Prepaid cards are increasingly being used to deliver
government benefits but, asks Jane Cooper, how far can this
distribution mechanism be used to monitor people’s activities?
Privacy campaigners insist the ability to monitor – and control –
transactions infringes on civil liberties.
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Being able to
view the digital trail of spending is just one of the advantages
for government bodies that use prepaid cards to disburse
benefits.
With welfare being paid out on
plastic, governments also have the ability to monitor – and control
– transactions so that they can ensure that taxpayers’ money is
being spent appropriately. Privacy campaigners, however, are
pushing for a public debate on how spending is controlled and what
data is collected.
The issues surrounding such prepaid
programmes threaten to move away from the industry’s talk of
cost-cutting and efficiencies to the more contentious topic of
civil liberties.
The campaigners have a sense of
urgency because they fear that because so much collection and
monitoring of transaction data is already possible, such actions
could be the first steps on a slippery slope to an Orwellian
scenario of a Big Brother state that is all-knowing and is able to
oppress its citizens.
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By GlobalDataWith such fears seeping into the
public consciousness, the bad press that issuers could receive over
its benefits cards threatens to damage the reputation of the
industry and the success of these prepaid programmes.
The parties are fighting to strike
the right balance in the dilemma, between preventing the misuse of
government funds versus the misuse of personal data, and the degree
to which welfare recipients should be subject to scrutiny.
Monitoring and analysing the data
is just one of the advantages of government benefit prepaid
programmes. Government agencies have also introduced the cards
because they can be reloaded, with the option of drip payments
rather than a lump sum.
Also, since many of the low-income
recipients of the benefits often do not have a bank account, the
cheques have to be cashed, which is riskier than a card that can be
reported lost or stolen. And benefits fraud is less likely to occur
because government agencies are now able to analyse transaction
data to spot unusual spending patterns.
Such benefits
programmes are an ideal application of the prepaid model and the
potential business is large for those in the cards industry.
Markets such as the UK were estimating benefits payments totalling
£165bn ($267bn) for 2009-2010 and other countries are also looking
to convert their benefits programmes to plastic.
The types of programmes include
payments for social care, asylum seeker benefits, housing benefits
and allowances for young people leaving care. Citi is one such
issuer to launch a number of prepaid products for these types of
welfare payments.
In March, the UK’s Department for
Work and Pensions (DWP) announced it had chosen Citi for the
contract to disburse welfare payments by card. According to the
government department, welfare payments by cheque had dropped to a
low level, and now only account for around 2% of all payments.
The DWP estimates it now costs the
taxpayer around £30m to process cheque payments, which are also
vulnerable to fraud that costs around £5m a year.
Citi has also won a contract to
supply various benefits payments programmes through local councils
in London, including the London Borough of Havering, where prepaid
cards have been introduced to replace cash and cheques for
benefits.
Such programmes are being used by
governments around the globe, with ABN Amro introducing one as far
back as 2004 and a similar scheme for a prepaid municipal card that
is issued by Poland’s PKO Bank Polski.
Monitoring and
control
The programmes are often cited as a
perfect application of prepaid cards.
While the monitoring and control of
transactions is given as a main selling point of the cards, many
campaigners are concerned this could be the beginning of
governments efforts to extend mass surveillance of its
population.
The justification that public money
should be monitored clashes with the idea that welfare recipients
have the same right to privacy – and choice in spending money – as
everyone else.
Issuers can
enforce certain spending restrictions with the cards. For example,
Italy’s Carta Acquisti social benefits card, which is provided by
Poste Italiane, has certain restrictions. The card can only be used
at certain food retailers and can be used to pay utility bills, but
it cannot be used at ATMs to withdraw cash.
In the US, many welfare payments
have now migrated to Electronic Benefit Transfer (EBT). Controversy
has broken out about the degree to which the transactions should be
limited.
In February, the Boston
Herald reported that in 2010 more than $44,000 was spent by
Massachusetts’s welfare card recipients in McDonald’s. Even more
sensational were news reports of benefits cards being used to
withdraw cash at ATMs in casinos and strip clubs, which prompted
calls for greater restrictions to be put on the spending on the
cards.
It is not just about preventing
playboy lifestyles at the taxpayers’ expense but an anti-obesity
drive has given rise to calls for buying soft drinks to be banned
on the cards. Senator Mike Carrell has introduced a bill, which had
its first reading in January 2011, to the Senate to limit the
spending on EBT cards.
But such calls have been met with
an angry response by those who argue it is an effort to control the
poor and subject the majority of innocent people to unnecessary
scrutiny for the sake of a small minority who are abusing the
system.
