The National Automated Clearing House Association is beginning to declare victory in its campaign for uniform operating rules in electronic benefits transfer systems.

On March 1, Hawaii became the 13th state to go live with a system conforming to the Quest framework that Nacha's EBT Council began hammering together in 1995.

When the clearing house association held its annual conference in Seattle two weeks ago, officials estimated 29 states will be using the Quest rules by yearend. That would be a majority of the 47 jurisdictions-45 states, the District of Columbia, and Puerto Rico-that are expected to have at least some form of benefits transfer system in place by Dec. 31.

William Kilmartin, comptroller of Massachusetts and vice chairman of the EBT Council, said he realistically expects 35 to 40 states to sign on to Quest "in the first pass," and most of the rest should eventually follow.

"Is 35 or 40 O.K.?" Mr. Kilmartin said during a press briefing at Nacha's Seattle conference. "It's clearly better than having 50 individual rules. But 50 out of 50 takes time."

The current 13, up from two a year ago, was seen as cause for congratulations all around. The National ACH Association took a bold and controversial step in September 1995 when it formed the EBT Council.

Few argued with the need for a consistent set of operating rules and standards, especially if the recipients of welfare, food stamps, and other such benefits were to be able to get their entitlements through any electronic payment terminal wherever they might be traveling.

Nacha seemed to come out of the blue with its standardization proposal, saying it was best qualified to manage the process because of its experience administering the direct deposit system and its relationships with constituencies that cut across the banking, private industry, and government sectors.

Although some bankers and others in the payment systems community were skeptical that Nacha could pull it off, the EBT Council began its life with support from the Federal EBT Task Force and a critical endorsement from the National Association of State Auditors, Comptrollers, and Treasurers. The latter pledged to recommend that states actively support the initiative.

By April 1996 the council approved the first version of the Quest rules- named for the logo Nacha acquired to symbolize participation in the EBT network.

"The rules were developed by all the stakeholders, not just the banking industry," said James M. McCarthy, chairman of the EBT Council and executive vice president of Star System Inc., the major automated teller machine network in the West.

The council has 60 members, representing governments, financial institutions, electronic payment networks like Star, retailers, and others.

"This was needed to create uniformity among the states," Mr. McCarthy said. "It is a voluntary, public- and private-sector initiative. It means recipients can redeem food stamps in any qualified location."

"The uniformity is critical for merchants, financial institutions, and other businesses that operate in more than one state," he added.

Mr. McCarthy said he is very high on use of the Quest service mark, though there is no statutory requirement for it. He pointed out that there could be conflicts and confusion if Star or other ATM and point-of-sale logos were also the EBT identifiers. Star cards are usable at liquor stores or casinos, for example, which would be off-limits for food stamps.

Mr. Kilmartin's EBT cards in Massachusetts have both the NYCE and Quest logos on the back. He said NYCE ATM owners in the Northeast stand to realize millions of dollars in interchange revenue as benefit recipients step up their transaction activity.

"We can't force states to use Quest, but I expect most will see it as the simple and intellectually correct thing to do," Mr. Kilmartin said. "Others will convert over time."

He pointed out that Maryland, which began its statewide EBT deployment before there was a Quest, has specified in its new processing proposal that it will convert.

He said EBT is "about one-fifth of the way" toward reaching the full complement of some 14 million households that are mandated to be on electronic delivery systems by 2002.

"It appears we will be a couple of years ahead of that," Mr. Kilmartin said. "This will touch the lives of a lot of people-people who did not have cards. Now they have one, and that is sure to be leading us somewhere."

Financial institutions, for example, may see in that an opportunity to "bank the unbanked."

Mr. Kilmartin suggested that the success of the EBT Council could provide "a model for developing other standards and rules that may be needed as governments opt to use commercial systems for electronic commerce."

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