Electronic Benefit Transfer (EBT) Programs:
Best Practices to Serve Recients

Executive Summary

A total of 19.8 million people living in 8.2 million households across the U.S. received food stamps each month in fiscal year 1998. (USDA, 2000). By 2002, these recipients will no longer use paper food stamp coupons – they will all access their benefits using Electronic Benefit Transfer (EBT) cards. How will EBT cards change the way recipients access benefits – will EBT be easier or more difficult for recipients than paper coupons? Can EBT systems be designed to maintain recipient convenience and flexibility? What choices do states have in designing their EBT systems, and what can they do to ensure that EBT does not lead to a decline in recipient flexibility or convenience? How can states structure EBT to improve recipients’ comfort with bank technology so as to bring recipients into the mainstream banking system? Since EBT cards are used in some locales for receiving cash public assistance benefits as well, what safeguards are needed to ensure fair and low-cost access to benefits? This report addresses these questions by examining the impact of EBT on recipient customer service in nine states and two California counties. We identify the best practices for EBT administration that should be adopted to provide the most convenient, flexible and efficient system for recipients. We recommend that all EBT programs implement all of these recommendations.

This report is intended to be useful to EBT program administrators and consumer advocates throughout the U.S. Although the majority of states in the U.S. have implemented EBT in some form, some states are still operating pilot programs only, and other states have only recently completed full implementation. Those states which have completed full EBT implementation have knowledge and experience which would benefit other states with programs still in development.

It is a particularly opportune time to incorporate these practices into California’s EBT system, since the contract has not yet been awarded to the private vendor that will implement the program in the state, in addition, county-level administrators have not completed their local implementation plans. By integrating these practices into its EBT program before full implementation, California and some other states may benefit from the experience of earlier programs, and may be able to avoid some of the pitfalls and growing pains of other EBT systems. In addition, it is more effective to incorporate program changes before implementing an EBT program across the state.

To investigate current EBT practices the authors administered a written questionnaire and follow-up telephone interviews with ten EBT program administrators. The authors also conducted telephone interviews with welfare advocates in order to gather a wider range of opinions on EBT implementation. The states examined were Florida, Illinois, Maryland, Massachusetts, New Jersey, New York, Texas, Washington, and Wisconsin plus pilot county-level programs in San Diego and San Bernardino.

Although most advocates and EBT administrators agreed that the EBT food stamp program is working fairly well, there are still problems in many states with EBT delivery of cash welfare benefits, particularly in areas which are largely low-income or rural. In particular, advocates are concerned about fee structures because states permit fees for ATM transactions above a set limit, and banks frequently add surcharges. Federal regulations mandate that food stamp purchases are fee- and surcharge-free, but cash benefits are subject to vendor, retailer, and bank fee structures.

In all programs, administrative structure, communication and philosophy play a key role in the success of an EBT program. In particular, county-administered EBT programs varied widely. County-level programs have an additional level of bureaucracy not found in state-administered programs. County by county administration led to a particularly wide range in program success among county-administered programs. There was more variation in the commitment and consistency of program management in the county-administered programs than in the state-administered programs.

Although all of the best practices described in this report can be implemented in any EBT program, county administration adds some challenges. Each program had unique demographic or administrative challenges, and the key to successfully addressing these challenges was program flexibility.

The current market structure of vendors is an oligopoly, and may soon become a monopoly. As of January 21, 1999, Citicorp Services, Inc. had been awarded contracts in 29 states. (Business Wire, 1999). A vendor market with a small number of firms provides incentives for vendors to use economies of scale for tasks such as telephone helplines. Economies of scale, however, can lead to a reduction in program flexibility, which may hinder a program administrator’s ability to address unusual or special needs among recipients. Program flexibility is essential for recipient services’ success. Fewer vendors also decreases contract competition, which may lead to limitations on the range and quantity of services provided to recipients.

The following section identifies best practices in card issuance, program administration, training and initial rollout, telephone helpline, fees, automated teller machines (ATM) and point of sale (POS) access, card problems and vendor contracting.

For the full report, click here.