Payment Systems Built for Ubiquitous Access, Not Profit – The EBT Story

Electronic Benefits Transfer (EBT) created by the United States Department of Agriculture to replace food stamps in the 1990s serves as a model of payment system as infrastructure not as a retailer choice of payment acceptance method. There have been many studies about the effectiveness of EBT as a nutrition redemption method for its beneficiaries, but few if any studies on the effect on small retailers or farmer market stall owners.

Since I have no data to analyze, I will make up thoughts based on absolutely no solid proof. It seems logical to me, that the lure of money showing up in the retailer bank account, without the risk of excessive cash in registers prompted some retailers that did not accept commercial cards for payments before EBT, decided to accept commercial cards because of the experience with EBT.  If they did, then those retailers increased their sales because consumer choice of payment increases sales (absolutely no proof of this, either).

EBT increased the velocity of money in small communities and helped grow the local economies. Couple the sophistication of a modern payment system with a low cost method for increasing demand (internet advertising),  and soon we see struggling brick and mortar businesses increasing sales enough to pay for more consumer choice in payment methods. The big brand cards then competed for State contracts for non-needs based method of cash distribution because they made money from retailer card acceptance and not a government debit card application. Payment acceptance costs rose, marginal retailers, could not pay the increased card acceptance cost, businesses closed, because money issued from government used a for-profit payment system instead of optional closed loop of EBT. (I don’t need facts when I can make up a perfectly logical assumption without basis in reality).

There is a lesson here, but somehow I feel too close to this sector of the industry to know what that lesson is. Perhaps there is a magic balance between public and private payment systems and if government policy promotes small retailers in an incubation stage based on sales or profitability, or some other factor gleaned from facts and not the idle musings of a blogger, then governments get strengthening economies and the payment industry gets graduates helping their collective bottom lines.

Are there too many isms here to look at different approaches for economic growth? Does our polarization prevent seeing if different paths at different stages help society more than attempting conformity to an ism? I think not, but here an opinion does not have to have a basis in fact.

Next Blog: More facts than fiction (in theory anyway)