Conforming somewhat early with the federal welfare reform mandate that requires all states to implement Electronic Benefit Transfer (EBT) services by 2002, the Eighth District's seven states are making strides toward that goal. Two states, Illinois and Missouri, are well into their pilot stages, while the other five are planning to launch their EBT pilots soon (see map).
EBT represents another step toward a complete electronic payments system. By 2002, recipients of state and federal benefit payments no longer will receive checks or food stamps. Instead, those with bank accounts can request direct deposit for their cash benefits. For those without bank accounts, as well as everyone enrolled in food stamp programs, states will issue EBT magnetic-stripe or chip-based smart cards, which will be used at automated teller machines (ATMs) or retail point-of-sale (POS) terminals. Users will be able to access cash benefits through any ATM that displays the Quest® mark. To activate the cards, recipients will use a four-digit PIN number.
In some states, financial institutions participating in EBT systems can gain additional fees through increased ATM transactions. Financial institutions should also see reduced food coupon processing costs under EBT. Institutions that elect to impose a surcharge for transactions must post this information on the ATM. Each state will decide whether to charge clients monthly maintenance fees for EBT accounts.
Besides using ATMs, individuals can perform EBT transactions at participating neighborhood merchants featuring the Quest logo. Some states, like Missouri, offer incentives to merchants who accept EBT cards. Also, Missouri merchants are able to accept EBT cards for debit payments, thus mitigating the need for the recipient to carry cash.
For more information about EBT, contact Cheryl McCarthy at (314) 444-8459.
Keep up with what’s new and noteworthy at the St. Louis Fed. Sign up now to have this free monthly e-newsletter emailed to you.
Fed in Print: An index of the economic research conducted by the Fed.