As more and more states move from traditional paper-based benefits systems into the brave new world of electronic benefits transfer, retailers are dealing with a host of technological and political issues brought on by the change.
The move to EBT for a wide range of government programs involves a total of $111 billion in annual benefits payments, said Craig Sadick, vice president of state government relations for the Food Marketing Institute, Washington. Of this amount, food stamps represent $24 billion to $28 billion in benefits.
For some retailers, the most pressing questions involve potential transaction fees for processing of EBT benefits. State and national industry associations oppose the institution of such fees, arguing that they had been promised that the move to EBT would be cost-neutral for retailers.
"We want to remind legislators that we're moving from a paper coupon system that's up and running 24 hours a day, with virtually no fees involved, to a system that has both risk and cost involved," said Barbara Hall, EBT/EFT project manager for the Milwaukee division of Fleming Cos., Oklahoma City.
"For 30 years, retailers have partnered with the federal government and accepted the internal costs of processing food stamps," said Linda Doherty, vice president for the New Jersey Food Council, Trenton, N.J., which represents distributors, brokers and manufacturers in New Jersey.
The move to EBT, however, could bring a variety of "brand new external costs that will be charged to retailers, so this concerns us," Doherty added.
Other issues for retailers beginning to accept EBT are the technological problems in processing these transactions. "We've encountered some significant delays where retailers can't provide products to food-stamp customers," said Jackie Snyder, electronic payments product manager, Supervalu, Minneapolis.
"I know states are working to address these concerns, but unfortunately, when the system goes down, these retailers have no alternative but to tell the customer to come back later," she added.
"I've been hearing that approval times for transactions are reaching up to 30 minutes," for retailers in areas that are just now switching to EBT, said Richard Palmer, manager of electronic payments for Fleming. "You can't have people in checkout lines for half an hour.
"This is especially a problem in states that don't stagger benefits availability." he added. "If all benefits are made available on the 10th of the month, for example, stores get hit then. If they have a problem getting through [to the transaction processor], it's a nightmare. There have been costs shifted to the retailers that they weren't expecting."
There are some indications that the promised benefits of EBT -- savings from not having to process paper benefits, and far fewer opportunities for fraud -- do accrue to retailers over time. For example, Valu Food, Baltimore, has accepted EBT benefits for about four years, according to Stu Denrich, vice president of management information systems. "There have been significant
savings. The biggest plus is that we don't have to handle paper food stamps any longer," said Denrich. "For the percentage of business they represented, the time needed to count, stamp and verify the food stamps was significant."
Valu Food accepts a magnetic-strip EBT card that is swiped at a stand-alone terminal in the checkout lane. The front-end hardware was provided by the state of Maryland, and is in "every lane in every store," said Denrich.
But even those retailers who have made a successful transition to EBT are worried about eventual plans to move Women, Infants and Children benefits onto an electronic system. Such benefits provide specific products, currently listed on the WIC paper check, to recipients.
"The messiest thing will be the move toward WIC, because it's not a dollar amount, it's items like cheese, milk and peanut butter," said Mike Hubert, vice president of management information systems for G&R Felpausch, Hastings, Mich.
"This is why the government is looking at smart cards, with a microprocessor on the card itself, to store the actual items a recipient is due," said Hubert. Such a system will "probably mandate an additional device on the front end" at supermarkets.
"A smart card would be perfect for WIC," said Denrich. "But because of equal access rules, the technology to process them would have to be in every POS lane. It would be a major change in technology -- hardware, software, the whole thing."
While many IS executives admit that smart cards have numerous applications beyond EBT, retailers are wary of additional investments in technology. "Most states are looking at smart cards for WIC benefits," said Supervalu's Snyder. "But there are no national standards yet for smart cards -- it's still a technology looking for a home. Currently, there's not a compelling reason for retailers to invest in this type of system."
Even if individual states offer to provide some of the required EBT technology to retailers, such programs bring up other issues. For example, some states only provide enough equipment for a few checkout lanes, based on the store's percentage of business from benefits programs.
"This means we have to label certain lanes 'food-stamp lanes,' " said Hubert. "That really bothers me. Part of the idea of this is to mainstream recipients so they don't have any stigma attached" to using these benefits, he noted.
Even if a retailer chooses to purchase EBT equipment on his own, access issues can still present problems, according to Hubert. For example, federal laws require that EBT technology be handicap-accessible. "This could affect the angles and heights the PIN pads are placed at," said Hubert.
Such questions are less of an issue when similar technology is used for credit and debit transactions, according to Hubert. "Credit cards are an optional tender, but for these people it will become a mandatory tender. Will we have to have Braille PIN pads? Will we only have to have them in our handicap-accessible lanes?
"My hope is we'll have the card-reading device on a swing arm in each store's handicap-accessible lane," he added. "This is something we'll have to resolve from an equipment standpoint."