Startup’s obstacle in fight against poverty
Four years ago, Jimmy Chen left a lucrative perch as a product manager at Facebook to found Propel, what he calls an “anti-poverty software company.”
In 2016, the Brooklyn startup released a smartphone app that lets food stamp recipients easily look up how much money was left in their accounts, rather than call an 800 number or keep paper receipts. Today, 1 million food stamp participants use Propel’s app, and the startup has added features like links to food coupons, healthy recipes, budgeting tools and job opportunities.
But in the last few months, the Propel app has been hobbled or become unavailable in many states, sometimes for weeks. Behind the slowdown is a big government contractor, Conduent, which runs the food stamp networks in 25 states, including California, New York and Pennsylvania. In those states, where 60 percent of Propel’s users live, Conduent maintains the database that Propel’s app uses to let people check their accounts.
The Propel-Conduent conflict offers a textbook case of a digital newcomer running into resistance from the old order. The twist is that the newcomer said it did not want to destroy the incumbent but instead build atop it to do good for underserved populations, as well as build a business for itself.
The animating idea behind Propel, Chen said, was to “apply the Silicon Valley playbook to poverty in some way.” He added that “we have to build on top of the old world to be successful.”
Propel has had no problems with the other major government contractor that manages state food stamp networks, FIS, Chen said. Nor did Propel have trouble with the Conduent system until recently. Propel has complained to Conduent managers repeatedly, but, Chen said, “They’ve never offered us a direct explanation as to why
now.”
In written replies to questions, Conduent, which was spun out from Xerox in January 2017, portrayed Propel less as an innovator than as a freeloader. Propel’s smartphone app, Conduent said, was introduced “without the knowledge, input or consent from Conduent.” It accused Propel of overloading its networks with data requests, causing “a capacity ambush.”
Conduent took actions to block the app, and described them as prudent “steps to prevent unauthorized access to data — from Propel or any other unauthorized user.”
The fight over the app is now affecting people like Brianna LaBelle, 25, of Augusta, Maine, who has two young sons. She has used Propel’s app to create shopping lists, track food purchases and budget. “I love it,” she said. “It’s very handy.”
But in February, when LaBelle tried to check her food stamps balance, she got a message that access to her information was “currently unavailable to the residents of Maine.” That interruption, she said, lasted for nearly a month, in which she also lost the time-saving and meal-planning convenience of the app.
Propel, Chen insisted, has tried to explain its business to state governments and to food stamp contractors. The Propel app is a digital “skin” that works on top of the websites of food stamp contractors, like Conduent. A user taps the app, which is known as FreshEBT, to look up the amount left in the account. On average, users check their balances seven times a month.
Conduent, in another twist, has begun competing with the startup. The business services outsourcer, which has $6 billion in yearly revenue, introduced its own smartphone app last year. Conduent’s entry, ConnectEBT, has significantly fewer reviews and lower ratings on the Google and Apple app stores than Propel’s FreshEBT.
Conduent’s app is available in Utah, South Carolina and Oklahoma, and offers only basic information on account balances and purchases. But the company said it was beginning a broader rollout this year, and would provide “more features and functions” as it gets states’ approval as a regulated contractor, unlike Propel.
Propel’s predicament is magnified because the food-stamp system’s technology, like many government tech services, is outsourced to a relatively small number of companies.
“It’s an oligopoly game, so there’s often not much choice, competition or innovation,” said Josh Miller, who oversaw the development of digital products in the Obama White House. He added that the volume of data requests from Propel is “tiny” in Internet terms.
Propel’s early success suggests there is opportunity for innovation in the low-income market, no matter how the startup’s wrangling with Conduent turns out.
Propel is a fledgling company, with only 11 employees, two of them former food-stamp recipients. Chen, 30, is not one of them. His family emigrated from China when he was 4, and he attended Stanford University on a full scholarship, based on need. Propel has raised $5.2 million from investors like Andreessen Horowitz, a Menlo Park venture capital firm, and Omidyar Network, which funds startups focused on social goals.
The Supplemental Nutrition Assistance Program, also known as food stamps, helps about 40 million low-income Americans, including 1 in every 4 children in the country.
Paper food stamps are long gone, replaced beginning nearly two decades ago by debit-style cards, called Electronic Benefit Transfer cards. The program is federally funded and administered by the states, which typically rely on private contractors to provide the service.
The account look-up feature in FreshEBT has been its way into the low-income market, but was only a first step. Other features that were added over time, including food coupons, job opportunities and recipes for inexpensive meals, have also become popular.
So far this year, FreshEBT users have downloaded coupons advertised on the app worth more than $2 million. In the past six months, they have applied for jobs more than 10,000 times from the app, the company said. Propel typically gets referral fees from its coupon, job-listing and other advertiser partners. It does not store or sell users’ personal information, the company said.
Keyana Workman, 25, who has two young children and lives in Brooklyn, has been off and on food stamps for the last three years, as jobs and income fluctuate. She calls FreshEBT’s balance look-up “a real improvement” from making 800number calls.
Lately, Workman has also tapped into the recipes and health and exercise tips. “I’ve been working out a lot,” she said.
Propel estimates that 80 percent of its users in the Conduent states have now had problems accessing their information from its app at some point in the past few months.
What Propel is doing in the low-income market is broadly similar to what other companies like Mint and Yodlee have done by offering digital services that let people organize and manage their personal finances. The major banks initially opposed allowing those online services to pull account information, but the Dodd-Frank financial reform law in 2010 included a mandate to allow consumers — and third-party apps on their behalf — to access their data.
A comparable principle of data control should apply to the food stamp program, said Stacy Dean, vice president for food assistance policy at the Center on Budget and Policy Priorities, a leftleaning research and advocacy group.
“It should be up to the participants in the program to decide how to organize and use their information,” Dean said.