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‘The computer says no’: automatic product blocking for the Cashless Debit Card


The Department of Social Services is looking for software that can automatically stop income support recipients from using the Cashless Debit Card to buy restricted goods such as alcohol.

While the Government’s cashless welfare system can automatically stop income support recipients using the cashless debit card at businesses like bottle shops and the TAB, it can’t automatically stop them from buying restricted goods at a shop that accepts the card. Instead, staff need to manually sight the card and refuse the sale. The Department plans to change this.

From income management to the cashless debit card

The Government created the cashless debit card in response to the recommendations of the Forrest Review of Indigenous training and employment. The review argued that the BasicsCard technology used for income management in the Northern Territory and other trial sites was too expensive to roll out on a broad scale. The review proposed a new approach that relied on the existing MasterCard or Visa system.

How it works

The cashless debit card is like an ordinary Visa debit card except that the cardholder cannot use it to withdraw cash or shop at businesses such as bottle shops. The system relies on merchant category codes (MCCs) to block merchants that sell restricted goods such as alcohol. MCCs are four digit codes that classify merchants by the kind of goods or services they provide.

There are a number of features that add complexity to the system. For example, the system does not block all forms of gambling. While betting shops and clubs with poker machines are automatically blocked, cardholders can buy scratchies and lotto tickets from places like newsagents. Cardholders can also shop online and make fund transfers to pay bills, but there are restrictions.

Limitations

One of the biggest problems with the system is dealing with retailers who sell a mix of goods, some restricted and some not. As the Department explains:

For mixed merchants, for example a bar and bistro, Indue [the card provider] engages with these merchants to enter into a contract to refuse the sale of restricted goods to anyone using the [cashless debit card]. In practice, this generally requires the register operator to manually sight the card and refuse the sale of restricted goods.

Both of these options present opportunities for non-compliance and workarounds.

Including mixed merchants has added administrative complexity and is one of the reasons it would be difficult to roll the cashless debit card out nationally. For example, in the Ceduna trial site the Government wanted to allow cardholders to purchase meals and other goods from the Foreshore Hotel Motel while relying on staff to refuse purchases of restricted goods. Because the Foreshore is in a blocked merchant category, the card provider has to manually unblock each point of sale terminal. On top of this, the Department has to issue a statutory determination to allow the Foreshore’s staff to decline transactions.

In some states such as Victoria, supermarkets can be licenced to sell alcohol. Blocking these supermarkets could leave cashless debit card users with few affordable places to shop, particularly in small towns.

Next steps

The Department is looking for a provider that can develop software to ‘automatically prevent the sale of restricted goods at the Point of Sale (POS)’ at mixed merchants. This may involve creating and maintaining a list of restricted goods and identifying them by the Global Trade Item Number (GTIN) encoded in the item’s barcode.

This is an ambitious project. In the United States, Massachusetts established a Cashless System Commission to look at ways to prevent misuse of income support payments. A report prepared for the Commission by Ripples looked at the feasibility of creating a system that could automatically block purchases at the product level but recommended against it. According to the report this option ‘would require an extreme financial commitment and yet not achieve total control over cash assistance misuse.’

The Forrest Review envisaged that new technology could enable product level control over purchases:

For products for purchase, there could be the ability to use the manufacturer’s barcode to hold the product data in the app, in a process not dissimilar to the current shopping apps of the big retailers. Products could be scanned in the selection process or confirmed at checkout using near field communications (NFC) payments capability. This could enable cross-referencing and the exclusion of particular products which do not add to the health of communities.

If this became possible a future government could attempt to block income support recipients’ purchases of a wider range of goods and services than they do now. For example, a government concerned about the impact of obesity and diabetes could decide to block soft drinks.

This is an issue in the United States where the Federal Government has come under pressure to block purchases sweetened beverages in the Supplemental Nutrition Assistance Program (SNAP). SNAP, formerly known as food stamps, enables recipients to buy food using an electronic benefits transfer card. Groups such as the American Heart Association and the American Enterprise Institute are pushing the government to restrict sales of sweetened beverages within SNAP. The issue has been hotly debated.

Payments technology is a rapidly developing field and it is not clear what will be feasible in the future.

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