Dive Brief:

• Farmstead plans to add technology to its platform by mid-2022 that will allow it to accept online Electronic Benefits Transfer (EBT) payments for SNAP participants, the e-grocer announced on Tuesday.
• Farmstead is working with Forage, a payments processor that specializes in EBT, to add the new capability, which will also be available to grocers that use Farmstead's Grocery OS service to manage their e-commerce operations.
• Farmstead is currently seeking approval from the U.S. Department of Agriculture (USDA) to join the agency's online SNAP program, which has drawn growing interest from grocers as food insecurity gained more attention during the pandemic. 

Dive Insight:

The pending addition of SNAP payment online builds on Farmstead's mission of making fresh food delivery easier, more accessible and less expensive, said Pradeep Elankumaran, the grocer's co-founder and CEO.

While the USDA has broadened the program allowing authorized retailers to sell eligible foods to SNAP beneficiaries through e-commerce channels, the expansion has not addressed the fact that grocers typically charge extra for online orders, Elankumaran said. That realization led Farmstead to explore the possibility of extending its free grocery delivery model to EBT users, he said.

"Just turning on EBT doesn't necessarily mean that it's a good pitch to the customer [if] you're still winding up asking them to pay more on products and pay more for delivery," said Elankumaran. "So in order to really make it work and actually unlock EBT for the majority of people who use EBT, you have to give them a better proposition, a better experience as a customer."

Farmstead expects to finish the technical work by the end of the second quarter of next year, but it is unclear when it might receive USDA clearance for its own SNAP payment acceptance. Farmstead said in its release that it will be the first online-only grocer to accept SNAP payments, which seems to be technically true, though Amazon was one of the first companies to accept the payments through its online service beginning in 2019.

The e-grocer plans to accept EBT payments in all markets where it offers grocery delivery. The company currently operates in Miami; Raleigh and Charlotte, North Carolina; and the San Francisco area, where it is based, and plans to expand to additional markets next year, Elankumaran said.

At the same time Farmstead expects to have the ability to process SNAP payments, it also plans to start offering the capability to grocers that use Grocery OS, but those retailers will need to receive approval from the USDA independently, said Elankumaran. However, grocers that elect to use Grocery OS may be able to streamline the application process because of Farmstead's addition of the technical infrastructure needed to process SNAP payments, he said.

"If a grocer stacks on to that and says we're going to use the same [user interface], it should help them go through the application process a lot swifter," Elankumaran said.

Elankumaran said Farmstead's decision to add SNAP to the range of payment options it offers was spurred in part by requests from customers and added that the company has had conversations with local government officials about ways it can improve grocery store access for SNAP participants.