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State-Of-The-Art Advancements Add To Appeal Of 'Closed' Cashless Systems

Posted On: 9/11/2006

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U.S.A. -- With the current buzz centered around credit card acceptance and mobile phones for vending machine purchases, most operators are enticed by the potential, but leery of their ability to justify the associated transaction costs on low-ticket items. While "closed" systems limit access to the population that is issued a prepaid debit card can't capture the credit card swipes of an increasingly cashless consumer base, operators are reporting that installing such technology has reaped measurable rewards for their clients, customers and bottom lines.

Art Dunham, assistant director of food services for Pinellas County Schools (Largo, FL), told VT that the school system has implemented eSecure Peripherals' cashless system at one of its high schools, in a groundbreaking pilot program launched last spring, and that its enormous success has provided the green light for eventual implementation in all of the school system's high schools.

Driving the first school towards cashless vending was its principal's decision two years ago to shift the school day to begin at 7:00 AM and end at 1:15 PM, with lunch following as the final period of the day, and students dismissed at 2:00 PM. "The problem is that no school here is more than 10 minutes from the beach, so most students, as soon as they finished that last class, left school for the beach, or home, or wherever. They're not likely to stay at school just to have lunch," explained Dunham. "It is our responsibility as a school to get nutrition into them during the school day and we decided that we could be more effective during their eight- to 10-minute passing time from class to class, if they could grab something convenient and nutritious from a vending machine that they pass on their way to class. Our whole goal was to increase participation in the lunch program."

The school hired a vending industry consultant who installed three Necta Star and Crane Shopper food machines and brought eSecure Peripherals on board, to develop an interface to integrate the cashless technology in the vending machines with the lunch accountability software already in place at the school.


Because federal law requires schools to verify students who qualify for free or reduced lunch by having them provide two means of identification, eSecure Peripherals equipped the machines with both a biometric reader and a keypad for the student to enter a PIN. "At the register, the two means of identification are the PIN, and the cashier checking the student ID, but with the machine, we needed a system to ensure that the right student is purchasing at a discount, or receiving free, one lunch. The fingerprint technology and PIN, all tied into the school database, assure that," explained Dunham.

When students who qualify for a free lunch make a purchase from the food machine, the compartments holding their selections open simultaneously, allowing them to retrieve the components of a complete lunch, including a protein, bread, fruit, vegetable and milk. For those entitled to a reduction in price, the discounted amount is deducted from the balance on their debit cards.

The school fills the vending machines with a rotating menu of sandwiches, yogurt, fruits, salads, juices and milk that meet stringent school lunch program criteria.

All students, faculty and visitors can insert their fingers into the biometric reader to make a purchase from the vending machines. When the machine does not recognize the fingerprint, these patrons are charged the full a la carte price. The machines do not accept cash; prepaid cards can be revalued with a check or cash at the school's management office. Students and parents can also revalue their accounts online.

According to Dunham, participation in the school lunch program has risen 25% since the launch of the cashless vending program.

Implementation of the eSecure Peripherals system was relatively seamless, according to the foodservice professional. "One of the only early development issues was that the biometric readers were at a 90º angle and it was difficult for students to get the whole tip of their finger in, so we had to remount them at a 45º angle," he recalled. "Other than that, it was almost perfect from the start, really wonderful. We're going to move it into every other high school in our system as soon as possible."

The program is funded by the school's foodservice budget. "It is more expensive than the regular service line when you factor in all the technology; you're saving on the cashier, but you still have to make the sandwiches and fill the machine," noted the foodservice executive. "It's not so much a labor saving as a means of getting more food to the students. With the eight to 10 minutes that they have, students will not wait on line, but with the vending machines, wherever they are, they can get a nutritious meal."

With the start of the new school year, Pinellas County Schools recently installed equipment to extend the lunch vending program to seven more schools. Dunham plans to have 21 schools on board with the program by spring and 50 high schools running cashless vending machines by the end of the 2008 school year.

"Kids today are not afraid of technology; they embrace it. They took to it like fish to water," reported Dunham. "It's been a huge success and we're very excited about expanding the program."

Jim Brinton of Evergreen Vending (Seattle, WA) shared another success story of employing "closed" cashless technology in one niche he serves. Operating 50 routes throughout western Washington and northwestern Oregon, Brinton currently employs Debitek's cashless vending technology at six prisons, and installed the technology in response to the client's request five years ago. He fully recognized the importance of such a system, given the nature of the population's base of repeat customers in an environment that is "closed" by its very nature.

