Electronic Benefit Transfer
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Electronic Benefit Transfer (EBT) is an electronic system that allows a recipient to authorize transfer of their government benefits from a Federal account to a retailer account to pay for products received. EBT systems are currently being used in many States to issue Food Stamps and other benefits. Over 95 percent of food stamp benefits are currently being issued by EBT.
State food stamp agencies work with contractors to procure their own EBT systems for delivery of food stamps and other state-administered benefit programs.
For example, in the Food Stamp Program, food stamp recipients apply for their benefits in the usual way, by filling out a form at their local food stamp office. Once eligibility and level of benefits have been determined, an account is established in the participant's name, and food stamp benefits are deposited electronically in the account each month. A plastic card, similar to a bank card, is issued and a personal identification number (PIN) is assigned or chosen by the recipient to give access to the account. Recipients are offered the opportunity to change the PIN at any time, and are offered ongoing training if they have any problems accessing the system.
All but two States have systems that use magnetic stripe cards and "on-line" authorization of transactions. When paying for groceries, the food stamp customer's card is run through an electronic reader or a point of sale terminal (POS), and the recipient enters the secret PIN to access the food stamp account. Then, electronically, the processor verifies the PIN and the account balance, and sends an authorization or denial back to the retailer. The recipient's account is then debited for the amount of the purchase, and the retailer's account is credited. No money and no Food Stamps change hands. Payment is made to the retailer through a settlement process at the end of the business day.
States may also use "smart card" microprocessor chip cards in systems that are "off-line." In these systems, the transaction is authorized between the chip in the card and the POS device. The PIN is verified by the chip and the chip is debited for the purchase amount. There is no on-line communication with a host computer during the transaction. At the end of the business day, the POS electronically contacts the host to perform settlement and update the database information.