The Future of Payment at Farmers Markets: Evolving Technology to Connect Farmers to SNAP and WIC
Posted On: October 18, 2011
The Future of Payment at Farmers Markets: Evolving Technology to Connect Farmers to SNAP and WIC
by Drew Love
There is a $64 billion dollar pool of money out there to support localized sustainable agriculture, and there is a piece of plastic standing in the way.
The $64 billion dollars is the amount of money that was allocated to the Supplemental Nutrition Assistance Program (SNAP, also known as food stamps) in 2010. The piece of plastic is the Electronic Benefits Transfer (EBT) card, to which SNAP dollars are added on a monthly basis, depending upon the financial need of the client.
Before SNAP went electronic, food stamps were a tangible physical scrip. When the transfer happened in the late 90’s, most grocery stores, corner stores, and other retailers were able to accommodate SNAP clients. The in-store terminals they had been using to accept debit and credit payments could just as easily be used to accept SNAP.
Farmers markets were another story.
Fortunately, innovative pilot projects across the country have started to reverse that trend. From 2007 to 2010 SNAP redemption at farmers markets has increased by 365%. The number of farmers markets that are authorized to accept SNAP has also shot up by 202% in the same time frame.
A market beet article released earlier this year detailed the positive trends, and obstacles, that are happening with SNAP acceptance at farmers markets. While this growth demonstrates a dramatic national increases in both the dollar amount of SNAP redemption at market and the number of markets that accept SNAP, a bottleneck is brewing.
Farmers market SNAP transactions are made possible through an investment of time and money for both the SNAP terminal operator, and the administration that reimburses the farmers. As SNAP rates soar, so does the administrative burden of the non-profit organizations and volunteers that are often holding the system together.
It’s this burden that keeps the majority of farmers markets from accepting SNAP.
Christie Welch, the Ohio State University Extension Farmers Market Specialist, is all too familiar with these obstacles. Her involvement in the farmers market community began with her initial work with farmers markets accepting SNAP. Her first project was successful in reducing , some of the prohibitive costs associated with a market buying a central terminal for a token system. That project was made possible with the assistance of matching funds from the Ohio Department of Agriculture (ODA), and assistance from the Ohio Department of Job and Family Services (the agency that administers SNAP benefits in Ohio), and the Growing! Ohio Farmers’ Markets Program. Even though ODA’s matching program, and others like it, are able to reduce costs for some markets, there are still thousands of other markets facing prohibitive financial obstacles to establishing and running SNAP at market
The current cost heavy system relies upon token systems that require an initial investment of approximately $1,200 for the terminal plus ongoing administrative costs for terminal operation, producer reimbursement and the necessary targeted marketing needed to increase awareness that SNAP benefits can be used at farmers markets. Given that USDA data shows that 60% of farmers markets are run by volunteer market managers, one can start to understand how such administrative costs pose significant barriers.
In addition to financial constraints, there are also geographical constraints of having one terminal per market.
Welch notes that with a central terminal system, an entire market is either SNAP accessible or not. Placing SNAP transactions in the hands of the vendor, through an iPhone or iPod touch, means that farmers can do so at each and every market they attend, as well as on-farm. The flip-side, of course, is that successful outreach to SNAP clientele depends upon clarity in communication—something made easier with some degree of universal acceptance in a market, where all farmers can accept the same types of currency.
Welch’s opinion, a view often shared by others in the farmers market community, is that if EBT acceptance at market is to be widespread, then it must be more cost effective.
Placing smartphone technology into the hands of farmers themselves is one strategy being used to create a more cost effective system.
Using an app based system requires the initial purchase of the appropriate hardware, and with the iPod touch going for just over $200 that’s a significantly cheaper product with multiple uses for the vendor or the market organization.
It’s these reduced costs that have inspired Welch to write a grant to accept SNAP at farmers markets using either an iPod touch or iPhone app. The Ohio Department of Jobs and Family Services, which administers SNAP in the state, has been the biggest ally in this process, though the partners are still looking for the right funder for their innovative approach.
