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1:56 PM

EBT Riding The New Commercial Payments Infrastructure

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EBT, the use of debit card technology to distribute nutrition benefits, such as those formerly called food stamps, dates to 1985. There were 3 principal reasons behind the launch of EBT or Electronic Benefits Transfer. They were the mitigation of fraud and abuse in the food stamp program as well as  the desire to make the distribution of benefits more efficient and user-friendly and to de-stigmatize the use of paper benefits at the store cash register.

Today, modern technology can take these goals to the next level. Mobile technology including EBT apps and mobile wallets can connect eligible beneficiaries directly with the transaction processors hired by state governments to distribute the benefits. This both reduces the opportunity for fraud and makes the use of the benefits at an authorized food retailer more convenient.

In addition, the cost benefit of EBT was originally premised on the theory that EBT transactions would "ride the existing commercial electronic payments infrastructure" rather than government paying to develop and operate a new payment system.

The day when "the existing commercial payment infrastructure" consisted solely of point-of-sale terminals and debit cards is long past. Existing payment technology now includes the ability of beneficiaries to initiated their benefit transactions on their mobile phones, just as non-benefit food shoppers do.

States can now take advantage of this technology to further secure the transaction and make it more efficient and user-friendly. The key to this is increased mobile technology.

The time is now for state agencies, EBT professionals and lawmakers to stop resting on the success of the first generation of EBT and provide EBT shoppers with the same security and convenience as not-EBT shoppers.

In addition, beneficiaries who lose their EBT cards must return to their local social services offices to have the card replaced, so that they can access their benefits. With an app on their mobile phones they can have immediate access to their benefits.

A mobile wallet can help beneficiaries better learn to how to take responsibility for managing their food spending. Currently much nutrition program fraud occurs when beneficiaries sell their EBT cards to dishonest food retailers or lose their cards. A mobile wallet holding the cardholder's current benefit balance eliminates the need to carry the EBT card on the streets where they can be stolen or misused.
1:55 PM

Has the Community Reinvestment Act outlived its usefulness in the 21st century

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Has the more-than-40-year-old Community Reinvestment Act outlived its usefulness. Congress authorized the CRA in 1977, at a time when the banking landscape was far different than it is today.

An article in the December 3, 2018 American Banker by Diego Zuluage of the Cato Institute’s Center for Monetary and Financial Alternatives examines this question.

The Office of the Comptroller of the Currency has initiated a study of the CRA. One issue that bears review is the degree to which the CRA in the world of 21st century banking can accomplish the goal that Congress set for it in 1977 .

The CRA mandates that banks make credit available in the communities in which they take deposits. The laudable goal of the law is that banks serve historically underserved low and moderate-income communities.

The law fails to guide regulators on exactly how to to encourage such lending. It done not address, for example, sanctions, fines or threats of charter-revocation. It does allow regulators to block bank expansion including mergers, so much a part of the new banking landscape. One of those regulators, the Federal Deposit Insurance Corporation, back when the CRA made its way through Congress, oversaw 14,000 banks, but now supervises about 5,000. This attrition, to a great extent is due to bank mergers. 

For 4 decades the CRA has provided guidance for regulators on assessing how well banks have met their CRA obligations. However, although we live in a metrics-driven world now, 40 years ago Congress failed to provide guidance on how to measure CRA performance.

Another important issue raised by Zuluage is whether the CRA’s 40-year-old goal could have contributed to the 2008 financial crisis. He posits that the crisis illustrate that for many financial vulnerable households the problem was not so much a lack of mortgage credit as it was too much easy credit. 
1:41 PM

Medicare for All

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The first rule of business that I learned in a thirty year career was that if something seems too good to be true, it probably is.

The Democrat party did a masterful job this past mid-term election of reshaping the electoral dialogue around healthcare, a strong issue for them and a weak point for their Republican adversaries. 

On this issue, some key Democrat politicians have been beating the drum for “Medicare for All” attempting to capitalize politically on the fact that in the five years since the party passed the Affordable Care Act, health insurance premiums have doubled for individuals and increased 140 percent for families. At the same time deductibles have also risen.

