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Many merchants that accept Supplemental Nutrition Assistance Program transactions face an important decision between now and Sept. 21. By then, participating merchants in the SNAP no longer are eligible for subsidized payment terminals because of a change in law mandated by Congress.
Until this change, states were allowed to offer merchants point-of-sale terminals to use with SNAP transactions at no cost. That’s changed. The reauthorization of the Agricultural Act of 2014 in February mandated several changes affecting merchants that accept SNAP, notably requiring most of them to pay for the equipment and related services. Some merchant types, such as farmer’s market, military commissaries and non-profit food-buying cooperatives, are exempt.
The law also prohibits manual vouchers for SNAP transactions except in the case of disasters or an electronic benefits transfer system failure.
Beginning Sept. 21, merchants that accept SNAP transactions will have to pay for their POS equipment and services, either by paying a monthly lease or purchasing their existing state-supplied equipment, or by purchasing their own EBT-certified equipment and services.
The change has prompted some in payments to spread the word. Merchants don’t realize this is happening, says Sandra Young, president of Data Processing Solutions Inc., a Southborough, Mass.-based independent sales organization that specializes in convenience stores.
“Each state is handling it a little different,” Young tells Digital Transactions News. “In Massachusetts, as of Sept. 21, they will start charging merchants $75 a month. For a small c-store that might do $75 to $100 in EBT per week, that might be a quarter of their monthly sales. It used to be free. It’s not free anymore.” A busy merchant might have 250 EBT transactions a month, she adds.
Indeed, that is one option for merchants in 16 states, including California, Illinois, New Jersey and Virginia. Marietta, Ga.-based CDE Services Inc. is offering EBT services and equipment, including a terminal and PIN pad, for $75 per month with a one-time $50 fee. Transaction processing is included in that rate.
In Massachusetts, according to a price sheet posted on the state’s Web site, a merchant pays $795 to purchase a First Data Corp. FD400 wireless terminal. Listings on Amazon.com Inc.’s marketplace for the same device range from $355.99 to $799.
Young’s salespeople face a challenge, however. Because the current terminals are free, many merchants are reluctant to act now. “I’m guessing when they get hit with the first fees, they will come in in droves,” she says. “The challenge is trying to get someone to give up something that is free today, but won’t be free in a few months.”
The change applies only to standalone payment equipment, not those with EBT payments integrated into point-of-sale systems, says Thad Peterson, an analyst at Boston-based Aite Group LLC, meaning large supermarket chains, for example, are not affected. “The likely impact would be on small retailers who are using a cash register enabled with payment technology,” Peterson says.
“Many of these retailers will also be using terminals from payment processors that are EBT capable, so the only retailers that will be impacted by this would be retailers who do not have a POS system with integrated EBT functionality,” he says. While that might be a small number of merchants, “it might disproportionally impact small retailers in less affluent markets,” Peterson says.
