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EEvleaclutraotnioicn BoefntehfeitsOTffr-aLninsefer
Demonstration
United States
Department of
Agriculture
_ The Impacts of the
_ Of[line EBT Demonstration
_.o,_,._.,o=n_._the Food Stamp Program
Volume II- Impacts on
Recipients, Retailers, and
Financial Institutions
The Impacts of the Off-line EBT Demonstration
on the Food Stamp Program
Volume II - Impacts on Recipients,
Retailers, and Financial Institutions
April 1994
Authors:
Pamela J. Koger-Jesup
W. Burleigh Seaver
Edith M. Smith
Submitted by: Submitted to:
Phoenix Planning & Evaluation, Ltd. U.S. Department of Agriculture
3204 Tower Oaks Boulevard Food and Nutrition Service
RockviUe, MD 20852 Office of Analysis and Evaluation
3101 Park Center Drive
Alexandria, VA 22302
Project Director: Gary L. Glickman Project Officer: Margaret Andrews
This study was conducted under Contract Number 53-3198-0-013 with the Food and Nutrition Service, U.S. Deparmaent
of Agriculture, under the authority of the Food Stamp Act of 1977, asamended. Points of view or opinions stated inthis
report do not necessarily represent the official position of the Food andNutrition Service.
THE IMPACTS OF THE OFF-LINE EBT DEMONSTRATION
ON THE FOOD STAMP PROGRAM
The evaluation of the off-line electronic benefits transfer
demonstration ispresented inthree volumes and anExecutive Summary.
The Executive Summary presents a concise review of the
evaluation and the major findings.
Volume I provides an analysis of the economic impact of off-
line EBT on food stamp operations. It also looks at the financial impact
of expanding the demonstration.
Volume II describes the costs and other impacts of the off-line
EBT system on retailers, recipients, and financial institutions. This
research includes both qualitative and quantitative impacts and provides
a comparative assessment of off-line EBT versus the paper coupon
system.
Volume HI describes the off-line EBT system design,
development and implementation process; system operations; and,
lessons learned. The purpose of this volume is to provide guidance for
other EBT development efforts.
TABLE OF CONTENTS
Page
Chapter 1: INTRODUCTION .......................................... 1
Research Design ............................................... 2
Evaluation Highlights - Volume H .................................. 3
Organizationof VolumeII ......................................... 8
Chapter 2: IMPACT OF THE OFF-LINE EBT SYSTEM ON
PARTICIPATING RETAILERS ............................... 10
Introduction ................................................ 10
Retailer Perceptions of The Off-line EBT System ....................... 15
Check-out Productivity Costs .................................... 29
RetailerProductivityCosts ...................................... 37
Chapter 3: IMPACT OF THE OFF-LINE EBT SYSTEM ON
FOOD STAMP RECIPIENTS ................................. 68
Introduction ................................................ 69
Design of the Recipient Impact Evaluation ........................... 69
Smnmary of Recipient Costs to Participate ........................... 72
Components of Recipient Costs ................................... 77
Chapter 4: IMPACT OF THE OFF-LINE EBT SYSTEM ON
FINANCIALINSTITUTIONS ............................... 130
Introduction ................................................ 130
Retailers' Financial Institutions ................................... 133
Concentrator Bank ............................................ 146
The Federal Reserve Bank ...................................... 151
Conclusions ................................................ 158
TABLE OF CONTENTS
(continued)
Pa_e
APPENDICES
Appendix A Retailers Participating in the Evaluation ........................ A-1
Appendix B Checkout Observations Methodology and Analysis ................. B-1
AppendixC Handling Cost Outliers ................................... C-1
Appendix D Selection of Control Site .................................. D-1
Appendix E Recipient Sample Disposition and
Respondent Demographic Characteristics ....................... E-1
Appendix F Analysis of Variance Summary Tables
Recipiem Cost to Participate ................................ F-1
Appendix G Time Series Analysis of FSP Participation ...................... G-1
LIST OF EXBrlRITS
page
Exhibit 2-1 Retailer Perceptions - Benefits of Off-line
EBTSystem........................................ 18
Exhibit 2-2 Retailer Perceptions - Drawbacks of
Off-line EBT System ................................... 20
Exhibit 2-3 Retailer Perceptions - Off-line EBT
Effects on Store Operations ............................... 22
Exhibit 2-4 Retailer Perceptions - Off-line EBT
Effects on Store Operations
(Comparison With On-line Systems) ......................... 24
Exhibit 2-5 Ease of Off-line EBT System Usage ......................... 26
Exhibit 2-6 Retailer Intent to Continue with
Off-lineEBT......................................... 29
Exhibit 2-7 Effects of Payment Mode on Transaction Time ................. 32
Exhibit 2-8 Effects of Payment Mode on Transaction Time ................. 33
