigations were in one state, New York.

 Pinning down program fraud, is a difficult venture. during this 4 year period the number of eligible beneficiaries declined while fraud rose. Normally, we would expect the two rates to rise or fall together. 

Wednesday, September 5, 2018

Is the new iPhone worth mortgaging your financial future

On September 12, Apple will launch its new iPhone. A survey by the personal finance website, WalletHub, released today shows that some 28 million people think that getting one of the new iPhones is worth going into debt for.

  1. Millennials were 5 times more likely to agree that possessing the new iPhone is worth going into debt.
  2. According to WalletHub, nearly 30 percent of those shopping for a cell phone don't realize that they might have to undergo a credit check when trying to purchase the phone.
  3. Almost 187 million Americans trust Apple and Google to handle their personal data more than they trust the government.
  4. Nearly 20 percent of people would rather have unlimited phone data than an excellent credit score.

In that same vein, 44 percent of millennials think that their cell phone has more of an impact on their live than their credit score.

The stock market is booming, not in small part due to Apple and its signature product.  Veteran investor, Warren Buffett's whose Berkshire Hathaway company owns a big stake in Apple has called the iPhone "indispensable" to many people.

Has the iPhone craze gone to far when consumers are willing to risk debt to acquire one. Not that long ago in the US, debt was a condition to be avoided at all cost. Apparently no longer.

However, an iPhone which also functions as a miniature computer can be viewed as an investment in the future of what in becoming an increasingly mobile economy, according to the WalletHub piece.

Thursday, August 23, 2018

EBT-The Perfect Public-Private Partnership

EBT-The Perfect Public-Private Partnership

I recently had the opportunity to attend the semi-annual meeting of the eGovernment Payments Council in Washington.

Among the Council’s work at the meeting were the following tasks.

1 A review by several government-relations analysts of legislative and regulatory issues facing EBT payment systems.
2 A deep dive into the current federal farm bill which includes language for modernizing EBT through technology like mobile commerce and online shopping.
3 The Council also received a report from its own task force proposing long-term strategies for EBT.
4 Also reporting in was a Council work group of state agencies that process both SNAP and TANF transactions through EBT systems.
5 Another internal Council group is advising EBT stakeholders on mobile technology and EBT.
6 The Council’s agenda also included an update on EBT processing rules and specifications.

EBT has been driven by three main engines, the desire to reduce the opportunity for fraud in lifeline assistance programs and a desire to reduce the cost of delivering these benefits, and a desire to make the delivery of these benefits a simpler, more humane process for food retailers and their customers, the beneficiaries of these programs.

The Council, which I am proud to have co-founded some 25 years ago, is comprised of representatives of private-sector organizations, state government agencies that use electronic-benefits transfer to dispense payments to eligible beneficiaries, and employees of the Agriculture Department’s Food and Nutrition Service. FNS administers two of the largest users of EBT technology, the SNAP (formerly known as the Food Stamps Program) nutrition program and the Women, Infants and Children (also known as WIC) nutrition program.

I was proud to see that agencies from 20 states  and territories have joined the group. I will be even prouder when the other 30 states, American Samoa, the District of Columbia, and the Commonwealth of Puerto Rico join their EBT colleagues from around the table.

Private sector Council participants include all EBT transaction processors, equipment manufacturers, leading EBT consultants, software developers and card manufacturers among other industry segments.

All Council members are united behind the three engines of EBT. This makes EBT one of the most successful public-private partnerships

Wednesday, July 18, 2018

When the old meets the new, something has to give

When the old (farmers markets) meets the new (electronic commerce) something has to give. Recently, a major supplier of mobile EBT technology (which allows farmers markets to accept SNAP EBT cards as a payment for for food covered by the SNAP program informed the federal government that it will no longer provide this technology.

As a result, thousands of SNAP cardholders have been unable to use their cards at these remote, unwires sites around the country and farmers markets, farm stands and route sellers will be deprived of a significant portion of their revenue until the problem is resolved.

The US Agriculture Department in a statement acknowledged the role that farmers markets plays in providing nutritious food for Americans as well as economic opportunities for farmers.

Brandon Lipps, the administrator for USDA’s Food and Nutrition Service which manages the SNAP program, explained that the agency’s focus is mitigating the impact of losing the technology provider on SNAP beneficiaries and farmers.

Administrator Lipps points out that current law requirers states to provide no-cost options for farmers markets to accept SNAP benefit cards. But the law doesn’t requirer that the mechanism be a wireless connection although the Food and Nutrition Service strongly encourages states to support wireless technology.

Because of the costs involved in providing wireless technology to farmers markets and the fact neither that farmers nor markets can be charged for the cost of the wireless equipment, Congress approves 4 million dollars every year to subsidized the use of wireless at farmers markets. With this funding, FNS since 2012 has enabled the purchase of wireless equipment for use by eligible farmers and markets.

Still, the economics of equipping thousands of farm markets with cutting edge technology may not work. Only a couple of companies are willing to provide this service.

FNS is continuing to look at ways to work through this economic conundrum by modernize the delivery of SNAP benefits at Farmers Markets.

Monday, July 2, 2018

The Relationship between Local Community Banking and Small Business Lending

The Relationship between Local Community Banking and Small Business Lending

The Federal Reserve Bank of Philadelphia has recently published a working paper on the importance of local community banks to small business lending.

The paper looks at the effect that a reduction in community banking can have on lending to small business.

The authors examined this issue in the context of mergers that involved community banks and the effects those mergers had on small business lending. Among the findings, local small business lending “declined significantly” in counties where only only the acquired institution operated prior to the merger, relative to counties where the acquiring bank had operations before the merger.

