Contactless payments coming like a freight train

Contactless payment using “electronic wallets” and cell phones will over time dominate retail commerce, including the vending market.

The latest research indicates that the self-serve marketplace will see the use of contactless activated “tap-and-go” cards and tags combined with near field communication (NFC) enabled cell phones outpace cash and magnetic swipe-cards.

Mobile commerce is coming like a freight train, and in the next one to two years we believe contactless implementation will ramp up dramatically.

More cell phones and PDAs are being manufactured with “electronic wallets” in them, encouraging consumers to switch to the convenience of mobile commerce rather than traditional swipe cards when making a purchase.

Companies in the payments industry, including MasterCard, Visa and Discover, are enabling the transition to contactless and electronic wallets combined with new a set of competitive entrants, including the ISIS group: Verizon, AT&T, and T-Mobile, Google, Apple, and PayPal. These companies are working together to make a big push into the mobile payments space, and they are aggressively targeting vending, kiosk and other unattended point-of-sale self-serve markets as an important part of their strategy.

Vending operators, large and small, and beverage companies are increasingly investing in cashless payment to make cashless acceptance a significant part of their standard payment offering, in association with cash and coin. The shift had been most evident over the past two years, delivering greater payment convenience to consumers, and enhanced competitiveness for vending operators.

Cashless grows in vending

We have been tracking the cashless trend closely since 2008, and have seen average cashless sales in vending machines grown from 16 percent just two years ago to roughly 30 percent of total sales today – almost doubling over that time period. Anywhere there is a self service retail business that had been predominated by cash-coin payments in the past, the consumer demand for card acceptance is growing significantly.

Approximately 30 percent of transactions in vending machines equipped with USA Technologies card acceptance terminals were cashless, with 70 percent of these cashless transactions being debit card transactions. Consumers have shown their preference in using their debit cards ahead of credit, especially for small-ticket purchases.  

We are not promoting the elimination of cash or coin because having all three options – swipe card debit and credit, contactless and cash and coin – gives consumers the ultimate choice and it ensures our customers should never lose a sale. However, there are situations where customers have decided to go all cashless in certain applications where cash payments did not make sense, while others have opted for all cashless to help overcome vandalism and theft at their machines.

All self service formats affected

We work in all facets of self-service retailing with vending being our largest channel. We are receiving significantly more requests and seeing a lot more conversion to cashless in other self-serve industries, including the kiosk industry, the laundry sector, the car wash and automotive markets, and the amusement and arcades business. These other self serve businesses are experiencing the same challenges that the vending industry experienced – limitations on how much cash or coin a consumer carries, price elasticity barriers, as well as demand from consumers wanting to use their credit and debit cards.

Our over-riding goal is to improve the consumers purchasing experience and grow same store sales for our customers by incorporating card acceptance. We want the consumer to purchase any and all of their desired products or services, without any payment limitations.

Over the past 12 months, competition in the electronic and cashless payments industry has ramped up dramatically between the traditional card companies combined with the emergence of online payment companies and the wireless carriers. In the next 12 to 24 months, we will see mobile commerce have an appreciable impact on moving people from cash and coin to electronic payments, using their cell phones and PDAs, and it will be a key factor in driving sales growth in the vending and self-serve retail space.