As care providers continue to escape the Affordable Care  Act (aka Obamacare), 3/4 of insurance plans are now highly restrictive. Many of those providers who have yet to flee Obamacare have consolidated their practices, as conservatives predicted they would, further restricting access to healthcare and raising consumer costs as fewer providers compete for the same customers.

To clean up the mess they have created, some Democrats believe the solution may be to enroll every man, woman and child in America in Medicare. By most estimates the cost of this free healthcare will be north of 30 trillion dollars. The tab in one state alone, California, is estimated at 400 billion dollars.

Beyond the cost issue, Americans will confront the same quality of care issues that have faced citizens of other countries that thought they could nationalize healthcare without any adverse effects including long waits for service.

What remains to be seen is how Americans, not a people known for their patience or willingness to take the long view on policy issues, will react to long lines and waits for service. 

To clean up the mess they have created, some Democrats believe the solution may be to enroll every man, woman and child in America in Medicare. By most estimates the cost of this free healthcare will be north of 30 trillion dollars. The tab in one state alone, California is estimated at 400 billion dollars.

For a dispassionate view of what is also called single payer healthcare, I commend to you “The False Promise of ‘Medicare for All’”, an opinion piece by Scott W. Atlas, that ran in the November 13 issue of the Wall Street Journal

12:17 PM

Leadership

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At last month’s  EBT-The Next Generation conference, sponsored by the Electronic Government Payments Council, I was honored along with my colleague, John Pfeuffer of Conduent State and Local Solutions to present the Council’s 2018 Leadership Award to Art Burger, the President and CEO of Burger Carroll and Associates. (https://www.burgercarroll.com) What follows is a summary of our comments while making the award to Art.

BCA is a national public sector information technology consultancy based in Santa Fe, New Mexico. Some 100 Federal, State, Territorial and Tribal government agencies have consulted with BCA.

BCA is a charter member of the Council. Art has served as the Council’s chairman as well as chairing a number of its work groups and committees.

Perhaps more than any other EBT professional, Art has been responsible for the successful adoption of EBT technology by state- managed Woman, Infants and Children nutrition programs.

In addition to advising WIC state agencies on EBT technology he was instrumental in explaining to the EBT industry what a WIC EBT transaction would look like.

He also brought WIC-facing organizations into the Council to help speed the migration of EBT technology to the WIC program, one of the most efficient federal programs, in terms of outcomes.

In addition to helping birth the technology of WIC EBT, Art is a master at understanding the public policy and funding issues of WIC and EBT.

Perhaps his crowning achievement came when he met with a team of Congressional aides and explained the many benefits of WIC EBT. More than anyone else Art Burger was responsible for Congress agreeing to fund the conversion of state WIC programs to EBT.  This culminated in a Congress mandating that all state must adopt EBT technology for their WIC programs by 2020.

An accomplished and trained debater, he demonstrated for Congress the absurdity of the paper-based system that WIC programs used prior to EBT by showing the congressional representatives a fistful of more that 30 paper vouchers that a typical WIC shopper would have to negotiate each time she shopped with WIC benefits.

This time-consuming process in the grocery store or supermarket slowed throughput at the cash register lines and contributed to higher food costs.


Today, because of Art’s effort, WIC EBT enjoys widespread support within Congress and the food retailing communities

12:18 PM

The War on Poverty

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The War on Poverty

An opinion piece in the October 11 Wall Street Journal entitled “Government Can’t Rescue the Poor” authored by Phil Gramm and John F. Early traced the effectiveness of the so-called War on Poverty from its inception in the mid-1960s to the current day.

Messrs Gramm and Early state that in the 20 years prior to 1966, without the massive spending that was soon to follow the poverty rate dropped from more than 32 percent to less than 15.

The authors point out that since 1966, the first year with a significant increase in anti-poverty spending, the rate of poverty has been virtually unchanged, according to the Census Bureau.

The Census Bureau classifies as poor everyone in families whose incomes are lower than the
the established thresholds for their respective family size and composition.

The Census Bureau has said that in 2016 nearly 13 percent of Americans lived in poverty.

Gramm and Early also note that it is not possible to reconcile this rate, which has remained virtually unchanged over the last 50 years, with the fact that government-transfer payments to lower income families have risen steadily.