Exhibit 2-9 Effects of Payment Mode on Checkout Costs ................... 36
Exhibit 2-10 Retailer Food Stamp Handling and
Reconciliation Costs
(ByTypeof Store)..................................... 42
Exhibit 2-11 Retailer Food Stamp Handling and
Reconciliation Costs
(Off-line vs. On-lineSystems) ............................. 44
Exhibit 2-12 Retailer Food Stamp Training Costs ......................... 48
Exhibit 2-13 Retailer Reshelving Costs
(ByTypeofStore)..................................... 50
Exhibit 2-14 Retailer Reshelving Costs
(Off-linevs. On-lineSystems) ............................. 52
Exhibit 2-15 Float Costs
(ByTypeof Store)..................................... 55
LIST OF EXHIBITS
(Continued)
page
Exhibit 2-16 Float Costs
(Off-line vs. On-line Systems) ............................. 56
Exhibit 2-17 Retailer Accounting Error Losses -
Coupon and Off-line EBT Systems
(By Type of Store) ..................................... 59
Exhibit 2-18 Retailer Accotmting Error Losses -
Coupon and EBT Systems
(Off-linevs. On-line Systems) ............................. 60
Exhibit 2-19 Retailer EBT Equipment Space Costs ........................ 63
Exhibit 2-20 Summary of Retailer Participation Costs
Per $I,000 of Benefits Redeemed -
(By Type of Store) ..................................... 64
Exhibit 2-21 Summary of Retailer Participation Costs
Per $1,000 of Benefits Redeemed -
(Off-line vs. On-line Systems) ............................ 67
Exhibit 3-1 Monthly Recipient Costs of Obtaining
Food Stamp Benefits - Summary of Costs ..................... 76
Exhibit 3-2 Monthly Recipient Costs of Obtaining
Food Stamp Benefits - Baseline Direct Costs ................... 78
Exhibit 3-3 Monthly Recipient Costs of Obtaining
Food Stamp Benefits - Follow-up Direct Costs .................. 79
Exhibit 3-4 Monthly Recipient Costs of Obtaining
Food Stamp Benefits - Baseline Time Costs .................... 81
Exhibit 3-5 Monthly Recipient Costs of Obtammg
Food Stamp Benefits - Follow-up Time Costs .................. 82
Exhibit 3-6 Monthly Recipient Costs of Obtaining
Food Stamp Benefits - Opportunity Costs ..................... 84
LIST OF EXI_rRITS
(Continued)
P_
Exhibit 3-7 Recipient Issuance Problems - Received
Less Than Full Allotment ................................ 85
Exhibit 3-8 Recipient Issuance Problems - Benefits
NotAvailableon Time .................................. 86
Exhibit 3-9 Problems After Issuance - Food
Stamp Benefits Stolen .............. .................... 87
Exhibit 3-10 Problems After Issuance - Food
Stamp Benefits Lost ' 88
Exhibit 3-11 Problems After Ismmnce - Card/Coupons Damaged ............... 89
Exhibit 3-12 Recipient Issuance Problems - Received
More than Full Allotment ................................ 91
Exhibit 3-13 Recipiem Issuance Problems - Received
Less than Full Allotment ................................. 92
Exhibit 3-14 Problems After Issuance - Percent
ReportingProblem..................................... 95
Exhibit 3-15 Methods of Keeping Track of EBT
Account Balance ...................................... 97
Exhibit 3-16 Problems After Issuance - Had to Return
Grocery Items While at Check-out Counter
Because Not Enough Benefits/Food Stamp Coupons .............. 99
Exhibit 3-17 Problems After Issuance - Overcharged
When Grocery Shopping ................................ I01
Exhibit 3-18 Problems Using EBT Card .............................. 103
Exhibit 3-19 Experiences in Partially Equipped Stores ..................... 104
Exhibit 3-20 Biggest Problems with Food Stamp Coupons/
PayEase Card ....................................... 106
LIST OF EXHIBITS
(Continued)
Page
Exhibit 3-21 Change in Biggest Problem Mentioned ...................... 107
Exhibit 3-22 Recipient Perceptions Regarding Card/
Coupon Security ..................................... 108
Exhibit 3-23 Recipient Perceptions Regarding Benefit
Diversionand Fraud .................................... 110
Exhibit 3-24 Recipient Perceptions Regarding Treatment
By StoreEmployees................................... 112
Exhibit 3-25 Recipients' Opinions About EBT and Coupons ................. 114
Exhibit 3-26 Perceptions About EBT Versus Coupons ..................... 116
Exhibit 3-27 Reasons Recipients Like EBT Card Better Than
FoodStampCoupons .................................. 118
Exhibit 3-28 Reasons Recipients Like Food Stamp Coupons Better
ThanPayEaseCard ................................... 120
Exhibit 3-29 SuggestedChanges.................................... 121
Exhibit 3-30 Share of Grocery Shopping By Primary
PayEase/Food Stamp Coupon Shopper ...................... 123
Exhibit 3-31 Frequency of Shopping Trips When PayEase
Card/Food Stamp Coupons Used and Type of
StoreWhere Spend Most Benefits ......................... 124
Exkibit 3-32 Recipient Needed to Find New Place to Shop Because
Store Did Not Accept Payment by EBT ..................... 125
Exhibit 3-33 Total FSP Participation................................. 127
Exhibit 3-34 Impact of Off-line EBT System on Level and
Trend in Participation of Households in the
Food Stamp Program in Montgomery County, Ohio ............. 129
