Where there’s a will there’s a way to beat cashless cards

Some cashless debit card recipients have found a way to buy alcohol and tobacco.

A cashless welfare card which is being used by welfare recipients in Wyndham, WA. Picture: Aaron Francis

Supermarket giants Coles, Woolworths and Aldi all contributed to a report to government that ­acknowledges weaknesses in cashless debit card trials including that recipients have found ways to buy alcohol and other prohibited goods including tobacco.

The charitable foundation of iron ore billionaire Andrew Forrest and his wife Nicola, who first recommended a cashless debit card in the 2014 Forrest Review to the Abbott government, urged the government to subsidise major retailers to roll out stocktake technology that can identify and ban the sale of gift cards that are effectively cash tender. The government is currently engaged in a tender process to introduce blocking to select mixed merchants.

The Minderoo Foundation sent its report to Human Resources Minister Alan Tudge. Among its recommendations is an “opt in” option for people who are not on welfare but want to be prevented from buying alcohol, cigarettes or gambling.

The report, based on talks with the Commonwealth Bank and major retailers, acknowledges loopholes emerged during trials. Some recipients circumvent ­restrictions with gift cards.

“Evidence suggests some recipients are determined to find ways to avoid restrictions on cash and prohibited goods,” the Minderoo Foundation report states.

“It is unlikely a fully ‘waterproof’ solution can be built. However, an approach that deals with most circumvention behaviours and places additional hurdles in obtaining cash or prohibited goods will better support policy outcomes, even if a smaller number of individuals are able to find ways around them.”

The cashless debit card is being trialled among working-age welfare recipients in the South Australian town of Ceduna, in the East Kimberley region of Western Australia and in the Goldfields region 600km east of Perth.

Despite the name, people in the trial still receive 20 per cent of their welfare payments as cash into a regular bank account. The rest goes onto a cashless debit card that can be used wherever EFTPOS is available. It cannot be used at pubs, bottle shops or gambling venues.

The report recommends retailers implement a system that ­allows the cashless welfare card recipients to shop at their stores but prevents them from buying particular items.

“There are two types of gift cards that have been identified during the trial period as giving CDC holders the ability to circumvent restrictions,” the report states.

“These are: (1) ‘closed loop’ gift cards that can be purchased at an unrestricted merchant (e.g. a Woolworths Group gift card purchased in a supermarket) and then redeemed at a restricted merchant (e.g. Dan Murphy’s); and (2) ‘open loop’ gift cards which can be purchased pre-loaded with an existing face value.

“Given that these gift cards ­effectively operate as a cash-like tender, it is not feasible to regulate their use and we believe they should remain restricted.”