Convenience stores in five states might soon see customers pull out their smartphones and show an app to pay with benefits from the Supplemental Nutrition Assistance Program.
In the test program, the new digital-payment app will be optional for SNAP—previously called food stamps—recipients and for convenience stores and other retailers selling groceries, the U.S. Department of Agriculture’s Food and Nutrition Service said.
The pilot program will start in Illinois, Louisiana, Massachusetts, Missouri and Oklahoma, the agency said. It did not provide a start date. If it goes well, it could help to expand the universe of consumers shopping by app at convenience stores and grocers.
“Digital wallets are changing the way we pay for everything, including groceries. We want to ensure SNAP leverages the latest technology to improve access to benefits, reduce fraud, and provide a better overall experience for the families we serve,” said Stacy Dean, USDA deputy undersecretary for food, nutrition, and consumer services, in a statement March 8.
But it won’t happen overnight. “These are complex pilots involving a wide range of stakeholders carefully coordinating efforts. Because of this, we estimate that this technology won’t be available to SNAP shoppers for 1.5 to 2 years,” a USDA spokesperson said.
The development follows a separate, successful online-shopping pilot for SNAP participants, which began in 2019 in New York state. The pilot program allowed SNAP recipients to pay for groceries, but not for delivery fees, with the government benefits. By March 2020, about 30,000 SNAP households shopped online.
This year, over 4.3 million SNAP households shopped online in January, and about 9% of all SNAP redemptions occurred online, a USDA spokesperson said. But 98% of online SNAP recipients also shop in the store, the USDA said.
Today, every state except Alaska has implemented online purchasing, and 190 retail chains use SNAP online purchasing, the spokesperson said.
The 2014 Farm Bill authorized the online-shopping pilot. The New York launch was followed by pilots in Washington, Alabama, Iowa, Oregon and Nebraska in the first half of 2020. Among the first retailers to express interest were Amazon, Dash’s Market, Fresh Direct, Hy-Vee Inc., Safeway, ShopRite, Walmart Stores Inc., and Wright’s Markets Inc., according to USDA.
Among convenience stores, 7-Eleven Hawaii joined the list participants in online shopping in 2022 and worked with Vroom Delivery. The two companies worked with Food and Nutrition Service for over a year to meet security and workflow requirement before rolling it out to customers.
- 7-Eleven Hawaii is No. 105 on CSP's 2021 Top 202 ranking of U.S. c-store chains by number of company-operated retail outlets.
Tom Falzani, co-founder and chief product officer at Lula Convenience, said SNAP’s decision to offer electronic payments and online ordering reflects market demand. “SNAP is realizing there’s a huge, huge need here. They’re starting to work on that technology,” he said. Lula Convenience offers an integrated platform to allow convenience stores to more easily offer delivery and manage inventory as online and app orders for delivery increase.
The app pilot could roll out in a similar manner to SNAP’s online shopping program and in time allow most eligible convenience stores to serve more consumers as they like to pay. Currently, SNAP recipients pay using an Electronic Benefits Transfer (EBT) card, similar to a debit card.
Massachusetts Gov. Maura Healey said testing contactless payment for SNAP recipients wanting to pay by app highlights the state’s interest in technology innovation. “Allowing households to buy groceries using SNAP benefits through their mobile device not only creates a more dignified and secure checkout experience, but also provides low-income families access to the same purchasing technologies as other customers,” Healy said.
Besides enthusiasm from state leaders, retailers see the opportunity. “I’m excited they’re looking into this. It’s definitely something that’s been chatted about internally, and convenience stores we work with have brought it up as well. There’s interest in the industry,” Falzani said.
Currently, SNAP recipients have to wait for their EBT cards to arrive in the mail, a USDA spokesperson said. With the app, the funds are expected to be delivered electronically as soon as they are available. The pilots will be used to assess whether electronic payments prevent fraudulent activities, such as card skimming or card cloning, the agency said.
“These pilots will test both Near Field Communication—when the customer ‘taps’ a mobile device for contactless payment—and QR code payments to understand the pros and cons of each technology for EBT and help additional states determine which approach is best for them,” the USDA spokesperson said.
The Food and Nutrition Service agency will work with state agencies, EBT processors, mobile-wallet technology companies and retailers on the pilot app program.
To determine the retailers for the pilot, USDA posted a Request for Volunteers on July 12, 2022, with an application deadline of Nov. 4. It rated proposals on privacy and data security, business model, rollout plan and system changes, transferability and customer service, a USDA spokesperson said. Participating retailers incur the cost of any system or equipment upgrades for the pilot, the spokesperson said.
The USDA-funded SNAP program is administered at the state level, where eligibility is determined and benefits are issued to eligible households. States operate the program, previously called “food stamps,” by determining eligibility and issuing benefits to eligible households.
Convenience stores that don’t currently participate can apply for a SNAP license from the Food and Nutrition Service. They must meet certain criteria, such as minimum stocking requirements or location in an area with high need due to limited access to food. The stocking requirements involve access to staple foods. Retailers are required to stock or sell a certain number of food items in the following categories:
- vegetables or fruits
- dairy products
- meat, poultry or fish
- breads or cereals
Restaurants typically are excluded from participating if 50% of gross retail sales come from sales of prepared foods intended for immediate consumption. In certain states, however, people with disabilities, the elderly and the homeless are allowed to purchase prepared meals at restaurants using SNAP benefits.
Information on criteria for retailers is available on the USDA’s website.
The government increased the average monthly SNAP benefit by $36.24 per person, for fiscal-year 2022, which began Oct. 1, 2021. At that time, the program was feeding more than 42 million Americans, about one in eight Americans, each month, according to government data.
Members help make our journalism possible. Become a CSP member today and unlock exclusive benefits, including unlimited access to all of our content. Sign up here.