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Research Graphs Cashless Payment Impact On Profit

by Michael Lawlor
Posted On: 6/3/2010

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USA Technologies, Michael Lawlor, cashless vending, cashless payment technology, credit cards, micropayments, telemetry, vending, vending machine, vending machine business, vending route, vending operator, ePort

Research in the vending marketplace is providing convincing evidence that cashless payment technology is dramatically transforming the industry, improving margins and ushering in exciting new growth. The research points to even greater change occurring over the next 12 months as cashless micro-transactions go mainstream, with cashless vending attracting much of the attention.

The "mainstreaming" of cashless payments for small-ticket items is already evident as more consumers depend on their debit and credit cards to purchase music online for 99¢ -- as well as coffee, fast food, cold beverages and snacks.

As cashless dependency increases, the impact of cashless in vending is becoming more evident, with vending operators and bottlers reporting that cashless solutions are helping them grow their businesses, meeting and exceeding their expectations.

Using data from more than 20 million transactions in over 21 different vending market locations, USA Technologies has been able to identify and analyze trends across vending machine types, locations and price points. Our findings show that cashless payment solutions are driving a rapidly growing return on investment, improving net operating profits and increasing sales.

Key research findings include:

• Cashless payment adoption by consumers is accelerating, and now accounts for approximately 25% of all sales represented in USAT's customer knowledgebase.

• When vending prices are set above $1, credit and debit card use in vending machines increases. The higher the vend price, the higher the incidence of card use.

• Cashless payment systems are key drivers in eliminating vend price elasticity barriers. Cashless is giving operators the ability to adjust pricing to help maintain profit margins without losing the 15%-20% in unit sales typical in cash machines..

• Consumers tend to purchase higher-priced items from vending machines when using a credit or debit card.

• Cashless payment solutions have grown top-line sales revenue in vending machines by an average 15%.

• The Nilson Report (November, 2008) revealed that electronic payment transaction volume had surpassed paper-based transaction volume, representing some 65% of all financial transactions.


Vending operators and bottlers participating in USAT's research are reporting total sales revenue growing by an average 15% after installing a cashless payment terminal.

Channels in education and financial services are recording average cashless transactions totaling more than 30% of all purchases. A more select analysis of a customer's 143 machines in an education account found they were averaging more than $3,000 a year in credit and debit card sales. In the military market, average cashless transactions were as high as 53.6%.


Among the most intriguing findings was an analysis that raising prices in cash-only vending machines typically resulted in a decrease in unit sales, while there was no material unit sales decrease when prices were raised in an ePort-equipped cashless vender. The research found that the flat volume of credit/debit card-equipped machines, when paired with the increase in price, resulted in incremental top-line sales revenue that was likely to be four times the additional revenue obtained by an equivalent price increase in cash-only machines.

Our research and feedback from vending companies and bottlers nationwide showed that when vend prices were increased above $1 in cash-only vending machines, unit sales declined 15%, 20% and even 25%, while unit sales in cashless machines remained relatively stable after the price increase.

Let's put that into perspective. We analyzed a number of 20-fl.oz. beverage vending machines with annual unit sales of 7,500. When the price was increased from $1 to $1.25, the top-line sales revenue impact on cash-only machines was $468, compared with $1,875 for machines with cashless payment terminals.


We also measured cashless card usage when prices were raised. With a vend price of $1, the typical cashless usage was about 22%. When the price was increased to $1.25, cashless usage grew to 27%, and usage grew to over 32% when the price was increased to $1.50. Once you cross the $1 vend price threshold, card acceptance becomes attractive -- and prevalent. Consumers told us it was due to the ease, convenience, and speed of using cashless payment, especially for higher-priced items and multiple vends.

Add it all up, and it shows that cashless addresses the fundamental issue of maintaining and growing profitability in vending, while enhancing customer satisfaction. Operators know that they need to increase price points to cover their growing operating costs. Our research shows that cashless payment is directly linked to an operator's ability to improve operating margins. In other words, the adoption of card payment in vending is contributing to the long-term sustainability of the vending industry.


USAT's research is leading to a better understanding of what vending operators want, resulting in tailor-made hardware and service programs that make cashless more accessible, responsive and affordable. For example:

• USAT's ePort Edge is the lowest priced cashless payment terminal on the market. It is also one of the most popular. Priced at under $199, it costs less than a traditional coin/bill acceptor, making it an industry first.

• JumpStart is a program under which operators can acquire the ePort Edge immediately, with no upfront hardware cost or long-term commitment. Instead, operators pay a low monthly service fee. JumpStart comes with everything an operator needs to "go cashless," from hardware and wireless connectivity to card processing, consumer services, online reporting and over-the-air machine alerts.

• QuickStart allows customers to purchase our ePort cashless solution, and pay over a period of years.

• EPort Connect is a suite of services that makes implementing cashless vending simple, scalable, secure and turnkey

• A new Wireless Signal Strength Kit is designed to determine optimum wireless signal strength before installing an ePort.

• Energy management solutions lower energy consumption in vending machines.


As the vending market continues to struggle with shrinking margins, the data supporting the effectiveness of cashless payment systems illustrates the power of cashless technology and services to improve margins and increase net operating profits.

The data further reinforce how cashless is driving greater operational efficiencies, adding greater ease of use and convenience, enhancing customer satisfaction and strengthening competitive edge.

And it's helping us better understand the vending industry's needs and desires, leading to the development of lower-priced technology, financing programs that require no upfront capital cost, and a cashless vending deployment service designed to help operators strategically locate their cashless vending machines where they deliver the best sales.

The research reinforces our belief that consumers today expect to be able to use their credit and debit cards at vending machines, and operators increasingly want cashless to be a part of their vending solution. Those expectations are supported by the Nilson finding that electronic payment volume accounts for well over half of all financial transactions.

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.