electronic benefits transfer is an ideal way to attract small stores that have resisted electronic payments.
EBT is a powerful selling point for merchants who "have been sitting on the sidelines," said MacAllister Smith, president of Pinnacle Financial Technologies of Braintree, Mass., a merchant-acquiring company owned by Nova Corp. of Atlanta.
Mr. Smith was addressing some of the more than 800 merchant processors who gathered in Baltimore last week at the midyear meeting of the Electronic Transactions Association.
His company typically sells EBT services in a package that includes other merchant card services, he said.
"We're not making a lot of money on EBT transactions, but we're making money on debit transactions," Mr. Smith said.
Controversy has swirled about the gradual nationwide conversion from conventional welfare checks to electronic distribution tied to plastic cards. Citigroup Inc., which owns the largest EBT processing business, has come under fire for its management of systems in various states, and welfare beneficiaries have complained of difficulties gaining access to their benefits without paying automated teller machine fees.
These concerns were not in evidence at the merchant-acquiring group's conference, where the preference was to focus on the business potential in EBT.
Mr. Smith, president of one of the largest authorized and certified providers of electronic food stamps and cash benefits, said there are many opportunities to pitch electronic benefits to drug stores, discount stores, small markets, and even furniture stores.
EBT can be a lever for merchants to accept "the full solution," including credit and debit card capabilities, Mr. Smith said. He said he has one retail chain in the Northeast, selling unfinished furniture, that handles as many electronic cash-benefit transactions as debit transactions.
So far, 39 states offer at least electronic food stamp capabilities and others are in the process of bidding out contracts for those and other benefit programs.
Wal-Mart Stores Inc. has begun accommodating welfare account payments, and K-Mart is about to do so, said John H. Pellettier, a retail manager for EBT at Lockheed Martin IMS in Albany, N.Y., a subcontractor for state programs. Among pharmacies, Osco, Rite Aid, and Walgreen have signed up. Among service stations, Mobil accepts EBT cards and Citgo soon will do so, he said.
Processors should look beyond the grocery store when selling EBT, industry experts said.
"We know what we have to do with food stamps -- there are some rules we have to follow," Mr. Pellettier said. "But most states are issuing public assistance money on these EBT cards, and this public assistance money can be used to purchase anything in a place of business. It's not restricted to food items."
Laurence L. Stone, president and chief executive officer of Card Payment Systems, a New York-based merchant services provider similarly contended that if a merchant in a low-income area does not start supporting EBT, it could be left out in the cold.
"You go to any urban area . . . most of these bodegas and grocery stores do not accept credit cards at all," he said.
