The Food and Nutrition Service, which administers Women, Infants and Children benefits for the federal government, plans to test two magnetic stripe programs in its search for a more efficient alternative to smart cards.
The first pilot program has been postponed several times and is now slated for September in Michigan. The other is to begin in 2005 in Washington State and eventually extend to California, New Mexico, and Washington, D.C.
The FNS, a division of the Department of Agriculture, has been wrestling for years with its conversion of WIC coupons to electronic benefits transfer disbursement. Particularly with food stamps now running almost entirely through EBT, paper WIC coupons have started to seem behind the times.
But where a food-stamp redemption is relatively easy (similar to a PIN debit), WIC transactions are intricate. Initially the FNS inclined toward using a microchip application to handle the copious data involved in WIC. And though WIC smart cards have worked in a few states, the FNS has been ruffled by the administrative costs of a chip program, including the price of deploying chip readers. Merchant resistance has also redirected the FNS to magnetic stripe as an alternative; much of the infrastructure on the retailer end is already in place for magnetic stripe systems.
The FNS has not given up on smart cards, however. Two chip pilot programs - one in New England, the other in Texas and New Mexico - are scheduled to get under way this year.
Stan Bien, Michigan's director of WIC vendor management and operations, said its WIC pilot was going to use smart cards at first. "We were moving in the same directions as everyone else," but retailers balked because of the need to outfit stores with new technology, he said. The state agency then asked the FNS to pursue a magnetic stripe or online pilot.
The revised program is offline and online. At grocery stores, benefits recipients must swipe their cards at a service counter before making any purchases. During this preliminary transaction, the store downloads the benefits data from a remote site. Mr. Bien said 1the complexity of the new system has caused some delays.
The program in Washington State is tentatively set to begin next February. The government initially opened the pilot to all states, but only three (Washington, California, and New Mexico), along with Washington, D.C., applied.
James P. Hammond, Washington State's manager of WIC Information Services, said the question of which was the better technology - magnetic stripe cards or smart cards - was not an issue. "What we saw with this project was an opportunity to just learn about EBT, with a relatively low investment and commitment of time on our part," Mr. Hammond said. "The Feds have the project available and we thought we'd hop on board."
The transaction will resemble a real-time PIN debit transaction, Mr. Hammond said. It will move through a funds transfer network to a central host that will remit authorization to the store, he said. The complex documentation of the types of foods bought will be noted at the host, he said.
Art Burger, the executive vice president of Burger, Carroll & Associates in Santa Fe, said he was enthusiastic about Michigan's pilot, but he questioned the assumption that WIC magnetic stripe systems are cheaper than smart card systems.
"The fantasy of online is that we can use the terminals that are out there," Mr. Burger said. But "the terminals are not sufficient to handle the WIC transactions. They don't have enough memory."
Robert A. Bucceri, the EBT industry council chairman for the Electronic Funds Transfer Association and a general partner with the Chaddsford Planning Associates payment consultancy in West Chester, Pa., said that the Washington State pilot could very well cost more than smart cards because it will be using EFT networks, which will charge a switch fee, and likely down the road an interchange fee as well.
