Panama Restricts Scholarship Card Spending in Unauthorized Merchant Categories

Guest Contribution – Panama’s Institute for the Training and Use of Human Resources (IFARHU) has introduced automatic payment verification for scholarship cards. Attempts to make purchases at merchants outside the approved list are declined by the system before any funds are charged.

Scope of Restrictions and Where Blocking Is Triggered

The mechanism applies to scholarship cards held by students receiving educational grants (becas) from the state institute. Transactions are blocked at unauthorized merchant categories, including casinos, gas stations, restaurants, and other establishments not included in the list of approved merchant categories.

In effect, the card functions as a filter, allowing only payments that align with the purpose-restricted funding. For a student who attempts to pay at a non-approved merchant, the transaction simply does not go through.

iGaming Popularity Drives Growth in Transactions

It is worth noting that the number of such transactions in the casino category grows year after year. This is entirely understandable: an increasing number of people around the world are drawn to iGaming entertainment. According to industry data, live casino shows and slots with bonus features are gaining particular popularity. Among the most sought-after titles are lightning storm game online for real money, Plinko, Sweet Bonanza, and other high-volatility titles.

It is precisely the accessibility of such entertainment through mobile devices that makes the control of payment instruments an increasingly relevant challenge for government programs.

How Payment Control Works

As reported by The Rio Times, citing TVN Noticias, with each payment attempt the system automatically checks the merchant against the list of approved merchant categories. If the merchant is not on that list, the transaction is declined without any operator involvement or additional review.

IFARHU Director General Carlos Godoy explained that the algorithm operates in real time rather than after the fact. This means that oversight is built directly into the payment authorization process, rather than being limited to analysis of purchases already made.

Payment Is Stopped Before Funds Are Charged, and the Location of Each Attempt Is Recorded

An important detail is that a declined transaction does not equal money spent. The payment is stopped before it is processed, and no funds reach the merchant. In practice, the card balance remains untouched.

At the same time, the system records exactly where a payment attempt was made. This data is retained and may be used by the institute for further analysis of spending patterns.

Where Educational Grants Are Directed

Educational grants, known in Panama as becas, are transferred by IFARHU onto students’ payment cards. Approved expenditures include food, school supplies, learning materials, uniforms, and other authorized purchases.

This purpose-restricted funding model resembles the food stamps / EBT-style cards system used in a number of countries. The difference is that the Panamanian system is oriented toward a broader range of educational needs.

One in Twenty Transactions Is Declined

According to TVN Noticias, approximately 5% of scholarship card transactions are declined. Among approved payments, the breakdown is as follows:

• roughly 70% go toward supermarkets,
• approximately 30% cover purchases of school supplies, learning materials, uniforms, and other eligible spending.

These figures indicate that the vast majority of cardholders use the funds as intended, while the share of non-eligible attempts remains comparatively low.

Monitoring Without Announced Sanctions

IFARHU describes the verification process as ongoing monitoring of the program. No information has been provided regarding sanctions against students whose transactions were declined. There have also been no reports of suspended payments, repayment demands, or investigations being launched.

For now, the system serves an exclusively protective function, preventing non-eligible spending at the moment it is attempted. Whether the institute will take additional steps based on the data collected remains an open question.

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