A new generation of payment technologies could help transform the federal government's image while simultaneously protecting sensitive consumer data.
The president’s rhetoric about the federal government embracing innovation and new technologies is taking hold.
At a cybersecurity summit earlier this month, Apple announced that its smartphone payment system, Apple Pay, would soon be accepted at national parks, and for debit cards issued for Social Security and veterans' benefits. And on Feb. 18, the U.S. Department of the Treasury’s Bureau of the Fiscal Service (Fiscal Service) announced that Pay.gov, the government’s collections portal, now accepts PayPal and Dwolla as payment options.
The federal government’s adoption of modern payment systems marks a milestone both in the technology, and in the evolution of federal government. Traditionally a laggard, the federal government’s adoption of these new payment technologies solidifies those technologies as mainstays, just as companies like Amazon and Target accepting Bitcoin legitimized digital currency.
For the federal government, the adoption of Apple Pay, PayPal and Dwolla indicates that the years of promises from the Obama administration that the federal government would be as forward-thinking and innovative as the American businesses it presides over is at least partially coming true. Hires like that of ex-Googler Megan Smith as the nation's chief technology officer, and the creation of startup-like agencies like 18F, are having a cumulative effect, even if it’s not enough to prevent the government’s billion-dollar health-care portal from continuing to flail.
The White House highlighted on Feb. 13 an executive order signed by Obama that is intended to advance secure payment methods for consumers. The announcement included security updates to traditional payment methods, like Visa and MasterCard, as well as the integration of Apple Pay into GSA SmartPay cards. New payment forms like Apple Pay are bridging access not just to people’s bank accounts, but also to segments of federal government payouts that amount to billions of dollars each month.
The Fiscal Service’s adoption of Dwolla and PayPal indicates that the federal government wants to do things differently, said Jordan Lampe, director of communications at Dwolla.
“When you look at security features like authentication and tokenization, these are usually services that you would buy on top of your existing payment system, whereas Dwolla is really able to embed authentication at the network level and make it a part of our core system,” Lampe said. “The idea of being able to pay the federal government without the federal government receiving any sort of sensitive financial information is not only a reduction of liability on their end, but they also knew it would [serve] taxpayers at greater ease.”
The landscape is changing, Lampe said, and that’s reflected in payment services. Soon, Dwolla will partner with BBVA Compass with the intent of reducing payment and money transfer wait times from the usual 24- to 48-hours, to a transfer that happens nearly instantly.
The state of Iowa was one of Dwolla’s first government clients. The adoption of Dwolla by both the federal government and Iowa, “which is about as risk-adverse as you can get,” can be seen as a sign that these technologies will only grow larger, Lampe said.
“So when you’re looking at the cost that comes with trying to process a paper check, usually depending on how good you are, you can get it down to like $2," Lampe said, “But on average, it’s like seven bucks, so if we can get that cost down to $0.25 through a payment mechanism that doesn’t require you to protect financial information – why wouldn’t you?”
Requests for interview with the Social Security Administration and the National Park Service were not returned by press time.