[Dave Birch] A couple of the projects that we are involved in at the moment are at the intersection of financial and social inclusion, which is a topic that interests me greatly. One of the aspects of the technological changes afoot at the boundary (between financial inclusion and the beneficial social infusion that it facilitates that deserves more discussion) is that of control. Where should we set the “dial”? Remember this?
Birmingham council, which represents around 1 million people, said that from 1 April Monday it would give out crisis welfare payments in the form of prepaid cards that could be redeemed only in Asda supermarkets. The Labour authority said the cards – which Asda said were similar to their gift cards – would restrict spending to a list of predetermined goods, which would exclude tobacco, alcohol, phone-related expenditure and fuel.
You see the dynamics around this. If I were Asda, or any other retailer, I would be happy to cut a deal like this. I don’t want to deal with cash, and I don’t want to pay merchant services charges to banks, so running my own payment card suits me just fine. And better still, cutting a deal with a state agency to drive welfare recipients in through my door with money to spend is a win-win. This subject of control did come up a couple of times at the Tomorrow’s Transactions Forum this year because we had an excellent presentation from Claudia Wood, the deputy director of think-tank DEMOS. Claudia was discussing her excellent report for DEMOS on the use of prepaid cards in public services.
A particularly important thread in the report is the once concerning this issue of monitoring and control of card spending. The authors note that there might be benefits to using prepaid cards to deliver financial services to vulnerable groups and that we should begin a debate on balancing the complexities and ethics of safeguarding spending balanced against “nanny state” interference.
Round about the same time that Claudia’s report was published, the Conservative MP for Elmet and Rothwell (no, I don’t know where that is either) had proposed a “ten-minute rule” bill in Parliament under which UK welfare claimants would be issued with a card instead of receiving their benefits in cash.
Benefits claimants should be banned from spending welfare handouts on alcohol and cigarettes, a Conservative MP has said. Alec Shelbrooke wants to prohibit benefits being spent on luxury items by introducing electronic cash cards which could only be used for essential items such as food and clothing. The cards would be similar to a chip and pin debit card but with a blocking function for non-essential items, the MP for Elmet and Rothwell told the House of Commons.
As I said at the time, you can’t do this with open-loop debit cards and basic bank accounts (“four-party schemes”) because the bank doesn’t know what you are buying. In the case of the Asda example, above, however, the retailer’s own three-party payment card has access to data that the four-party schemes do not: specifically, the “Level 3” POS data on what you’ve actually bought. So while Barclays could block my debit card by MCC and (potentially) by location based on Terminal IDs (TIDs), they can’t block by item. They can see that I’m shopping at Tesco not whether I’m buying own-brand value tea bags (which might be allowed under Mr. Shelbrooke’s stringent governance of benefit expenditure) or Duchy of Cornwall luxury leaf tea (which might be allowed under the wife of the Governor of the Bank of England’s stern governance of nature’s bounty). Even if it were possible, I’m not clear how the payment system would maintain and resolve these complex rules and interactions. Who would have precedence? The Health Czar might want people to buy gooseberries but the Benefits Czar might insist on blackberries and the Foreign Office might insist that Egyptian soft fruit is left to rot while Syrian soft fruit is pukka.
I am allowed Duchy of Cornwall luxury leaf tea because I am not on welfare benefits.
I’m not advocating this blocking even when it is feasible. Just because we can do something, as in so many walks of like, it does not mean that we should do something. As reactionary a bastion of the establishment as I am, I still think it’s a bad idea to attempt to police the spending of benefit recipients in this way. It may well pander to our sense of moral rectitude but it would be ineffective at best.
All it means is that benefit recipients will have to trade (inefficiently and at a discount) to get the booze, fags and weed. Given the entrepreneurial nature of the criminal underclass, a likely outcome would be the invention of an intermediate currency for the black economy (e.g., detergent bottles).
[From Welfare dependence]
What this story is about, to me, is not the restriction of welfare recipient’s spending but yet another confirmation of some of my long-held views about the future of retail payments being more about a multiplicity of retailers apps that can provide more functionality in-store and the related drivers for multiple three-party payment schemes. Having half a dozen different retailer cards (that you have to manually load in the case of pre-pay) in your wallet is a pain, but having half a dozen different retailer apps using bank APIs to auto-load as required is not. And better still a retailer app that makes a noise when your welfare arrives and helps you to budget your spending and plan meals and spread the cost of school clothing and .. and.. and for double loyalty points, I’m in.
These are personal opinions and should not be misunderstood as representing the opinions of
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