Historic, archived document Do not assume content reflects current scientific knowledge, policies, or practices. 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