According to the authors’ research, from 1965 to 2016 the value of transfer payments in real dollars targeted to low-income families has increased from about 3,000 to 34,000 dollars.

Gramm and Early conclude that even given the magnitude of this increase, the numbers fail to reflect the true growth in transfer payments to low-income families since they exclude Medicare and Social Security which help subsidize low-Income retirees in the bottom quintile of earners.

They postulate that the lowest quintile of earners can receive as much as 10 times the lifetime benefits received by the top fifth of earners.

The stasis in the poverty rate according to the authors is due to the fact that since the start of the War on Poverty the Census Bureau has not counted transfer payments as income. The Bureau measures poverty using what it refers to as “money income”

Money income includes earned income and payments like Social Security and unemployment insurance which a person receives as a result of having been employed. Excluded in the calculation are transfer payments like SNAP (formerly known as food stamps), Medicaid, CHIP (The Children’s Health Insurance Program) and nearly 90 other means-tested federal payments and most state means-tested assistance programs.

Gramm and Early opine that these uncounted transfer-payments amount to some 1.5 trillion. And that  if the government were to count them as income, the true poverty rate today would be below 3 percent.

The 3 percent rate would drop even further if the Census Bureau included as income the estimated 500 billion in private charitable donations given to the poorest Americans.

Gramm and Early write that system of transfer-payments has failed to accomplish the goal of the War on Poverty as stated by the president who launched the War, Lyndon Johnson. President Johnson’s goal was to allow America’s poorest citizens “to develop and use their capacities”

It is impossible to say that this goal has been realized when 85 percent of the disposable income of the poorest Americans comes from transfer-payments, according to the authors.

12:57 PM

Disrupting EBT

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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?

12:45 PM

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

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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.
3:00 PM

Mobile Security in EBT

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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.
1:03 PM

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

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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 www.fns.usda.gov/disaster.
2:22 PM

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

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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. 
11:54 AM

Is the new iPhone worth mortgaging your financial future

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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.

2:14 PM

EBT-The Perfect Public-Private Partnership

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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
1:08 PM

When the old meets the new, something has to give

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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.
2:35 PM

The Relationship between Local Community Banking and Small Business Lending

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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 https://philadelphiafed.org/research-and-data/publications/working-papers.

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

To contact the authors directly, email julep.jagtiani@phil.frb.org
2:48 PM

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

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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. https://www.philadelphiafed.org/PCC.

The authors of the discussion paper are Jeanne Rantezelas and Larry Santucci
1:08 PM

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.

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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, www.ebt.ca.gov.

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.
  
1:13 PM

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

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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.
6:58 AM

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

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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.
11:24 AM

A Great Program Badly in Need of Disruption

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Disruption is a good thing in technology because it is how we grow and evolve. The last significant disruption in Federal food distribution was the Agriculture Department’s final rule mandating that all states adopt EBT for the distribution of Woman, Infants and Children benefits. This occurred in 2016. It is also worth noting that the Rule incorporates provisions of the Healthy, Hunger-Free Kids Act of 2010. HHFKA passed Congress 6 years prior to the Final Rule.

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 rests on its laurels.

In February of 2018 the Agriculture Department which manages the SNAP program, formerly known as the Food Stamp program, announced plans to convert a portion of each eligible household’s monthly benefit to what it dubbed a America’s Harvest Box pending the approval of Congress. The box would contain shelf-stable food staples.

The Harvest Box idea was previewed in President Trump’s 2019 budget message to Congress in February 2018. It is part of the Administration’s plan to cut federal SNAP spending by 200 billion dollars or 30 percent. 

Opposition to the plan was emotional, overwrought and largely along party lines.

In a statement Eloise Anderson, the Secretary of the Wisconsin Department on children and Families and Chair of the Secretaries’ Innovation Group comprised of 22 state human services and workforce leaders from 22 states covering 52 percent of the country, wrote that she likes the idea that the Harvest Box proposal helps assure that recipient families…have a ready supply of healthy and nutritious food.

Agriculture Secretary Sonny Perdue, according to a published report, admitted that the Harvest Box idea surprised members of Congress but also said that Department staff had consulted with experts while formulating the concept. He also reportedly called the plan a work in progress as the Department starts taking public comment.