In the case of food benefits, for
which there are an estimated 38m recipients, the traditional food
stamps have now been replaced with the Supplemental Nutrition
Assistance Program (SNAP).
A spokesman for the Food and
Nutrition Service, which oversees the programme, tells Cards
International that the EBT cards has given authorities a
greater ability to monitor the misuse of the benefits as well as
the ability to identify retailer fraud.
“Trafficking, the illegal sale of
SNAP food benefits for cash, has decreased significantly over the
past 15 years, which is largely attributed to the implementation of
EBT,” the spokesman said.
Ensuring food benefits are spent on
food was also the intention of the Azure card, introduced to
disburse allowances for asylum seekers in the UK. The card was
designed to limit spending to certain supermarkets and
chemists.
Guy Herbert, general secretary of
NO2ID, a UK organisation that campaigns against the ‘database
state’, argues this is an example of practices last seen in
Victorian times. Others argue that the limiting of spending is
another way of stigmatising the poor and assumes that the
cardholders are incapable of spending their money wisely.
Herbert agrees it is valid to
restrict certain purchases to ensure funds are spent on what they
were intended, but “there is a distinction between restricting a
payment to a particular use and monitoring how a card is used”.
Whose money is
it?
The danger is, because technology
allows this monitoring and it is already possible to collect so
much data, this information may be used in more sinister ways in
the future.
However, each country has its own
data protection and privacy laws that aim to prevent transaction
data from being misused. For example, the US Food and Nutrition Act
of 2008 outlines how state agencies can collect sensitive
information and the safeguards that must be employed to protect
individuals’ privacy with the SNAP programme.
Ian Makgill, managing director of
Ticon, which has worked on a number of benefits programmes, argues
a distinction needs to be made as to whether the funds belong to
the state or the individual.
In the case of general allowances,
such as a state pension, the individual is free to spend those
funds how they please. But if the funds are for a particular
purpose, the government has the right to enforce that.
“Where it is the client’s funds, no
institution should be viewing the transactions,” says Makgill.
“Card issuers are clear about the division about what are state
funds and what are client funds.
“Where it is client funds they are
not providing that information and government is not requesting it.
Where the government owns the funds, the client is aware in advance
that their spending will be monitored.
“If a council becomes aware that
clients are spending housing benefit money on something else, I
would want to be certain the council was doing everything it could
to prevent that,” Makgill adds.
“There is the opportunity for a Big
Brother to evolve, but when you understand who owns the funds then
that perception changes.”
Makgill compares it to the example
of an employee spending on a company’s expense account, where they
would expect their employer to check how the card has been
used.
The value of
data
Herbert argues, because it is
ultimately the taxpayers’ money that is funding the benefits, there
needs to be a public debate about how the spending is limited, as
well as what data it is necessary for governments to collect from
such cards.
He argues government agencies
collect as much data as they can because it is technically
possible.
“There is a terrible tendency to
collect information because it can be done and is seen as useful,”
Herbert says, but adds this trend could be dangerous in terms of
data protection and privacy.
Kevin Haggerty, a professor of
sociology and criminology at the University of Alberta, and an
expert on surveillance, points to the potential uses of such
data.
The data could be used for risk
profiling or to run predictive profiles of what people are buying
and how that data could be used to predict other types of
behaviour. It is possible, Haggerty says, that governments could
sell this data to a third party. He also points to the security
risks of there being so much data on people and the potential
breaches and likelihood of identity theft.
Haggerty adds this issue is part of
a long history and general trend of subjecting the poor to greater
scrutiny and regulation, compared to other more well-off segments
of society.
“These cards provide a new avenue
for that heightened scrutiny and monitor of the poor in a different
way to other groups,” Haggerty says.
Herbert of NO2ID argues: “If
somebody is in a position of losing a certain amount of autonomy,
as a matter of principle they should not lose any more than is
absolutely necessary.
“It is something that has to be
discussed and addressed in a public debate.
“Everyone is entitled to privacy
and all the technology deployed should have the maximum privacy and
minimise the transfer of information – only the information
necessary to carry out the transaction at issue.”
As campaigners are pushing for the
debate to move into the public sphere, card issuers involved in
such programmes could find themselves at the centre of a public
relations storm.
For now, it is only the fear of
what could happen with the potential of such programmes that is at
issue, but still, the industry could do more to reassure its end
users that it takes privacy issues seriously.
In addressing such issues, the industry has the challenge of
striking the perfect balance between ensuring government funds are
not misused, but an individual’s personal transaction data is also
not abused.
