July | August 2017


 

 

 

 

 

 

CSG Examines State Use of Electronic Payments

By Lisa McKinney, CSG communications associate
Ten years ago, The Council of State Governments published a report on the acceptance and use of electronic payments by states, and it remains one of the most comprehensive reports on the topic. This year, CSG is updating and expanding the report to evaluate electronic payments both to and from states.
“The original report had a lot of great information and we thought it was really important to keep it up to date so that states have the data needed to make decisions about how they handle e-payments,” said Jennifer Burnett, CSG’s director of fiscal and economic development policy. “A lot has changed over the last 10 years.”
Description: C:\Users\jburnett\AppData\Local\Microsoft\Windows\INetCache\Content.Word\noncash-payment_23580675_b9e42c14444a46f9e7f147b23e1024b2515b2e2e.pngWhen the last report was written, checks were still the predominant method of (noncash) payment in the U.S. But since then, debit and credit card use has become ubiquitous, which has significant fiscal, policy and programmatic implications for state leaders, Burnett said.
According to a study by the Federal Reserve, consumers wrote 19.3 checks per household per month in 2000, compared to 19 debit and credit card payments. By 2015, consumers only wrote 7.1 checks per household per month but debit and credit card payments grew significantly to 64.3 uses per month.
To help guide the new research, CSG developed an advisory group, which met for the first time in June at CSG Headquarters in Lexington, Kentucky.
“We’ve pulled together a great group of public and private sector members that will provide expertise and set the research goals and parameters for this report,” said Burnett.
One of those advisory members is Kentucky Comptroller Ed Ross, who said electronic commerce offers a wide range of financial and logistical benefits to state governments as well as to vendors and taxpayers.  
“It will be important for states to stay abreast of all electronic methods of payment, including credit cards, debit cards, and debit and credit ACH transactions,” he said. “This project will enumerate the benefits of electronic commerce over paper checks, which are far more expensive to process.”
Although the last report by CSG only included information on states’ acceptance of electronic payments, the new research will also cover how states disburse payments to residents—particularly through the use of prepaid cards. 
Advisory group member Tom Pennington, director of electronic payment systems for the Oklahoma Department of Human Services, said his state started using prepaid cards to provide residents with an efficient and easy-to-use system for receiving benefits, while also reducing opportunities for fraud and waste of taxpayers’ dollars.
“By using a single prepaid debit card for all of our different programs, it has allowed us to reduce the cost of printing, mailing and tracking paper checks, as well as the investigating of possible fraud, and has given us a way to get the funds directly to the citizen who may not have a bank account,” said Pennington.
To increase the use of electronic payments by agencies, Oklahoma took a legislative approach.
“Our Legislature passed an act requiring state agencies to use electronic payment disbursements as much as possible,” said Pennington. “This also allows our citizens to contact one unit in our agency to discuss problems with their payments or cards and no matter which program, we have a clearing house unit to help with problems.”
CSG’s Burnett said she hopes the new report will provide guidance and much needed comparative data to state policymakers.
“Electronic payments are just going to become more prevalent and understanding how your neighbor states are tackling these challenges just makes sense,” she said.
The report will be released in December at the 2017 CSG National Conference in Las Vegas, Nevada.