According to one report, Secretary Perdue is looking for Congressional permission to develop a Harvest Box pilot program.

2:10 PM

3 Simple Steps for Crafting a Winning Pitch for Government Business

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3 Simple Steps for Crafting a Winning Pitch  for Government Business

Know Your Customer. In government sales, there are several parties you will have to deal with. They are the buyers who work for the procurement agency,  the program officials who will actually manage how your produce or service will be used, the government employees who will actually put your produce or service into play. In the government sales cycle, the buyers are the people you will have to negotiate with. They are the gatekeepers. Regardless of the merits of your offering, unless you please the buyer, you won’t get to the program official who will be responsible for the use of your offering. Once you are tendered a contract, the program manager will be responsible for the use of your offering. Screw up at this point and you’re out, Tom. The program officials rely for counsel on the field employees who will be responsible for the deployment of your offering.

Plan in Advance. Understand that a government customer can differ from a commercial customer. A commercial customer is answerable to the company’s shareholders. This is the dynamic that ultimately drives all decisions. A government customer answered ultimately to the taxpayers. So, government customers generally choose the “lowest, best offer” Understanding the differences between the two customers will allow you to battle plan a successful proposal to a government agency. Whatever you do, don’t try to get by on the cheap by recycling an old prop to a commercial customer. We serve both commercial and government customers. We know the differences and why a commercial proposal won’t work with a government prospect.

Tailor your proposal to a government prospect. Your prop should always focus on why your offering is the “lowest, best” offer in the solicitation. Understanding the differences between the commercial and government customers, make the proposal more about the government prospect and less about your company. Avoid chest-thumping praise of your own offering. Be aware of what your prospect’s issues are and in your proposal very concisely focus on how your offering solves those issues. Make the case by citing other government customers that have benefitted by your offering, if you have any.  
2:13 PM

The electronic message that drives EBT transactions is about to change

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EBT electronic transaction messaging to get a rework

The Retail Payments Subcommittee of electronic financial message standards group X9 is soon to begin revising the financial transaction message for EBT.

Standardization of the electronic processing of SNAP (nee Food Stamps) purchase transactions “provides cost efficiency, ease on conversion, data and reporting consistency for the SNAP program.

Parties affected by the change include The Department of Agriculture, which is responsible for managing the SNAP program, state and territorial agencies that manage SNAP on a local level, the handful of companies that process SNAP electronic transactions, third-party processors of SNAP transactions, software developers, point-of-sale terminal manufactures, authorized food retailers that vend the food which SNAP EBT cardholders purchase, as well as software developers who build the retail POS systems.

The subcommittee is seeking subject-matter experts among these stakeholder groups who would be interested in participating in the rewrite of the SNAP EBT message.
2:28 PM

Yet another state goes live with EBT payment technology

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Yet another state goes live with EBT payment technology for the WIC program


In April of 2018 the State of Arkansas began converting its Woman, Infants and Children nutrition program away from paper benefits checks in favor of electronic benefits transfer, or EBT, technology. 

This is a project that Chaddsford Planning work on in the planning phase, assisting the EBT planning contractor, Burger Carroll and Associates. It is gratifying to see the State and its EBT processing contractor, Solutran, get the EBT system off the ground.

EBT is more efficient for the state, beneficiaries, and food retailers  who vend the food to the EBT cardholders. Shopping with a pile of WIC checks is inefficient and stigmatizing for program beneficiaries. Retailers incur the labor and banking costs to handle and account for thousands of WiIC checks each month. States also incur the costs of printing, issuing and accounting for the checks. Under EBT these check processing costs go away for taxpayers.

To support its WIC beneficiaries, Arkansas has chosen online “smart card” EBT technology. When states migrate their WIC benefit distribution from paper checks to EBT they can choose either of two technologies: online EBT (similar to a banking debit card) or offline EBT (the beneficiary cards carry a microcomputer chip which holds the large amount of data required for the WIC program) The microcomputer chip may also be more secure than the magnetic strip on an offline card.

There are advantages and drawbacks to each technology. However, experience has shown that both EBT technologies are far superior to the traditional benefit distribution method of printing, distributing, negotiating, and settling thousands of checks every month.