In reaching this conclusion the authors controlled for the general SBL market and local economic trends.

The authors call their findings “consistent” with an argument that after such mergers small business funds have been diverted to the markets of the acquiring institution. They say they have found “even stronger evidence” during and following the financial crisis that SML was directed away from the markets of acquired community banks.

Nevertheless, their overall finding is that local community banks still are important players in small business lending.

To read the working paper, visit

The authors of the working paper are Julapa Jagtiani and Raman Quinn Maingi, of the Bank.

To contact the authors directly, email

Thursday, June 14, 2018

The Financial Industry can do more to help elders avoid becoming victims of financial fraud

The Financial Industry can do more to help elders avoid becoming victims of financial fraud.

Combining Forces to Combat Elder Financial Victimization, a discussion paper recently released by the Payment Card Center of the Federal Reserve Bank of Philadelphia, provided a roadmap of what consumers and the financial industry can do to help elders to avoid the “financial pitfalls” that may occur as consumers, after years of financial independence, age and may no longer be able to manage their own financial affairs.

The paper notes that crimes that prey on seniors are “vastly underreported” which is why we believe the paper merits a post by The Lobster. Since The Lobster often covers financial industry issues and is well-read by members of the financial industry, this post will focus on what the industry, including banks, security firms, regulators, and policy makers can do to address the problem.

The authors outline six questions that financial institutions should be able to answer for consumers. They are:

Is the institution’s staff trained to recognize financial vulnerability
Does the institution use software to monitor potential vulnerably
Whether the institution has monitoring tools for account holders and their financial caregivers
Does the institution offer a emergency contact form and have guidelines for when to use the form to reach out to the emergency contact
Does the institution have a way to prevent power-of-attorney abuse
When it suspects financial fraud is the institution’s policy to report that fraud to law enforcement.

Although the industry has done much to combat fraud, there is much more that can be done. The authors point out that regulators and policy makers have not been proactive in regulating protections against senior financial abuse.

Several factors contribute to the problem. Among these are that seniors are taking on more debt. According to the paper, during one recent 12-year period, borrowing by seniors increased by 60 percent. Seniors may have trouble managing all that debt.The paper cites a 2012 study saying that bankruptcy filing grew fastest among consumers 65 and older. All that debt creates opportunity for late fees, foreclosure and bankruptcy.

 Secondly, the shift from defined benefit plans for retirement to defined contribution plans, such as 401(k) plans places the burden of determining how much to save for retirement on the shoulders of the senior consumers, which creates more chances of debt accumulation with its attendant problems such as foreclosure or bankruptcy.

Medical researchers have found a nexus between age-related decline in cognitive abilities even without the presence of disease and financial vulnerability. According to the authors, a first sign of cognitive aging is diminished financial capacity. Evidence of this diminution may be infrequent at first but become more noticeable through time. Eventually the bank may detect a suspicious transaction.

A 1981 report by the House Select Committee on Aging concluded that financial abuse was the second most prevalent form of elder abuse. The report also concluded that financial abuse often was paired with another type of abuse like psychological pressure.

Seniors can be prepared to mitigate the effects of financial abuse that is abetted by age-induced cognitive impairment.

The authors provide seven actions that seniors can take to help prevent financial abuse. They are:

Assign a trusted advisor to all financial accounts.
Have a durable financial power-of-attorney
Draw up a will
Be aware of current financial scams preying on the elderly.
Monitor your credit and identity
Hire a money manager
Think about hiring a financial account monitoring service.

You can find the complete paper on the website of the Federal Reserve Bank of Philadelphia’ Payment Card Center.

The authors of the discussion paper are Jeanne Rantezelas and Larry Santucci

Wednesday, June 13, 2018

Social services beneficiaries in California are being advised that their EBT cards may not work for a 24-hour period in late June, because of a planned service interruption in order to work on the system.

Social services beneficiaries in California are being advised that their EBT cards may not work for a 24-hour period in late June, because of a planned service interruption in order to work on the system.

California counties are advising beneficiaries of the CalFresh and CalWorks programs to prepare for the fact that their EBT access cards may not work for a 24-hour period from 11 pm June 23 through 11 pm on June 24 due to a planned service outage.

EBT debit card, which replaced food stamps, are used in the CalFresh program to purchase authorized food at retailers that have been permitted  by the government to accept the cards for payment. The cards are also used by participants of the CalWorks program to make cash withdrawals.

Because of the temporary service disruption, the customer service number listed on each EBT card will also be inoperable during the same 24-hour period as will be the state EBT website,

Beneficiaries of the two assistance programs are advised to food shop in advance of the system shutdown and to make any necessary cash withdrawals in advance.

Friday, May 25, 2018

A smart device app solution for merchant processing of government nutrition payments, such as WIC

A smart device app solution for merchant processing of government nutrition payments, such as WIC. 

Nova Dia Group, a Texas-based developer of mobile-payment solutions, has announced that its Mobile Market family of products has been certified for electronic WIC transactions by Conduent, a leading EBT transaction processor.

The upshot of this certification is that retailers that use merchant processor WorldPay for their point-of-sale transaction processing and use the Mobile Market products wIll now be able to support electronic WIC as a tender type.

Mobile Market+ Select is billed as an mPOS solution for merchants who want a smart device solution as well as the ability to accept both types of EBT tender: SNAP and WIC.

According to NDG, its Mobile Market products can now provide merchants with a single POS solution to process the following types of tender: WIC, SNAP, credit, loyalty. The company claims the Mobile Market solution is the only smart device app that can process WIC, SNAP, and credit across all state lines for multi-state merchants.