SNAP goes digital with online purchases

Digital payments are experiencing rapid growth with the help of new tech companies.
Illustration: WGB staff / Shutterstock

The U.S. Department of Agriculture’s Supplemental Nutrition Assistance Program has been a consistent reality for millions of Americans since the passage of the Food Stamp Act of 1964, but despite the popularity of the program, adapting SNAP for the digital era has been slow going. 

That program officially launched in 2019 with large retailers like Walmart, Amazon and others, and it’s quickly growing to represent a substantial percentage of the SNAP dollars. Now, smaller grocers are getting into the game and breaking down barriers to food security for millions of people throughout the U.S.

“Online EBT (Electronic Benefit Transfer) solves some very critical problems for SNAP customers,” according to Ofek Lavian, co-founder and CEO of Forage, one of three companies certified by the USDA to process online SNAP payments—Fiserv Inc. and FIS Inc.’s Worldpay are the other two.

Food deserts are common throughout the U.S. and one out of every five households in the country has a family member with a disability, making it harder for them to get to a brick-and-mortar store, Lavian said in a recent interview with Winsight Grocery Business. Making SNAP available for online purchases—the cost of delivery and other fees are not covered—helps solve a “core structural problem” for many Americans, he said.

Online SNAP is growing

More than a quarter of a million retailers were authorized to accept SNAP benefits in brick-and-mortar stores, as of Sept. 30, 2021, according to the most recent data available from the USDA’s Food Nutrition Service (FNS), the agency that oversees the SNAP program. Only 89 of those 254,350 firms accepted SNAP benefits online. That’s up from seven companies in 2020.

Although small, that fraction of a percentage of all retailers in 2021 accounted for 3.95% of the total SNAP dollars spent that year, more than $4.96 billion. In 2020, those seven companies alone processed more than $800 million in SNAP benefits. Lavian says he believes that percentage will be near double digits once 2022 statistics are available. 

It’s good news for the San Francisco-based tech company, which unlike its two competitors, is solely focused on making online SNAP EBT payments available for all qualified retailers. “If we do our job right here at Forage, being able to accept EBT will be as ubiquitous for online grocery retail as accepting credit and debit cards,” Lavian said. 

The fewer than 100 retailers accepting SNAP in 2021 has grown to about 200, about 80 to 90 of those are through his former employer, Instacart, where Lavian helped pioneer the technology used to process EBT payments. The Instacart connection has served Forage well, as the company raised $22 million in August 2022, from the company’s founder, Apoorva Mehta, along with finance-technology firm Nyca, PayPal Ventures and EO Ventures.

While companies like Instacart, Walmart and Amazon are certainly driving the large dollar amounts in the early days of online SNAP payments, many large grocers like Costco, Dollar General and Dollar Tree have yet to begin accepting them. 

Many states still have only a few grocers that accept SNAP online, according to FNS, which publishes a state-by-state list of which grocers are participating in the program. Nebraska has only seven participating grocers, for instance, compared to New York state, which has 30.

Up and running

Getting set up to accept online SNAP payments takes some work on the back end, but both the technical and regulatory hurdles are getting easier to navigate, according to Matt Smith, co-founder and COO of Grocerist, an ecommerce technology and marketing company that builds grocery store websites on Shopify.

It was through his work with Shopify clients that Smith met Lavian and began collaborating with Forage. Smith said the two companies have worked together to build out the technology, and Forage has mastered navigating the regulatory requirements. 

That’s a big barrier for many smaller grocers aiming to set up online EBT payments, according to Smith. Kayla Jones, who heads Marketing & Growth at Forage, said the process begins with the grocer sending a letter of intent to the FNS.

Companies like Grocerist, which launched its first online SNAP merchant in June of 2022, then get to work tagging all of the online products as eligible for SNAP or not, according to Smith. That portal is then put through a series of tests to prove the system works. 

“We help shepherd them through the FNS review process, which is becoming more and more streamlined,” he said. “We’ve already met FNS’s requirements many times over, so it makes for no surprises as we go through the testing process, but we have to go through that process with each merchant.”

The grocer must also prove a number of online capabilities, such as the ability to: 

  • properly display error messages when users get stuck. 
  • handle estimated pricing for items based on their weight.
  • not charge sales taxes on SNAP purchases. 
  • allow for split tender transactions that are partially paid for via SNAP. 
  • enable customers to decide how much of their SNAP benefit they want to use in each order. 

Beyond online grocers

Grocery stores aren’t the only retailers beginning to accept SNAP payments onlineother entities such as Flashfood, a company that sells perishable food nearing its sell by date at a substantial discount, is one of growing list of non-grocers that are updating their tech to accept SNAP online. 

Jones said Forage has worked with the online platform to help them accept SNAP online on behalf of their merchants. That means that shoppers who use Flashfood can take advantage of the program, even if the grocer does not accept online SNAP payments. 

“So, when we put out a press release that says we worked with Flashfood to enable Meijer to accept EBT online, we’re enabling Meijer to accept EBT online through Flashfood’s app, because they are the platform,” Jones said. “We also work with retailers directly, who are not on platforms, to enable them to accept SNAP online just via their website versus a platform.”

Similarly, Grocerist has worked with Hub on the Hill in New York state to make it the first grocer in the nation to use SNAP benefits to purchase discount produce online through its Double Up Food Bucks program, which doubles the value of SNAP dollars for purchases of fruits and vegetables. 

“We worked to figure out how to create an online version that matches as closely as possible the in-store experience,” Smith explained, adding that the fully automated solution works without the grocer having to facilitate anything from an ecommerce perspective. 

Click here to view WGB's full SNAP report.



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