Vending Industrys Payment Providers Emphasize Convenience And Security ACE 2014

MYRTLE BEACH, SC -- Representatives of leading payment technology providers offered an update on the state of the art at a seminar held during the 2014 Atlantic Coast Exposition. Panelists were Jon Finkbeiner of USA Technologies, Ashley McPhaul of Cantaloupe Systems, Lauren Miller of Crane Merchandising Systems and Paresh Patel of PayRange. Lance Roper of Canteen Vending (Columbia, SC) moderated.

Each led off with a summary of their companies' products. McPhaul explained that Cantaloupe, established 10 years ago, pioneered "cloud-based" route management software. The Web-hosted service provides remote machine monitoring through the "Seed" device and accommodates cashless payments; the vending management software handles a wide range of tasks from inventory control to the calculation of sales taxes and commission payments, and gives operators access to their information through any Internet connection. Cantaloupe services are backed by an expert support staff presently numbering 30 engineers and vending specialists. "Our customers say we give them a 'differentiator' other than commission rates," the industry veteran summarized.

Miller observed that Crane's Stream­ware business now includes the comprehensive VendMax management software suite, which works with the Streamware Connect communications system and Navigator telemetry and cashless payment processing device to provide a seamless environment. Streamware Connect conforms to the Vending Data Interchange standard, and so is "agnostic," able to exchange data with VDI-compliant systems from other manufacturers. Miller concluded by describing Streamware Connect capability as enabling a gateway for remote machine monitoring (of new telemeter-equipped venders or kits retrofitted to existing equipment) as well as cashless payment, including prepaid and loyalty programs, at vending machines and micromarkets. It also enables loading content down to remote machines. And VendMax, which handles the data, also can accept information loaded up from handheld route computers.

Patel explained that he developed PayRange to meet a need he encountered as a successful vending operator. "I wanted cashless payment capability on my machines, everywhere," he recalled. "I wanted a 'plug-and-play' solution that didn't involve a card reader." With those criteria in mind, he applied his information technology skills to devising a little module that simply plugs into a machine's payment system, using the existing harness. This communicates with customers' smartphones using their Bluetooth personal-area network transceivers, enabling them to receive machine identity and pricing information. The smart­phone, which is connected to a very powerful network, then accesses a secure website to register the payment, deduct it from the customer's account and authorize the vend. That done, the vend is enabled by local Bluetooth transmission. The Pay­Range module costs $45.

Finkbeiner explained that USA Technologies developed its first cashless payment system for unattended equipment nearly two decades ago, and has been refining it steadily since then. It thus has developed into an end-to-end cashless payment services pro­vider. "We're integrated; there are no 'handoffs'," he observed. "We have more than 300,000 installations, and we've never had a security breach." Moreover, USAT's long experience with a large and varied clientele has enabled it to assemble a continually updated "knowledge base" of the performance of cashless vending in a wide range of location types. The business consulting program that this makes possible is available to USAT operator subcribers at no charge. USAT's service includes back-of-house functions and accommodates mobile payments, micromarkets and coffee and water delivery systems as well as prepaid services and loyalty programs. In vending, it is able to transmit DEX and MDB alerts from machines in the field.

Roper opened the discussion by asking the panelists to describe the method a vending patron uses to make a payment.

McPhaul replied that Cantaloupe's system accommodates existing magnetic, contactless and near-field wireless instruments, from traditional credit cards through Google Wallet and Apple Pay (with the new iPnones 6 and 6+). It also can accommodate loyalty programs.

Miller explained that Crane has striven for a system able to serve customers who carry no cash as well as those who carry nothing else. As such, its equipment can handle all sorts of payment cards, NFC applications like Google Wallet, Softcard (fomerly Isis) and Apple Pay. For that reason, it is compliant with the EMV protocol and security standard, and will be easy to update when the criteria for full EMV compliance in the U.S. are finalized. The operator can choose specific bezels to accommodate desired payment system options.

Patel observed that the object should be to free the patron from having to think about how the payment system works. "All of us think about, and see, vending machines, because that's what we do," he pointed out. "The customer doesn't see what we see. When you ride in an elevator, you don't care about the firmware or the hardware. Our goal is to eliminate friction from the payment process."

Finkbeiner agreed: "The customer is the center of the universe," he said. "Let your customers pay however they want to, as long as you get the sale."

Roper then asked about security. "The newspapers were reporting another major retail security breach," he said. "Is the problem getting worse?"

McPhaul replied that card fraud in vending is negligible, amounting to well under $1 for every $1,000 spent. "People don't use stolen credit cards at vending machines -- they go out and buy a television set," he pointed out.

