Low-income recipients of cash aid or Supplemental Nutrition Assistance Program benefits are especially vulnerable to crime. Since their benefits are usually loaded onto cards that rely on a simple magnetic stripe, thieves can use skimming devices at ATMs, grocery stores, and gas stations to steal card information when the cards are swiped. This allows them to drain the recipients’ accounts.
California, the most populous state in the nation and known for its generous social safety net policies, has been particularly hard hit. Over the three-year period ending in August 2024, low-income Californians reported $242 million in stolen cash aid and $119 million in food benefits.
That’s why California has become the first state to plan the implementation of embedded microchips in its electronic benefits transfer (EBT) cards for added security. This basic level of fraud protection, commonly known as EMV chips, has been available to debit and credit card users for over a decade.
As the largest and arguably most progressive state, California may serve as a bellwether for other states to adopt similar security measures.
“The move by California to equip EBT cards with chip security places them on the forefront of the trend to better secure all types of prepaid cards,” said Jordan Hirschfield, Director of Prepaid at Javelin Strategy & Research. “In this case the chip provides a simple and effective way to reduce fraud, protecting both the beneficiaries and state taxpayers who fund reimbursements to the cards.
“Retailers are already equipped to accept chip cards for credit and debit transactions,” he said. “That means only the state, as the issuer, needs to incur costs to implement the program, and the retailers should already be ready to go.”
Golden State Upgrades
California has recently taken several steps to overhaul its technical operations. The state’s DMV is testing support for ID cards that could be stored within the Google Wallet app. If approved, California would join 11 other states that have adopted digital IDs. Additionally, it became the first state to place all of its vehicle titles on the blockchain.
However, the EBT upgrade looks like it will take longer than anticipated. The state budgeted $50 million for the EBT system upgrades last year, with plans to distribute the new cards to families this summer. But the rollout was delayed due to what the state’s Department of Social Services described as “the complex technological changes required.” The cards are now expected to be in the hands of recipients within the next six months.