MAG Insights

If you think EBT chip cards won’t be used in your store, you may want to keep reading! The first chipped EBT cards will come from the state of California, which also uses their cards to distribute cash benefits. The cash benefits can be used more broadly than the food benefits (SNAP) that come to mind when you hear EBT, so the issuance of chip cards may impact your systems, including ATMs, even if you are not a SNAP participating retailer.

I first wrote about the migration to chip EBT Cards in January. Since then, there has been a lot of activity progressing those efforts. The X9A11 EBT Working Group finalized the proposed changes to the message spec and the preliminary ballot passed the initial voting cycle. Several voters submitted comments that had to be resolved before moving forward to the X9 Board vote. The administrative process to publish the final spec may still take a couple of weeks or longer. The final published spec, however, is just one step in a long sequence of events that must occur before merchants will have access to the software for their POS systems. eCommerce merchants will also need to update their checkout pages and logic due to new data fields and values.

The EBT state processors have communicated through the X9 EBT Card Industry Forum their systems have been updated with the new spec, even without it being formally finalized. Additionally, they added that the updates have been passed on to the parties downstream to begin their development and testing efforts. 

Moving to chip is a complex process that involves all stakeholders in the transaction value chain and can take years to implement from end to end. For example, the most recent migration to chip cards in the U.S. involved commercial fleet cards. A brand-agnostic, international specification to handle the additional data within a fleet transaction was created through Conexxus. This was recognized by the International Forecourt Standards Forum (IFSF) in 2019 and has been updated over time to the most current version. Four years later, and some card networks are still in the early stages of migrating to the new spec, while many petroleum merchants still aren’t capable of processing chip commercial fleet cards in accordance with the spec. 

The State of California performed early testing of production systems by creating production cards based on the new specification and took them out to live retailer locations. These tests were only intended to show that these chip cards will be backwards compatible with mag stripe processing. Testing one hundred retailers/ATMs, roughly 40 percent of their test transactions "failed;" some terminals immediately rebooted, some crashed completely, and some entered the death loop of swipe card, insert card, swipe card, and so on. It is unknown if acquirers were engaged to validate the data messages of the tests that "passed." Regardless, their results show many retailers’ systems may be negatively impacted, and customers may have no recourse but to abandon their carts.

Merchants need to understand how their terminals react to an unknown AID (referred to as Empty Candidate List or ECL). You will want to test your payments system to understand how it is impacted when a chip card is presented. You may need to work with your IT team, acquirer/gateway, POS manufacturer, etc. to correct any issues. The state of California has plans to issue chip cards as early as June 2024. These cards will be issued with dual interface capabilities, meaning they will also be NFC-enabled. In addition, the cards used by the state of California are used for cash benefits. Cash benefits greatly expand the number of retailers who could see one of these cards presented. The state of Oklahoma hopes to be a quick follower, issuing cards this year. Their cards will be contact only and are not used for cash benefits. Given the early test results and issuance plans, all retailers (especially those in California and Oklahoma) are encouraged to contact their acquirer or gateway to request test cards to ensure your systems can process an ECL mag-stripe transaction. If your acquirer is unable to supply test cards, you can reach out to FIS directly.

There are several key components of new EBT chip cards:

• Cards will utilize a white label AID that is unique to these cards, meaning it doesn't exist in the payment ecosystem today. The AID that will be used is A0000000044542.
• Cards will have a service code of 220. 
• Cards will have an expiration date. This is not an expiration of benefits, only of the card.
• Cards will have a CVC2 for use in eCommerce transactions.

The above is not an exhaustive list of the changes to the specification

Many states are participating in the X9 EBT Card Industry Forum, which is comprised of over 500 members across the payments ecosystem, and meet weekly to gather facts and data needed by all stakeholders as they build out their plans to implement and support EBT chip card acceptance. The data gathered will be compiled into a series of whitepapers published by FNS to the various stakeholders. If you're interested in participating in the Industry Forum, you can request to be added to the meeting invites by emailing the X9 Administrator.