Arkansas WIC EBT S takeholders’ Meeting – May 5, 2009

1. Arkansas WIC EBT Stakeholders’ Meeting – May 5, 2009 Partnering to create a better WIC

2. WIC The Retailer Perspective (Gary) • How big is WIC business? • WIC is relatively small, approximately 1.5% total food sales, annually • FY 2008 WIC sales: • Arkansas: $49 million; 90,000 participants • Nationwide: $4.5 billion; 8.9 million participants • The importance of WIC is not limited to WIC food sales, it extends well beyond, to total food sales • When shopping, WIC participants buy much more than WIC food items • Nutrition education classes teach WIC participants to purchase and prepare nutritious, healthy foods • Families with healthy babies and children spend more money on food at home • WIC customers are often part of a store’s “loyal” customer base • Use a loyalty card • Use vendor coupons • May use SNAP

3. WIC The Retailer Perspective (Gary) • Generally, all retailers base major decisions on a profit-centered business model. • Since 2004, WIC vendors in Texas and New Mexico have experienced a positive return on investment (ROI) in offline WIC EBT, the Smart Card Technology. • Paper WIC has long been the most costly, time-consuming, and confusing transaction conducted at the retail point of sale. • Based on retail experience, we would consider the WIC EBT system model deployed by Texas and New Mexico a “best practice” business decision. It’s a smart and cost effective way to increase food sales while lowering the high costs of WIC food sale transactions.

4. Retailer Business Model Considerations (Gary) • EBT • Increase sales • Reduce operating/overhead costs • Maintain/increase profit • Efficient checkout for the customer

5. Online WIC EBTRetailer Experience (Reed) • Costly • Millions of dollars expended • Problematic • Online programs have been attempted in several different states, with several different processors over the last six years. • Only one retailer has successfully integrated their POS with online WIC EBT • Others have spent millions trying • Significant increase in Michigan-specific processing outages during the last six months • Often linked to “out of memory” issues. • Affecting SNAP EBT and WIC EBT • Stand-beside terminals • Operational nightmare. • Cashiers must scan every WIC item twice. • When prices change, managers must enter the new prices into each terminal. • Access limited to between 2 and 5 lanes. • Clients must declare that they are conducting a WIC transaction – spotlighting that customer as a WIC recipient.

6. Offline WIC EBTRetailer Experience (Jason/Reed) • Background • Partnered with Texas and New Mexico EBT from the beginning • Roll-out has been smooth throughout Texas and New Mexico • Wyoming successfully converted from SVS to Texas model Nov. 2008 using the same card as Texas and New Mexico • Cherokee Nation implementing on a tight timeline – no problems anticipated • Advantages • No third parties siphoning dollars from the WIC agency and retailers. • Increased transaction speed – no wait for Host communication or outage delays. • Fully interoperable – New Mexico and Texas are doing this today. • Cards can be leveraged to include SNAP, TANF, Medicare/Medicaid, child support and Social Security.

7. Offline WIC EBTRetailer Experience (Gary/Curtis) • Texas WIC modified proprietary electronic cash register (ECR) and point-of-sale (POS) systems to accept smart cards in-lane in exchange for long-term retailer commitment. • Execution • WIC EBT enabled ECR and POS systems representing 75% of WIC vendor lanes nationwide have been certified by USDA/FNS and Texas as meeting design, performance and accuracy standards – ICL-Fujitsu, IBM-ACE, IBM-SA, NCR, ACR, Wal-Mart (IBM), JPMA, Sweda • ECR/POS representatives provide WIC EBT enhancements to WIC vendors with qualifying systems at no cost • Texas WIC vendors with non-qualifying systems are reimbursed for their purchase of USDA/FNS and Texas certified ECR/POS systems in accordance with the USDA/FNS approved reimbursement policy.

8. WIC EBTIndependent Grocer Perspective (Polly) • Arkansas WIC Locations (approx) • One location: 135 • Between 2 and 13 locations: 134 • More than 13 locations: 172 • Independent grocers in Texas, New Mexico, and Wyoming have embraced offline eWIC enthusiastically. • USDA reimbursement of system costs helped many smaller retailers modernize their front-end systems.

9. CostsComparing Online and Offline • Offline (Gary/Jason) • Agency • Cards: $3.00/card • Terminals: • $12,000/lane (over three years) • Retailer owned and maintained • $4.8 million total (assuming 2 terminals at necessary locations - spread over three years) • Clinic Terminal: $80/clinic • Development/Support: Minimal – use USDA-owned technology. Already developed and proven • Retailer • New development: $30,000-$50,000 • Implementation for current operators – minimal. • Online (Reed) • Agency • Cards: $0.50 - $1.00 • Terminals: • $600/lane (per year) • State-owned and maintained • $800,000 per year (assuming 2 terminals at all locations and 1 phone line per location) • Development/Support: $1.00-$1.50/household per month • Retailer • New development: $500,000 - $1,000,000 • Per transaction processing fee • Implementation for current operators – N/A.

10. IntegrationComparing Online and Offline • Offline (Amy/Jennifer) • Successful integration statewide for 2,500 retailers Texas, New Mexico, and Wyoming • 2008 Wyoming (90 vendors) integration was smooth and uneventful • Cherokee Nation • A few ongoing ankle-biting issues; nothing that outweighs the general success story in these states. • Online (Reed/Amy) • No successful integration effort in any state • Variations result in unnecessary costs and hurdles • Ongoing blunders by state processors continue to hamper developments. • Washington • Michigan • Nevada • Kentucky • Bottom line – it still doesn’t work: anywhere.

11. InteroperabilityComparing Online and Offline • Offline (Jason) • Texas/New Mexico/Wyoming system is fully interoperable • In times of natural disaster, recipients can redeem benefits in relocation states. • Online (Reed) • No two online systems are alike – all are proprietary. • Currently no way to support variant online WIC EBT solutions at the same POS. • Message formats for different processors might preclude interoperability altogether.

12. Communication IssuesComparing Online and Offline • Offline (Amy/Jennifer) • No need to communicate back and forth with the host • If stores have power WIC clients are served • Batch submission at the end of the day • Disruptions in communication infrastructure don’t interrupt transaction processing. • Online (Reed) • Must have connectivity through (at minimum) two gateways. • Most complicated online transaction ever attempted • Message sizes 10-20 times larger than other online transactions • Outages have increased in Michigan following implementation – impacting both SNAP and WIC

13. Training IssuesComparing Online and Offline (Amy/Jennifer) • Offline • Standard register training mode • Cards loaded with benefits work for training • Training transactions simply not submitted for settlement • Online • No host training box • Requires a large development to implement useful training • Retailers must develop a testing environment unique to online eWIC. • “Dummy” cards can be provided

14. ConclusionsArkansas Retailers’ Recommendation (Jamie/Mike) • Ultimately, each WIC agency needs to choose a platform that works for them. • Important considerations: • Service to our customers • Costs • Likelihood of success