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Issue Date: Vol. 51, No. 3, March 2011, Posted On: 3/31/2011


Cashless Payments Go Mainstream In Unattended POS Markets


by Michael Lawlor
USA Technologies, USAT, Michael Lawlor, cashless vending, cashless payment, credit card usage, debit card usage, video game, AMI Entertainment Network, juke box, snack vending, micropayments, vending business, vending machine

Cashless payment has gone mainstream in vending, and is expanding rapidly into nontraditional vending and other unattended point of sale markets. The number of people buying sodas, snacks and other single-serve items from vending machines with their debit and credit cards reached a tipping point in the latter half of 2010.

As a result, the market has changed dramatically. Not only has the cashless payment option become standard in vending as we move further into 2011 -- in new machines and retrofitting existing ones -- but cashless is spreading at lightning speed into kiosks, entertainment equipment like countertop games and jukeboxes, into self-serve laundires at universities and in high rise buildings, and into automotive services like carwashes. Card use also is expanding as a way to pay road and bridge tolls. Cashless acceptance in vending, kiosks and other unattended points of sale has fast become a "must have" for operators to stay competitive in the marketplace.

At the same time, cashless payment media are changing just as quickly across the board, from the traditional debit and credit "swipe" cards to prepaid cards, contactless cards, and mobile payment devices, led by cellular phones incorporating near-field communications (NFC) capability.

VIRAL TO COMMONPLACE
Cashless today is where bill validators were 30 years ago, when consumers preferred to pay with $1 notes rather than a pocketful of coins. Bill validators were long offered as an alternative to coin, then suddenly "went viral." Almost overnight, banknote acceptance on many kinds of vending equipment achieved 100% penetration in the U.S., and became commonplace worldwide.

It's a fact: young people today do not carry much cash in their pockets. They prefer to pay with what is "top of wallet," and that typically is a debit or credit card.

Recent USAT research showed almost 30% cashless usage in vending machines equipped with card acceptance terminals. Debit card activity was significantly outpacing credit card usage in vending. We estimate more than 70% of USAT's transactions are done with debit cards. Debit cards are quickly replacing cash and coin payments.

Electronic and contactless payment, especially wireless (mobile/cellular phone) payment methods, are growing at unprecedented speed. We are seeing more contactless payment competitors emerging; Visa, MasterCard, Discover, AT&T, Verizon, T-Mobile, Sprint and PayPal will get more involved. One of our preeminent customers, Starbucks, already has a mobile application which is operational nationwide.

FINAL BASTIONS CRUMBLE
Today's wired and wireless consumers love their cards, and are beginning to show increasing interest in using their mobile phones for making payments. This continual move towards cashless payments for everyday purchases is pushing the last traditionally cash-only markets toward accepting cashless payments.

USAT has seen this accelerated move into cashless payment firsthand, and over a very short period of time. In just the past 12 months, we have more than doubled our cashless customer base to 1,400 -- more than 1,200 bottlers, vending companies and other owner/operators in the self-serve retailing space. We have nearly 110,000 cashless connections on our ePort Connect Service, twice as many connections as just a year ago. Our annual cashless transaction run-rate has exceeded $100 million. Our daily transaction count is approaching 250,000. It is only a matter of time before card readers are as commonplace as bill validators are today.

OPERATORS WANT COMFORT PLUS
Customers switching to cashless want to feel they are making the right investment decision. Converting to cashless, after all, is probably the most significant change to happen in vending in a quarter century. Operators want cashless to help them grow revenue by offering a more convenient way to pay, raising prices without losing volume, increasing incremental sales from consumers buying more than one item per transaction with their cards, and buying more expensive items. Once they decide to go cashless, operators need to determine what service will best suit their needs.

We have found that most operators are looking for:

• A proven one-piece cashless solution that is easy to implement and scale.
• An open system that gives them the flexibility to connect the technology they have.
• A system that provides ancillary features and benefits like DEX telemetry services together with cashless payment services.
• A single-source partner, helping them avoid the need and cost of going to separate hardware, software and services providers. They prefer a one-stop shop.
• A partner equipped to provide accurate marketplace intelligence to help them locate their cashless services for the best return.
• A partner supported by formidable patent protection.

The cashless value proposition is something operators can take all over the world, and it is not limited to just the estimated 30 million vending machines worldwide. We are seeing growing evidence of cashless expanding rapidly in the kiosk market, as well as entertainment, laundries, carwashes, auto services, toll roads and more.

For the kiosk market, USA Technologies already offers the software developer's kit version of its ePort cashless technology. Kiosks are fast reaching the "tipping point" in transitioning to cashless. We estimate there are about one million kiosks moving $750 million in transactions in the U.S. alone.

We already have upwards of 8,000 e­Suds cashless terminals in self-service laundries at nearly 60 universities and colleges nationwide. Cashless laundry services are also growing rapidly in high-rise and other multifamily housing.

Our cashless software is being "OEM'd" into countertop videogames and other entertainment machines. One customer is manufacturing all-new touchscreen games terminals with the software installed.

Car vacuum machines and tire inflation services at gas stations and carwash services are also going cashless.

USA Technologies is not only simplifying the payment process for vending, but in a growing area of non-traditional vending and other unattended POS areas, where operators are seeking greater efficiency and financial effectiveness, and consumers greater ease and convenience.

We are convinced that the more vending machines, kiosks and unattended POS terminals offer cashless payment, the more consumers will come to expect the ability to use their cards and mobile devices, and the more sales will climb.


MICHAEL LAWLOR is vice-president of sales and business development for USA Technologies Inc. (Malvern, PA). He has 24 years experience in the vending and beverage industries, working half of them at USAT. Prior to USAT, Lawlor was president of Apex Vending Services. He also worked at PepsiCo. USAT provides networked credit/debit card and other noncash systems to the vending, commercial laundry, hospitality and digital imaging industries, as well as energy management technology for vending machines and other appliances.


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