Miller explained that "Crane doesn't touch your card, and doesn't store your data." Crane's hardware complies with the Payment Card Industry's security standards, he said; once the transaction request has been sent to the payment processor, that processor assumes responsibility.

Patel reported that "We never see your credit card number." He said there is no way to know whether fraud is going to be a problem in vending, but it is well to pay attention to the shift in responsibility for losses occasioned by card fraud that may imperil merchants who do not adopt terminals that conform to EMV requirements by October of next year.

Finkbeiner observed that USAT's end-to-end process keeps the transaction process in house. Operators certainly should be aware of security threats, since the cost of a breach could be catastrophic. USAT will have an EMV-ready bezel available next year.

An audience member asked who is responsible if someone steals card information from a merchant.

"At Crane, we're the merchant, but you're responsible for the location as a 'submerchant,'" Miller explained. "You would be responsible if somebody installed a 'skimmer' on one of your card readers."

Patel agreed that the vulnerability is at the card reader, and pointed out that "skimmers" -- unobtrusive little mechanisms that thieves can attach to the card entries of terminals -- have been unleashed with great effect against targets including the New York City Transit Authority, Costco and the U.S. Postal Service. He added that it can be difficult to imagine how a thief could install a "skimmer" on a merchant terminal, since there's always someone nearby. "But my operation had a machine in a middle school, and somebody drilled out the lock," he recalled. "The security showed them doing it -- and also showed the assistant principal walking by and saying 'Hi' to them as they worked. If you look like you know what you're doing, nobody will bother you."

Finkbeiner reiterated that USAT is the "merchant of record."

Cost-Benefit Analysis

Roper then asked the panelists about the return on investment an operator can expect from a cashless payment system: "What's the breakpoint, the payback?"

McPhaul replied that it is variable, but the investment will prove worthwhile since a great many customers would like to use cards instead of, or in addition to, cash.

"Right; it's not a magic number," Miller concurred. "We've got a calculator you can use. The VendMax program can 'mine' your data for six months or a year to help identify the best machines for cashless payment, or remote monitoring."

Patel observed that another answer is, "What's the ROI for a coin mech or a bill validator?" That calculation is seldom done because those things are essential to being in the vending business.

Finkbeiner said that USAT can provide specific estimates for different kinds of machine and location; "but in general, we say you'll see a 15% sales rise. Beyond that, we'll help you predict the results."

Another audience member asked how an EMV card differs from the familiar traditional credit and debit card.

"Well, it requires a physically different card reader," Miller replied.

"And an EMV card is much harder to duplicate," McPhaul added.

"At the moment, no EMV readers are available," Miller continued. "We can supply a compliant one right now, and it will be updated to full EMV conformity." Finkbeiner said that USAT also offers such a bezel.

An audience member asked what percentage of vending machines are equipped for cashless payment. The panel's consensus was that the number is less than 10%.

"Why has adoption been so slow?" another participant asked.

"This industry scrutinizes every dollar it spends," Miller replied. "Vendors don't jut dive into new things."

"Right," McPhaul agreed. "The adoption rate is steady, but it's not rapid."

Patel suggested an analogy with consumer adoption of personal electronics. "I had six or seven 'personal digital assistants' and cellular telephones before I got an iPhone," he recalled. "Most people didn't. The iPhone took away all the complexity and met the needs of consumers; Apple eliminated the friction.

"That's what I'm trying to do," he added. "And it's hard work!"

Finkbeiner pointed out that bill validators also encountered considerable resistance when they first became available, but operators eventually recognized that they had to have them. He predicts that cashless payment systems will follow the same trajectory, because the younger generation is demanding them.

In response to a question about the NFC compatibility of available cashless payment systems for vending, McPhaul, Miller and Finkbeiner replied that NFC-capable card readers are available for their respective systems. Patel pointed out that the new Apple Pay system does away with the need to read a physical card, since it stores the user's card information for encoding and transmission from the phone. "You don't need a card reader," he pointed out. "Our system works with Bluetooth, not NFC, so the customer can use any phone."

Another audience member asked about two-tier pricing, now allowed by the major card issuers. Miller replied that Crane has found that offering a cash discount at the vending machine has become more prevalent, and has prompted less "pushback," than had been anticipated.

Finkbeiner said that USA Technologies operator-subscribers are running close to 30,000 machines that offer two-tier pricing. "The differential doesn't seem to bother locations. One way to present the concept is to say, 'Mr. Location, I want to add cashless vending here, which will enhance customer convenience and boost sales. I can do it in either of two ways: by offering two-tier pricing, or by deducting the cost of the installation from the commission.' This is worth trying," he suggested.