EBT move to EMV may accelerate adoption
October 17, 2014

While many big businesses are moving slowly toward the EMV smart chip standard on credit cards and debit cards, there is definitely some resistance from many smaller retailers. The cost of switching from a standard magnetic swipe to EMV can be really expensive for retailers to manage, especially given the costs of buying new equipment. In addition, smaller stores such as convenience stores and gas stations have been given extra time to switch over due to the small profit margins they have. However, an unexpected development may rapidly change the adoption rate of EMV in the payment processing business, and it comes from the federal government's electronic benefits transfer program.

Securing benefits
The federal government uses EBT as the primary method of delivering benefits to impoverished Americans. This is particularly the case with Social Security, the Women, Infants and Children program as well as the Supplemental Nutritional Assistance Program, the latter also known as food stamps. In recent years, EBT has taken over all aspects of giving out government benefits. The primary means of accessing these transfers is through a magnetic stripe card that functions similarly to a credit or debit card which is processed similarly.

According to political blog The Hill, multiple sources from the White House are saying President Barack Obama is on the verge of announcing a change to the EBT program. This change would require states to replace their current mag stripe EBT cards with ones that at the very least include the EMV chip. The official announcement has been delayed for unknown reasons. Because of the lack of information, it is uncertain whether the new EBT cards will be both magnetic stripe and EMV or simply EMV only. It's also unknown the timeframe that states are expected to replace their EBT cards.

If the change is to an EMV-only system and placed in a short time frame, the adoption of the standard would accelerate faster than even optimistic projections. This is because many convenience stores and grocers accept EBT out of obligation or convenience for their customers. These same stores are also the ones most resistant to switch to EMV due to cost and necessity. A switch to an EMV-only system will require them to purchase or lease new terminals in order to continue accepting the cards. Given that the adoption of chip-based transactions in other countries occurred rapidly due to government intervention, this situation will likely cause the same result.

Nexus: G-WEBCD1