Unemployment That Doesn't Suck: Part 1 - The Way2Go Card

I have $15 on a debit card that I'll never actually use, someone is making money on that, and it pisses me off

I waited about 2 months after I was laid off last year before I applied for unemployment in Arizona. I’d like to say that was due to laziness, but it was probably pride. Once I got over it and went through the process, I just got mad. I stopped thinking about it, but a bit of a slowdown at the end of a long work project has me being reflective and getting mad all over again.

I was extra-inspired earlier this week when

Kyle Frost

published his own deep-dive into Recreation.gov and many of the issues with that program born out of a private-public partnership that shares many parallels with unemployment administration. So, here’s part 1 of a deep-dive into what’s wrong with the nuts and bolts of unemployment administration in AZ (and elsewhere) and what I think we should do about it.

FR isn’t a policy newsletter, but this is an interesting intersection between tech and policy that I’m excited to dive into.

EPCs 101

The industry vernacular here appears to be Electronic Payment Card (EPC), but really it’s just a debit card connected to an account that you don’t actually own. In AZ, it’s branded as Way2Go and it’s used for all state payments. For some reason, most of the state documentation on the program is classified under child support rather than unemployment.

But, that’s not the only type of payment card governments will issue; opposite EPCs are EBTs (Electronic Benefits Transfer); in AZ, that’s the card type used to administer nutrition assistance, and that’s the same for SNAP as a whole for the federal government.

EPCs and EBTs are very similar, but EPCs are more flexible. EBTs aren’t part of a larger card network, but EPCs are (mine is on MasterCard); that means it’s accepted anywhere that accepts MasterCard (everywhere) while EBT cards are merchant-locked. Given the different purposes of the programs, that makes sense to me; unemployment and child support payments are all-purpose support whereas nutrition assistance is specifically to make sure folks have enough to eat. I’m not saying EBT is perfect, but that’s not where my beef is.

Yes, It’s Better Than Paper Checks

The main selling point by the folks that provide both EPC and EBT management services to governments is, essentially, that they’re better than paper checks. I will not dispute that statement. To me, this isn’t exceptionally-convincing selling material, but there’s nothing to take issue with there either. So I’ll grant them this win: they’ve improved on paper checks:

• One-time physical distribution cost and more timely regular delivery

• No bank account required (~5% of American’s don’t have an active bank account)

• Can be used immediately and directly without any conversion

Those are good feature improvements, and I’d say they’re likely worth the investments made to make the transition.

But Can’t We Do Even Better?

Of course we can! Here’s my hitlist of the biggest issues with the EPC implementation:

• There are still physical distribution costs - once is better than monthly, but even once still carries a hefty postage and processing cost.

• Free ATM access is limited - in AZ, there are 6 ATM networks that you can use Way2Go for free, and none of them are associated with any of the 5 largest banks in the area. They’re mostly the ATMs in grocery and convenience stores, and at least for me they’re much less convenient than the closest bank branches.

• The dead balance issue persists - it’s like gift cards at even more massive scale. My leftover $15 could be transferred out at least (unlike a gift card), but honestly I’m not likely to go through that effort, and I’m not likely to remember to use the card for my next low-dollar purchase. If there’s ~$10 billion in unused gift card value in the US, how much more does that grow when you add in every EPC?

• No digital version - unlike my actual debit card, I can’t add they Way2Go card to my Apple Wallet.

What About Direct Deposit?

If you read the list above and thought “why not just use direct deposit like we do for payroll?” then you’re in good company. I absolutely expected to receive unemployment via direct deposit, but there was no form with the initial paperwork. I figured that would come later once I was approved; instead, a debit card showed up in the mail one day.

Turns out, you can explicitly request direct deposit from the state. But, I didn’t discover that until doing research to write this post; its not a standard form in the application, and it seems like it’s just buried in a page written in 2021. I assume it would work, but how are folks supposed to know to look for it?

Obviously we need a solution for folks without a bank account, but I’d expect that the vast majority of folks with an account would prefer their cash go there directly each week.

A Truly Digital-First Approach

This isn’t a fully fleshed-out idea yet, but my idea here is essentially skip the physical card, go digital only, and have it easily-connectable to the user’s digital financial portfolio (from Venmo to bank accounts). 85% of American households have a smartphone, so we’re not far from the penetration of bank accounts (which is, frankly, insane). I think execution could be easier here if the onus of connecting accounts is on the user rather than the provider, so it may even be more efficient than direct deposit.

People Deserve Options

My main take here is this: people deserve options for how the receive their money. Different form factors will work better for different people, and having a default with other options buried on an old webpage is a terrible way to make the decision.

My hunch is that there are real, but bad, reasons for the suboptimal defaults we have these days, and that’s what I’ll dive into next. I’ll look at this industry, how the deals are structured, and try to tease out the incentive structure that’s actively harming the true user experience with these programs.

Then, finally, I’ll offer some recommendations not just for a new delivery mechanism, but a new system entirely. I hope you’ll follow along.