Congress has mandated that by 2020 all states must replace their WIC check operations with an EBT system. As of April 2018, about half of all states, territories, and tribal authorities, have, like Arkansas,  already complied with the Congressional mandate. Another handful are in the process of implementing EBT. Several others are in the process of rolling out or piloting a WIC EBT system. A few are still planning for EBT. 
2:35 PM

The recently released Farm Bill mandates modernization of the Electronic Benefits Transfer system used to distributed SNAP (nee food stamps) benefits to eligible households

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Congress’ recently released Farm Bill mandates modernization of the  Electronic-Benefits Transfer system, the specialized debit-card technology by which SNAP (nee Food-Stamp) benefits are transacted by cardholders. 


With over 40 million cardholders using their EBT cards an average of10 times per months, EBT is one of the largest stand-alone electronic-payment systems in the US.
  
Congress has identified several specific targets for EBT technology modernization. These are.

1) Adding the ability for SNAP recipients to access their benefits through mobile technology

2) Online acceptance of EBT

3) A national gateway to facilitate the use of benefits beyond the state that issued them to a particular recipient.

4) Addressing access to state EBT systems.

5) Incentivizing the modernization of EBT technology.

The bill also addresses public-private partnerships for improving EBT technology. 

It is important to note that EBT leaders in the private, Federal, and state sectors have for some time already been working on implementing these improvements.

It is also worth noting that the bill mandates certain back office changes to improve SNAP integrity. These include procedures for the replacement of EBT cards, data reporting, tolerance levels for payment errors, state performance indicators. 
1:47 PM

Marketing Technology to Government

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Marketing Technology to Government

I have seen a number of sellers and marketers crash and burn trying to market their technology products to government agencies. Often, the problem is a failure on the part of the seller or marketer to realize quickly enough that he or she and the agency rep are or should be on the same side of the table.

All too often, the seller or the marketer will approach the agency rep antagonistically because of pricing. The seller’s job is to sell his company’s products or services at the greatest possible margin. The agency’s rep’s job is to secure the seller’s wares at the best possible value. This value is a combination of price and technology.

So, if your technology is not the freshest on the market don’t be surprised if the buyer asked you to take a haircut as the buyer is willing to trade a newer technological iteration for some cost savings.

Once you both move past the money issues both parties should be working toward the same goal, a sale.

Both sides need to recognize that the agency has a problem to solve and that the seller may very well have the solution to that problem. Since the seller is proposing the solution, it is incumbent on him or her to avoid a stand-off or shouting match in order to get the deal done. Prideful reluctance to give in to the buyer should not stand in the way of a good deal.

The technical aspects of the produce being sold and bought may present another barrier since the agency rep may not be versed in the nuances of the product. Similarly, the seller may not be familiar with how government agencies operate and how decisions are made.

If a seller approached the sale as if the agency’s problem is his own and recognizes that he and his counterpart are playing on the same team to solve the same problem, the sale will be made at a price that is fair to both teammates.
11:36 AM

Getting Started Contracting with Government

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Getting Started Contracting with Government 

By one estimate, there are 80,000 government agencies, federal, state and local, that purchase a variety of goods and services from the private sector. The aggregate value of these purchases is in the billions of dollars.

Your first move in the government sector should be to settle on exactly which of your many goods or services you plan on selling to government. At this point, you should become familiar with the NIGP, or the National Institute of Government Purchasing index. This is a listing of all the goods and services that government agencies typically buy. This will be your first indication if there is a government market for your company’s offering. You should also visit the website of any agency to which you wish to sell and click on the procurement tab to find what things that particular agency buys. This will tell you if that potential buyer needs your company’s offering.

You also need to determine where you wish to sell: nationally, regionally, only in the state in which your company is domiciled, or locally. There are advantages and disadvantages to each of these. for example, selling nationally opens up a huge market for you but could entail a great deal of travel the expense that will cut into your margin. If your company doesn't already have regional operations you could actually realize more profit selling locally. 

You next should locate specific bidding opportunities. 

There are several ways to go about this. One way is to contract with an aggregator. This is a company that will report to you periodically on which agencies have issued tenders for the goods or services that your company supplies. The drawback to this approach is expense. These reports are costly and most bidding companies will not have the bandwidth to respond to more that a fraction of the opportunities in the report. In addition, much of the information is repeated from report to report to report. So, you will be paying repeatedly for the same data and you will be paying for information that your can’t use or which is stale. 

