Post Top Ad

1:56 PM

EBT Riding The New Commercial Payments Infrastructure

by , in
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

by , in
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.