And she’s not alone, for good reason.
Earlier this year, Federal Nutrition Services (FNS) released a memo mandating that all state WIC agencies implement EBT systems by October 1, 2020. It is important to note that the EBT mandate does not apply to the Farmers Market Nutrition Program. However it does apply to the Women Infant Children Cash Value Benefits (WIC CVB). A recently added component to the WIC program that applies exclusively to fruits and vegetables.
The EBT memo raises some concerns in the farmers market community, because it echoes what happened with the SNAP transition. Over a decade ago farmers markets were not ready for the transition to SNAP, and lost millions of dollars in revenue when the transition happened.
How can a similar loss be avoided with the WIC EBT mandate?
Well, it turns out there’s an app for that.
Ricky Aviles, senior member of Austin, TX technology firm the Novo Dia Group (NDG), has been working with his team to create an app for the iPhone and iPod touch that accepts EBT WIC and SNAP benefits. They call it the Mobile Market + App.
While converting a farmers market to smartphone EBT processing technology has its challenges, Aviles believes that in the long run the cost is certainly worth it.
Using an iPhone or iPod touch and the Mobile Market + App eliminates the majority of the cost issues associated with the “token” based system that had raised Welch’s concern, as well as the concern of many others in the field.
Using smartphone technology, the EBT client simply walks up to the retailer (whether the farmer or the market), swipes their card through the card reader attached to the iPhone. This is not unlike the Square (about which I reported in a January 2011 market beet article), where the payment gateway is essentially eliminated as a middleman.
Aviles explains that some systems communicate to a gateway and the gateway then sends those transactions to the processor, The Mobile Market + App connects directly to the processor instead of going through a traditional payment gateway First.
Currently, the Mobile Market + App works in states where ACS is the processor. The other widely used processors include JP Morgan, CDP and FIS. In order to work in states where JP Morgan, CDP, or FIS are the state processors, the Mobile Market + App will have to be customized to work with the corresponding processor in that state. Aviles says that projects are underway to bring Mobile Market + to CDP and JP Morgan.
In 2010, NDG partnered with the Michigan Department of Community Health WIC division on a pilot project that would allow farmers markets to accept EBT WIC Cash Value Benefits (CVB), which is a part of the WIC program allotted exclusively for fruits and vegetables. At the beginning of each market day, the farmers and vendors were given an iPhone with the Mobile Market App that was capable of accepting EBT WIC CVB.
The pilot project for the program is still underway. The WIC department in Michigan expressed a clear interest in moving forward to assess the viability of accepting CVB at farmers markets both from the perspective of the WIC client and the farmer.
The Texas WIC program completed its transition from coupon to EBT system in April of 2009.
John Hannemann, EBT Development Manager in Texas, is currently working on a pilot to accept WIC at four farmers markets in Texas. The four pilot sites that John has selected will experiment with two different types of EBT WIC acceptance. Two of the markets will use the NDG technology that’s already been implemented in Michigan. The other two markets will use a Dejavoo terminal, a POS device that’s been developed by a company called ii2P.
Clearly, the acceptance of EBT at farmers markets, whether it’s SNAP or WIC, is still a project that is in its infancy. It is, however, a most necessary tech supplement to the farmers market community. Without a cost effective method of accepting SNAP and WIC, farmers markets are only cutting themselves off from the increasingly more popular and lucrative world of electronic banking transactions. It’s a necessary revenue stream to help farmers markets continue their rise as a viable marketplace for all shoppers– and for local farmers.
For those who are interested in learning more about the opportunity to connect EBT with farmers market through smartphone technology, please talk to your state’s SNAP and WIC agency contacts. More information about the up-and-coming technologies mentioned in this article can be found by contacting the following:
Novo Dia Group
Please note that FMC does not endorse any particular technology mentioned in this article, which is designed for information purposes only.