WASHINGTON (FNS) -- Retailers stand to benefit from a plan that would speed up the implementation of government-mandated electronic benefit transfer programs.
The plan, as unveiled at the White House, would lead to the widescale use of EBT networks for programs such as food stamps by the year 1999. It would help retailers by allowing easier access to the estimated $111 billion in annual benefits spending and by streamlining the current labor-intensive processing system.
Details of a plan, under which supermarket point-of-sale systems and automatic teller machines would be linked to federal and state EBT programs, were released on May 31. Taking part in the event were Vice President Albert Gore and Bob Gowens, executive vice president of finance, administration and electronic service for Randall's Food Markets, Houston.
Among the goals of the project are reducing administrative costs, fraud and abuse, and thus creating savings for the government and retailers to the tune of $195 million annually.
The plan is being devised by the Federal Electronic Benefits Transfer Task Force, formed last fall as part of a program to reinvent and streamline government. It would scrap the current paper-based government benefits disbursement system in favor of a nationwide electronic transfer system before the end of the century.
Gowens, who serves on the electronic payment systems committee of the Food Marketing Institute was on hand to demonstrate how the card-based system would be used to redeem food
stamps at supermarket checkstands. Randall's is a test site for a federal electronic food stamp project.
Gowens is a vocal proponent of the program and points to the success of the Treasury Department's Houston Project, an electronic food stamp program he helped start three years ago. Of his early meetings with Treasury Department representatives, Gowens said, "We told them, 'You're not going to have to go out and train our people. Just bring the cards in, and our people will use them, just like debit cards.' That's the beauty of it. It's called piggybacking on the existing infrastructure."
Gowens said cards used in the Houston Project and in some other states with EBT programs can be accepted nationwide. He contrasted the national program with the approaches of states like Maryland, New Jersey, and later this year, his home state, which hired independent contractors to set up their own networks that are limited by state lines.
Jack Radzikowski, executive director of the Federal EBT Task Force, said supermarkets currently involved in electronic funds transfer will reap benefits, as well as will those retailers contemplating investing in such systems.
"What we're bringing to him is a market of recurring transactions, where Uncle Sam largely is the payer," Radzikowski said. "And the retailer knows he's going to get the money and get it in a focused manner, so he's got a much better investment climate.
"Our intention is to bring him that customer revenue stream," in a way that is compatible with his business practices, he continued. "We don't intend to disrupt what's going on now."
Radzikowski said other advantages retailers will see is reduced check fraud because "people will only be able to draw down from money that actually exists." Cash management also should improve, he said, "because we'll be moving to a same-day or day-after settlement process."
One executive at Mesa, Ariz.-based Megafoods Stores, which operates 70 stores, summed it up simply: "Less headaches."
"We'll be cutting the fraud down because you'll have one card, so you can't be taking other people's food stamps," said Bob Stratton, management information services director. Megafoods is upgrading some of its own communications technology, he said. FMI favors the proposed federal program in general, said Peter Larkin, vice president of state government relations, but has yet to take a position on the government report.
"We're pleased with the direction the task force is headed," Larkin said in an interview. Retailers are interested in who will pay for the terminals at the checkouts, how they will be designed and who will pay the transaction fees -- details yet to be worked out, Larkin noted.
Under the government plan, the transfer system would develop on two tracks. The first would involve joint ventures between the federal government and states to develop one program to deliver state and federal benefits. The second track would permit states to develop their own transfer programs if they choose to do so and to incorporate direct federal benefits by linking with banks approved by the Treasury Department.
Costs and financing of the program would be shared by the government and private merchants, the report said, adding, "The federal government should pay a reasonable share to provide nationwide EBT services, including an upfront investment in EBT design, development and implementation. The U.S. Department of Agriculture would be the lead government agency in the initiative."
In a year-old demonstration project in Maryland involving the food stamp program plus five cash-benefit programs, some 3,000 food retailers participated as well as 1,800 automatic teller machines.
A state study showed that a majority of the recipients, retailers and banks preferred the electronic program. The annual costs of administering the statewide food stamp program were cut almost $1.3 million, the study found. The study also found that Maryland's food retailers preferred the electronic program to coupons or checks by an 8-to-1 margin. Under the test program, retailers would be provided the transfer terminals without charge or given the option to use those terminals for commercial credit and debit transactions.
Gowens, who chatted with Gore informally prior to the news conference, said he was impressed with how well the vice president grasped the intricacies of the program. "He clearly understood what needed to be done," Gowens said. "Many times people in his position are too much removed. He definitely knows more than President Bush did about supermarkets."