"I saw a spike of 17% to 30% in sales when I added the cashless system. It's like using a credit card, it doesn't feel to the customer like they're spending money when they use their smart card," reported Brinton.

Evergreen Vending offers tiered pricing through its Debitek system. Prisoners pay a higher vend price that incorporates a built-in commission to benefit an inmate betterment fund, while staff members receive a discount on vended products. The vending company also issues discount cards that provide even greater savings for key staff members.

"It's much easier to use debit cards than cash. For one thing, it's much easier to increase the price; it's less noticeable and it gives us the ability to raise the price in any increment, whether it's 1¢ or 25¢," Brinton remarked. "It also allows us to track purchases from each numbered card, which is a big help when it comes to determining the authenticity of refund requests. We can look at the card number and what they bought, at what machine at what time, whereas in the past, we had to take their word for it -- and it's not the most scrupulous population."


The majority of Evergreen Vending machines at such sites accept only debit cards, while those in areas accessible to both visitors and prisoners accept cash as well.

Until recently, patrons could only add value to their cards with cash at revalue stations, but Brinton has upgraded the system with the ability to revalue with a credit card. "I'm not at a point where I'm ready to accept credit card payment in my machines, because the per-transaction costs are too high," commented the operator. "But customers can use a credit card to put value on a card, which is a whole other level of boosting cashless sales, because people think less of putting the money on their debit card when it's coming from plastic instead of cash. I can afford the transaction cost for $20 of value on a smart card, but not on a 75¢ purchase. They might not want to put $20 cash on the card, but they'll think nothing of swiping their credit card."

During the first few years, Evergreen Vending issued customers a magnetic stripe card, but Brinton made the conversion to smart cards two years ago. "Smart cards are more reliable; there are fewer moving parts in the reader and we've had much better success," he told VT. Brinton charges clients a $2 deposit to cover the cost of the more expensive smart card, whereas the vending company absorbed the 30¢ cost of the magnetic stripe card.

Following Evergreen Vending's cashless vending success, the prison system requested the ability for staff to purchase meals in the cafeteria using the same card, which has proven to be a successful extension of the program.


Brinton is in the process of extending cashless vending into some of his healthcare sites, where he is integrating his services into a back-end system that adds credit to smart cards by means of direct payroll deductions. At one hospital, all staff members receive a discount when they use their smart card, which has proven beneficial all the way around: for the staff, the hospital in the morale boost it provides its employees, and Evergreen Vending by boosting sales.

John Battaglia of J&J Vending Inc. (Rochester, NY), who runs a small vending business, was impressed when he saw Paykey's technology at a National Automatic Merchandising Association show in 2002. "I saw it as something my competitors don't do that could give me a competitive edge," he told VT. "With the ease of use it provides the customer, I though it could boost sales."

Battaglia's hunch proved right and he has since installed Paykey's system in 18 accounts. He began by offering the cashless technology only to his largest locations, but has since successfully installed it at locations with as few as 30 employees.

"I've also installed the Paykey devices in more public locations, like malls along with cash acceptance. So, even though it's a 'closed' system in their workplaces, I let customers who have Paykey know that they can use it at the mall and receive a discount, and it provides an added value for them," the operator explained. "I offer discounts to promote sales with the Paykey and they get rewarded for having the key, no matter where they go."

J&J Vending primarily offers Paykey's system in business and industry sites, where customers haven proven most apt to use the technology. The operator has found that while Paykey sales are less brisk at healthcare sites, it is still well worthwhile to make use of the cashless technology in such environments as well.

"It's just way too handy to use the Paykey! It costs them nothing, and it's only a benefit to customers that they need no cash and get a discount. They can easily put notes and coins in the machine to revalue their key," Battaglia remarked. "In a lot of industrial sites, it's very important that they can lock up their purse or wallet and be able to just use their Paykey. Some managers also add value to keys as a reward for employees that have had an exceptional day or week; it's a nice little perk."

Battaglia said he has seen at least a 15% sales lift in sites where he has installed the Paykey system. "Besides added sales, as a small operator, I look at it as another marketing device to provide something other operators are not using," he emphasized.