COLUMBUS, Ohio -- The state of Ohio is poised to launch the country's first smart card technology-based program for statewide electronic distribution of food stamps.
The final step of the approval process could come this month, when the Ohio Controlling Board is expected to vote on the selection of Citibank, New York, as the state's processor for electronic benefits transfer.
If successful, Ohio's program could serve as a model for smart card technology in a wider range of retail applications. An 18-month development period is expected to be followed by a five-year statewide rollout.
Ohio's EBT program would eliminate paper food stamps and instead issue recipients smart cards embedded with integrated circuits that store and process information. With the exception of limited pilot tests in Wyoming, all other state and regional EBT programs are based on magnetic stripe on-line technology.
Although retailers in Ohio acknowledge that smart cards' advanced technology holds potential in the future, they are apprehensive about having the technology foisted upon them.
"We don't have an objection to the smart card system. We think it's a very promising technology but it's awfully premature to be moving in a technological sense -- jumping ahead to this -- when there's no real commercial use of smart cards in the country," said Paul Bernish, director of corporate affairs for Kroger Co., Cincinnati, which is participating in the test and operates 194 stores in the state.
Waldo Yeager, chief financial officer and treasurer at Seaway Food Town, Maumee, Ohio, said
selecting smart card hardware before industry standards have been established involves some degree of guesswork and is risky.
"It's very important to use equipment that eventually the whole commercial infrastructure is going to use," said Yeager, whose company operates 36 stores in Ohio. "We have no question that smart cards are the way to go, ultimately. But are we jumping the gun here?"
Retailers also cited concerns about incompatibility with neighboring states' magnetic stripe card-based EBT programs, integration with existing front-end systems and the state's unwillingness to commit to full-lane coverage of smart card terminals.
Ohio plans to install readers that accept both magnetic stripe and smart cards; however, equipment deployment will vary from store to store based on food stamp volume.
"I think a good many of our stores would only qualify for one lane" to be equipped with the readers, Yeager said. Retailers voicing similar concerns have been told, " 'If you need more [units], you pay for them, boys,' " he said.
State officials, however, maintain the move to smart card technology is based on broader initiatives that go beyond EBT applications and promise administrative savings and cardholder convenience.
"We're exploring having a [microprocessor] chip placed on driver's licenses and state ID cards issued to all residents, not just welfare recipients," said Jody Zimmerman, assistant deputy director with the Ohio Department of Administrative Services. He said the technology will be key to a relational data base that could link various state agencies ranging from the Bureau of Employment Services and Department of Motor Vehicles to the state parks program.
Ohio approved a $16 million two-year budget for the PayEase EBT program in May, following a pilot test in Montgomery County. Statewide implementation would include about 7,500 retail sites and 532,000 recipients. The ongoing test involves 10,500 households and 71 food retailers in the West Dayton area, said John Scaggs, assistant deputy director of management information services at the Ohio State Department of Human Services.
Participating retailers reported that accepting food stamps via smart card EBT rather than paper coupons saved an average of 38% in processing costs, which factored in checklane productivity, reconciliation and training. EBT transactions cost retailers $15.21 per $1,000 of benefits redeemed, compared with paper coupons' cost of $24.73 per $1,000, according to test results compiled by the U.S. Department of Agriculture's Food & Nutrition Service, Alexandria, Va.
Scaggs said the statewide EBT program will begin in Montgomery County, and likely expand to three other counties encompassing Cleveland, Cincinnati and Columbus.
Until the statewide rollout begins, the contractor for the pilot, National City Processing, Louisville, Ky., will provide processing services in Montgomery County.
Wyoming is the only other state testing smart technology for EBT. Currently, 75 retailers in seven counties are distributing Women, Infants and Children benefits on smart cards.
"The seven-county initiative is what we would call a full-blown pilot in that, assuming we have success, the plan would be to roll it out statewide," said Terry Williams, Wyoming WIC and state EBT program manager.
Other states considering smart card technology for EBT include Maine, New Hampshire and Vermont, which collectively could launch a hybrid smart card-magnetic stripe card for WIC and food stamps as early as next year.