MAG Insights

As the efforts to modernize EBT continue, several key milestones have been met, but new issues may throw a wrench in merchant acceptance models. This article breaks down these factors and provides updates on state implementations, discusses the state-specific product waivers, reviews the status on the whitepaper(s) being finalized by the X9 EBT Card Industry Forum, and looks at the future on what changes in the EBT space may require additional updates to the specification.

State Chip Implementations:

As the chip card rollout in California comes to an end, the State of Oklahoma is actively planning their pilot and implementation. Oklahoma uses a different EBT state processor than California, so merchants are urged to test their systems rigorously to ensure interoperability with their systems. Cards issued through different states may not work the same, especially in these initial chip implementations. Merchants should test to validate Empty Candidate List (ECL) Fallback functions correctly, or that the chip functionality, whichever your systems are designed to accept. Oklahoma’s cards differ from California’s in two ways; they will issue contact-only chip cards that contain SNAP benefits with no cash access. Oklahoma could start issuing cards any day now, as they indicated they are working through the last steps on their end to start their pilot. If you are unable to obtain test cards through your normal channels, please reach out to Kelly Andrus directly, who will connect you with the project team in Oklahoma for assistance. Additionally, merchants can see which states are planning to issue cards next on the FNS EBT Modernization website.

State Product Waivers:

Chip cards are not the only complexity coming to EBT processing space. Earlier this year, states were given the opportunity to apply for waivers to restrict which products merchants in their state can sell to EBT beneficiaries. Until now, EBT cards could be used to purchase the same products across all states, making it easier for merchants to manage acceptance across their portfolios and support transportability across state lines of benefits. Beginning in 2026, states with approved product waivers can limit which products their beneficiaries can purchase with an EBT SNAP benefits card. 

As of this article, six states have been granted waivers, restricting purchases of products such as soda, candy, fruit and vegetable juices with less than 50% natural juice, unhealthy drinks (undefined), and taxable food items as defined by one state (with an exception for plants and seeds for food production). Each state can request a waiver to restrict any product, and each state may define the restricted product differently, which will make pricebook management a nightmare for merchants. Check the SNAP Food Restriction Waivers website regularly for an updated list of states whose waiver has been approved.

Merchants are scrambling to understand the implications of these waivers, and what impacts it will have on the transportability of benefits. Take Utah for example. Their waiver exempts soft drinks from the eligible foods list that can be purchased with SNAP benefits from any merchant location in Utah. What if a Utah beneficiary crosses state lines and purchases soft drinks from a merchant located in Colorado? Can a merchant location in Utah sell soft drinks to a Colorado EBT cardholder who is visiting the state? And online orders get even more complicated. Distribution centers aren’t merchant retail locations, so are sales of restricted products based on the merchant’s address of record with FNS or from where the product is shipped? These are all questions that merchants should be asking to their acquirers and SNAP contact. We have asked FNS for guidance and are awaiting a response.

X9 EBT Card Industry Forum Whitepapers:

Over a year ago, FNS facilitated a series of round table discussions with members of the X9 EBT Card Industry to gather information needed by the various stakeholder groups to facilitate the migration to chip cards. These sessions focused on four topics:

• Transaction Processing
• POS Upgrades and Updates
• Card Personalization and Replacement Strategies
• Rollout Considerations and Strategies

FNS led the initial data gathering and working sessions and has since turned the draft papers over to X9 for completion. Their diligence in capturing considerations across the stakeholders in the ecosystem ensures that all voices were heard. To consolidate all the data gathered into a cohesive document(s), Guy Berg agreed to take on the task of finalizing the whitepaper(s), and his expertise with chip processing will benefit the entire EBT ecosystem. The MAG will continue to offer the merchants’ voice to this effort.  

Possible Future EBT Enhancements:

The SNAP Mobile Payment Pilot will be next up for consideration in the world of EBT processing. FNS is eager to move this effort along, although allowing EBT cards to be stored and used within mobile wallets will require careful planning and execution. Common wallets such as Google Wallet and ApplePay utilize network tokenization in lieu of passing the card number in the transaction. Network tokenization is widely used for branded credit and debit cards, although EBT cards process on a closed-loop network. Network tokenization, as it works for debit and credit today, utilizes token BINs, whereby cards from multiple issuers are combined into a single bin range, obfuscating the issuer. This could cause problems if replicated for EBT, especially considering the state waivers discussed above, as merchants may need to know which state issued any given card. The X9.58 (2024) EBT specification doesn’t identify the state of issuance today.

To facilitate tokenization, states and/or state processors will need to contract with a Token Service Provider (TSP) to provide tokenization and vaulting services. For a refresher on the complexities of tokenization, the MAG published a microlearning course entitled Advanced Tokenization Strategies and has a companion Merchant Reference Guide: Tokenization. Both resources are available to merchant members at no additional cost.

The MAG will participate in conversations related to mobile payments for EBT transactions and will keep our members informed on the developments in this area. Please reach out to Kelly Andrus to find out how you can get involved in these efforts.