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Article published in Issue Number: 070202

Elementary EBT

By Ross Federgreen, CSRSI

What's one compelling thing the grocery and professional-office vertical markets have in common? They wrangle with electronic benefits transfer (EBT). If you, as ISOs and merchant level salespeople (MLSs), become familiar with basic EBT concepts, you will more easily gain the confidence of decision makers in both of these arenas.

Fortunately, key issues related to EBT acceptance are similar to those pertaining to traditional credit and debit card acceptance: cost, integration, liability and security.

EBT versus ESD

EBT was introduced 30 years ago by the Food Stamp Act of 1977. It was enacted to facilitate the transfer of allocated federal and state funds to eligible beneficiaries. Examples of funds delivered via EBT include food stamps, which help low-income people purchase groceries; support payments for dependent children; and energy assistance programs.

A number of governmental programs do not transfer monetary value to beneficiaries. Instead, they enable other types of government/beneficiary interaction. They are known as electronic service delivery (ESD) programs.

Examples include those that help determine eligibility for Medicaid (a government-funded health insurance program for people with low income and few resources) and day-care assistance.

A growing number of federal and state programs use EBT and ESD; the number of beneficiaries affected is significant.

All 50 states now use EBT for food stamp benefits distribution, making food stamp delivery the largest EBT program in the United States. The requirements for this program are in the Code of Federal Regulations, Title 7, Parts 274.12 and 277.18.

EBT implementation

By law, the food stamp EBT program contains no intrinsic costs for participating merchants to absorb. However, merchants accepting EBT do incur costs.

First, many merchants need to use third-party processors to participate. These vendors charge merchants a direct fee for every EBT food stamp transaction. The fee approximates a typical debit transaction fee.

Also, merchants of all sizes and types face indirect issues and hidden costs related to EBT acceptance. You can distinguish yourself by helping them mitigate these.

Often, merchants who accept EBT also accept credit and debit card payments. Space at the POS is at a premium. Offering a terminal or solution set that accepts both EBT and traditional electronic payments is essential.

For example, a medical office accepting credit and debit card payments may want to add EBT acceptance. The business will benefit if it can add EBT capability to the terminal it is already using.

In addition, retailers have significant issues concerning the reconciliation of electronic payments. Requirements for EBT reconciliation only increase these difficulties. If you can offer common solutions for both traditional electronic-payment and EBT reconciliation, merchants will find this helpful.

Single report generation is optimal. It delineates an EBT's fees, payments, reporting period, and originating agency or entity.

What if a company accepts EBT from multiple jurisdictions because the business operates in multiple states, or its customers are drawn from multiple states? This is a significant opportunity for you to demonstrate knowledge: Certain systems and programs enable retailers to have a single point of acceptance for multijurisdictional EBT. Research the options and present them to your clients.

Other hidden costs of EBT acceptance include system implementation and maintenance in addition to employee training and supervision. Whenever you can provide informed, professional assistance in identifying and resolving these issues, merchants will appreciate it.

Quest Mark questions

The Quest Mark program is sponsored by NACHA - The Electronic Payments Association. Merchants considering EBT acceptance will want to know what the Quest Mark is and what value it provides.

The Quest Mark logo is used nationwide to indicate retail locations that accept EBT. When displayed, it alerts customers that they may utilize EBT payment at a given location, saving time for merchants and shoppers alike.

When purchases are stalled or denied at the POS, three groups are immediately affected:

  1. Customers attempting to make purchases at the POS become frustrated because they cannot complete their transactions.
  2. Other customers waiting for their turn at the POS may decide to skip their purchases because of the delay.
  3. Merchants lose revenue from lost sales. Also, they often have to spend management time and money sorting through the problematic transaction's issues.

It is very important, therefore, for you to encourage merchants to fully participate in the Quest Mark program. It is free. And if you discover a competitor is charging a merchant for Quest Mark participation, you can point this out and perhaps gain the merchant's business.

EBT purchase power

Retailers will ask you what purchases are allowed under various EBT programs. This is a complex question. Answering it adequately requires a full understanding of the specific program and jurisdiction involved with each such request.

No matter what program is employed, merchants are not permitted to charge EBT beneficiaries for EBT-related services.

Three basic types of purchases are eligible for EBT:

1. Cash purchase for the transaction amount: This permits clients to use their EBT cards to purchase goods or services only.

2. Cash back with purchase: In addition to purchasing goods and services, this allows customers to receive cash, which is withdrawn from their EBT accounts. It requires no additional transaction on the part of retailers, who may cap the amount of cash to be given back. However, the limit must be the same for clients paying by other means.

3. Cash back without a purchase: In this case, beneficiaries present their EBT cards to obtain cash. No purchase is required. The amount of accessible cash is determined by the availability of funds, which is driven by the program involved and the funds remaining in the beneficiary's account.

There are many reasons to become familiar with the basics of EBT and ESD. This article highlights some of them. Now, go ahead and read additional material on these important topics.

As always, knowledge is power. This can translate into income for you.

Ross Federgreen is founder of CSRSI, The Payment Advisors, a leading electronic payment consultancy specifically focused on the merchant. He can be reached at 866-462-7774, ext. 23, or

Article published in issue number 070202

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