Some 1,700 farms and farmers markets that could have lost the ability to accept food stamps this week have been granted a reprieve.
Novo Dia Group had planned to shut down its widely used Mobile Market+ smartphone app on July 31 after a new government contractor planned to go with different technology.
But New York state on July 27 agreed to prop up the payment service for markets nationwide through the end of February.
A farmers market group had previously agreed to fund the service through August.
Those moves averted a crisis at the height of produce season that would have hurt both farmers and needy people.
“That (arrangement) gives us all extra breathing room” to find long-term solutions, said Jeff Cole, senior program adviser at Mass Farmers Markets, a Massachusetts group.
Accepting Supplemental Nutrition Assistance Program, or SNAP, benefits at farmers markets is generally seen as a win-win.
Low-income consumers get access to fresh, healthful foods, while local farmers reap increased sales, said Diane Eggert, executive director of the Farmers Market Federation of New York.
Last year SNAP recipients spent $22 million in benefits at farmers markets and farm markets nationwide.
New York, Massachusetts and Pennsylvania had the highest farmers market SNAP sales after California.
Mobile devices are the most practical tools for processing these payments at farmers markets, which are often held outdoors and lack electric hookups.
But a payment terminal costs roughly $1,000, Cole said — about $800 for the unit plus monthly base and transaction fees.
With their thin profit margins, farmers may need more than $30,000 in SNAP sales before the terminal pays for itself.
Fortunately for producers and farmers markets, USDA offers grants that cover the cost of the devices and some of the fees while they build their SNAP customer base.
But since 2013 — when the agency began offering the grants directly to markets instead of through the states — USDA has churned through the contractors that provide the devices.
The first two contractors, both farmers market industry groups, subcontracted Novo Dia to provide the mobile-device software.
The company came to serve a quarter of the 7,000 farmers and farmers markets that accept SNAP nationwide.
But in March, USDA awarded the $1.3 million contract to Financial Transaction Management, a one-person startup that chose not to use Novo Dia’s product.
When contracting decisions had to be made, Novo Dia did not have a solution that met all of the necessary payment card industry security standards. That would have left farmers markets liable in the event of a data breach, said Angela Sparrow, CEO of Financial Transaction Management.
Going through three vendors in five years would be challenging enough, but the requirements for receiving new devices also seem to have tightened this year.
That’s a problem because payment terminals become functionally obsolete every few years when suppliers stop offering updates, and the current crop relies on wireless technology that is being phased out, Cole said.
Markets typically sign three-year contracts for the payment technology, and it wouldn’t make sense for farmers markets to switch to a new technology every time that contract ran out. “All these existing markets were kind of left in the lurch,” said Juliet Glass, a spokeswoman for the Maryland Farmers Market Association.
Most of the group’s markets run Novo Dia software.
When, in early July, the company announced plans to kill Mobile Market+, many Maryland farmers markets started looking into brick-shaped card readers that are reliable but expensive.
Markets also faced a two- to three-week waiting period to get the devices, Glass said.
Novo Dia is the only company that accepts Massachusetts’ Healthy Incentives Program, which gives SNAP clients additional money to spend on healthful foods, Cole said.
That’s a big deal because clients used $4.8 million of HIP benefits in the June 2017-March 2018 market season, compared to $600,000 in SNAP benefits.
In Maryland and other localities where incentive programs are offered, SNAP customers receive tokens to redeem their bonus bucks.
The news that Novo Dia was planning to kill its app didn’t help confidence in the SNAP program.
Some customers got the idea that their benefits would no longer be good at any farmers markets, undercutting a program for which farmers always are looking for new customers.
“For markets, getting and retaining SNAP shoppers is a challenge because people go on and off that benefit” as their financial situation changes, Glass said.
It’s not clear if USDA considered the possibility of disruptions when it awarded the contract to the new vendor.
In an emailed statement, the agency said the new contractor was not obligated to use Novo Dia’s technology, and that all of the contracts had been awarded in a competitive bidding process to companies that were “technically acceptable and the best value.”
That wasn’t good enough for New York’s Andrew Cuomo.
The governor called the SNAP payment issue an example of “the federal government’s ineptitude” and part of the Trump administration’s “continued assault on the nation’s most needy.”
In a statement Thursday, Novo Dia said it was working with farmers market groups to find a long-term solution before the February deadline.
Among market groups, one of the top ideas is finding an entity to take over the Mobile Market+ app.
Even that might not be enough, though, if farmers markets can’t get subsidized replacements when their present equipment gets old.
Given the weaknesses in the farmers market SNAP program exposed by this crisis, “it’s very easy to see this happening again,” Glass said.