For some food stamp recipients, 2018 could shape up to be a particularly aggravating year, including for one of the only startups trying to find ways to innovate on the ways that food stamps are delivered and managed.
It’s not something that’s talked about much in tech circles, but perhaps it should be, given that 42 million Americans rely on the more than 50-year-old, anti-hunger program behind the stamps — called the Supplemental Nutrition Assistance Program, or SNAP — for basic food assistance.
What’s the problem? It’s twofold essentially. First, let’s take a look at the farm bill, which includes the SNAP program. The farm bill, which got its start in 1933 as part of FDR’s New Deal legislation, expires and is updated and passed anew by Congress every five years, after which the sitting U.S. president signs it into law. The last bill was signed in February of 2014, so Congress is working on the next version now. But things aren’t looking very promising for the program’s recipients. Already, the first draft of the House Republicans’ farm bill, which has already passed through one committee, looks to cut $20 billion from the program over the next 10 years, potentially cutting off two million people in the process.
The cuts will be debated on the House floor beginning early next month, meaning it’s far from clear what happens from here. While Republicans argue they want to promote self-sufficiency (the cuts are expected to come via tightened work requirements), poverty experts see the proposal as chipping away at the already shrinking safety net for America’s most vulnerable. As an article about the bill in Vox notes, half of the 42 million people who are living below the poverty line and relying on SNAP for food assistance are children.
By now you might be wondering what startups have to do with any of this. Stick with us.
Propel, a four-year-old, Brooklyn-based company, makes software for low-income individuals. Its founder, Jimmy Chen, is a former Facebook manager who knows about need; he receive a full scholarship to Stanford based on it. (Chen’s family came to the U.S. from China was he was four.)
Propel is a for-profit enterprise and in fact has raised $5.2 million in outside funding, including from Andreessen Horowitz, the Omidyar Network, and the Center for Financial Services Innovation. It makes money through marketing. For example, though its app primarily helps food stamp recipients check their balances (something they’ve historically had to keep track of themselves or by calling an 800 number), Propel’s features also include coupons and notices about job opportunities, and it receives referrals fees from both food companies and employers for these services.
Still, the 11-person outfit remains rare in its focus on improving a public sector service, which is perhaps why more than 1 million people — or roughly 5 percent of SNAP participants — now actively use its technology. Indeed, the company’s app, which also enables users to create shopping lists (which helps with their budgeting), has grown its user base fourfold over the last eight months alone, largely via families telling other families.
Alas, Propel is newly in the crosshairs of a much bigger company that worries Propel is encroaching on its territory. Big government contractor Conduent — which runs the food stamp networks in roughly of all U.S. states — and which manages the database that Propel’s app relies on to help people check their accounts, keeps finding ways to cut off Propel’s access. It’s hamstringing Propel’s users in the process, some recently told the New York Times. (One young mother of two sons said she lost access to the time-saving app for a month.)
Conduent says it’s just protecting itself. In emailed replies to questions from the Times, Conduent said that Propel’s smartphone was launched “without the knowledge, input or consent from Conduent.” It further accused Propel of creating a “capacity ambush,” owing to its data requests. It said its measures were aimed to preventing the “unauthorized access to data — from Propel or any other unauthorized user.”
Chen calls it a misunderstanding. “We saw an opportunity for [the food stamp program] to be part of a modern financial product, to create digital tools that can reduce the stigma of poverty that people were experiencing at the cash register,” including by “creating a plastic card that they just swipe at the register” — like the rest of us.
Propel has taken a “fairly conservative approach to data” he adds. Because Propel is dealing with highly sensitive information, it doesn’t run data in the background of anyone’s phone, retrieving information only when someone opens the app, which he says users do seven times a month, on average.
Most important, says Chen, Propel isn’t trying to replace Conduent or any of a small number of other electronic benefit transfer (EBT) processors that make money via contracts with states. “We’re a direct-to-consumer software play that makes no money from the government and is not looking to [secure] government contracts. Instead of trying to displace them, we’re trying to work with them, and we think we can do it in a way that’s productive for all parties.”
Which takes us back to that farm bill.
If Conduent can’t be persuaded to see Propel’s side of the story, the startup — and others trying to help low-income Americans — may have no recourse, not unless Congress helps them. In fact, part of why the farm bill is reauthorized on a regular basis owes to changes in modern tech.
While lawmakers fight to see how much of its budget they can cut, they might take into consideration stories like Propel’s, too. Maybe they think a government contractor should be able to stamp out a company like Propel. We hope they do not. If they want to see more startups innovate on behalf of low-income Americans, they need to protect the companies doing the innovating.
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