An alternative to an aggregation service is to retain a consultant. Make sure your consultant has hand-on experience selling to government not just other contractors. Experience selling in your vertical would be a bonus. This is a much more personal approach than using an aggregator. In the interest of full discloser, Chaddsford Planning provides this service.

A  third approach, if you have the time and/or resources is to go it alone and contact thousands of government agencies yourself to determine if they purchase what you are selling and then to continue dialing for dollars until you find the right person who has purchasing authority and can buy from you.

The next step is to identify the requirement of the job. in order to for your potential customer to do business with you you will be required to submit a formal written proposal that accomplishes three things. 1) specifies exactly what you are offering, 2) specifies exactly what you expect in return, 3) shows precisely how your offer solves the agency’s problem.

It is a lot of work, but there is a lot of reward.
1:07 PM

Public Speaking Can Be a Career Builder or a Career Breaker

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Public Speaking Can Be a Career Builder or a Career Breaker

If you follow The Lobster I am betting that your interest in career development will make public speaking a career builder for you.

Unfortunately, if you are unprepared and try to wing it, a speaking opportunity could well be a career breaker.

When I went off to Ohio’s Defiance College I was a tongue-tied 18-year old. The few ideas I was able to articulate were delivered in a thick East Coast brogue and cadence which left my audiences wondering what they had just heard.

That was until I fortuitously was scheduled into Prof. Robert Pearce’s Speech class.  The dean of students must have caught my act at some point and placed me there. Professor Pearce had what I thought was the coolest job. Companies would hire him to give speeches of behalf of executives who could not clearly articulate the company’s message despite their business acumen.

Company communications flacks would give him the content and overall message which he would deliver in a beautifully crafted speech. Being an adjunct professor for inarticulate knuckleheads like me seemed to me like slumming it.

After four undergraduate years and a graduate degree from one of the country’s most prestigious universities and a long career in business, I tell everyone that Prof. Pearce’s speech class was the biggest career builder I had.

Not only did I have one career, I had several, all involving public speaking. For several years I was high school teacher, bringing the finer points of Hamlet to 16, 17, and 18 year olds.

From there I became a broadcaster, speaking to unseen audiences. My first boss in broadcasting and my business mentor was Mr. Fred Palmer, the owner of WATH in Athens, Ohio. Not exactly a 50,000 watt flamethrower. Mr. Palmer was my Prof. Higgins who taught me how to speak properly and connect to an audience.

After I left Mr. Palmer I continued in the broadcasting industry.

I next parlayed my broadcasting experience into a long career in marketing and PR. This career has given me numerous speaking opportunities which have raised my industry profile. This has brought in more and more new clients.

I meet many business colleague who assiduously avoid opportunities to get up in front of a room of several hundred decision-makers and influencers. This I believe is one of the biggest mistakes a businessperson can make.

If you receive an unexpected invitation to speak at a conference or other function, follow these 3 steps.

1) be positive and thank the person who rendered the invitation.
2) ensure that you know the audience.
3) quickly go online to make sure that your knowledge of the topic is up-to-date.

Invitations to speak can sometimes appear from nowhere. In a business setting, always be mentally prepared to speak if asked. One good way to do this is to evaluate other speakers for what they seem to do correctly or wrongly. As they speak notice how the audience responds to them. 
2:09 PM
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Chaddsford Planning Associates in the News

We recently publicized our participation in the 20th annual EBT-the Next Generation conference especially Front Page Focus which centered on the positive impact of the SNAP program on disaster recovery in Puerto Rico after the devastation of Hurricane Maria.

As a result, our press release garnered 6500 unique views including 1600 in the first hour. 30 viewers clicked over to this website for more information. 13 percent of the viewers  were referrals from over sites.

2000 of the interested viewers were from Virginia and 1600 were from California. 1600 views originated in Ireland. 

The most social media mentions about Chaddsford Planning came from Illinois and Pennsylvania. Nearly 80 percent of the social media mentions were on Twitter.


The social mentions potentially reached 24,000 people in the first week after release.