Last week, millions of people had their cards declined at grocery stores across the U.S., thanks to a computer glitch at JPMorgan Chase & Co. The twist? Those cards weren't debit cards or credit cards, they were government benefit cards.
These days, most government benefits from programs like Temporary Assistance for Needy Families, commonly referred to as welfare, or the Supplemental Nutritional Assistance Program, commonly known as food stamps, are loaded on to electronic benefit transfer, or EBT, cards rather than distributed as paper checks or coupons.
If you've ever seen someone use an EBT card or have used one yourself, you know that it looks almost identical to a debit card. Like debit cards, they're swiped at terminals. Users have to enter a PIN. Then, the transaction is processed electronically.
In a lot of states, that last part is handled by Chase, which is contracted by 24 state governments through a subsidiary called JPMorgan Electronic Financial Services to administer the EBT cards.
Unfortunately, a computer glitch at Chase on Friday morning spelled trouble for EBT card users in 10 states, including Florida, New York, Pennsylvania, Georgia, South Carolina, Indiana, Kentucky, Connecticut, West Virginia and Delaware. All told, that meant no access to benefits for about 7 million SNAP beneficiaries in those states.
Mike Feusco, a Chase spokesman, says technical teams began working on the problem as soon as they noticed something was amiss.
"We have technical teams monitoring our programs around the clock," Feusco says. "We caught it as soon as it occurred, and we worked very quickly to resolve it.
Still, it took six hours to resolve the problem, he says.
Feusco was quick to emphasize that the outage was isolated to JPMorgan's EBT systems.
"It did not affect debit, credit or any other cardholders," Feusco said.
Nevertheless, I think it's fair to say the incident underscores the fragility of today's high-tech systems of payment. Cash and checks may be clunky and inconvenient, but their ability to conduct transactions isn't contingent on the smooth functioning of massive networks run by far-off banks of servers.
I'm a big fan of electronic payments, but imagine if something similar to this incident happened to a major bank's payments systems that went down at a particularly bad time, say Black Friday, or suffered an extended outage, rendering debit cards and credit cards useless. Not good.
What do you think? Are today's payment systems too fragile?
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