Smartphones unlock new forms of payment

It’s no secret consumers are carrying less cash. In their pockets is something even more versatile - smartphones. Besides its original purpose of voice communication, the smartphone is also a mini computer able to access the internet from anywhere. Therefore, the smartphone has enabled cashless payment alternatives to credit/debit card readers on unattended devices. And I’m not just talking about mobile wallets. In Galveston, Texas, parking meters were added to a popular tourist destination that only take mobile payments, according to mobile payments today.

The city chose a system by PayByPhone that allows customers to sign up for an account at the firm’s mobile Website and pay for a parking spot. The consumer enters a parking location number and the amount of time they want to buy.

The most interesting aspect of this conversion, in my opinion, is why the city chose the smartphone payment system. A police officer quoted in the article said that meters that took credit cards were considered, but would have cost millions of taxpayer dollars in equipment and yearly maintenance fees. The PayByPhone system was only the cost to install signs explaining to drivers how the service worked and had no monthly fees.

If the person doesn’t have a smartphone or credit card, then they can go to a retailer and pay with cash. For the first 160 days the system was operational, 50,000 transactions were generated.

This municipality leapfrogged right over credit cards for unattended retail and jumped into smartphones. Why not vending? Traditionally, the industry has been slow to add technology to machines. Credit/debit card readers have only a 5 percent penetration. Yet less and less people are carrying cash.

50 percent of adults use smartphones

Smartphone penetration in the U.S. is estimated to be more than 140 million users. Considering the latest census stats put the number of adults in the nation around 240 million, this means over half of them are using a smartphone. This is steadily approaching the more than 70 percent that have at least one credit card. And the partnerships in vending already exist. Many cashless terminals already take payment via Google Wallet and Isis.

I’m not saying credit cards shouldn’t be accepted on vending machine, because they clearly are more common among consumers, but I am saying that payment by smartphone might be closer in the vending industry than in other retail. At convenience stores and grocery stores, credit card readers are common place, which is not the case for vending. Consumer reluctance to use mobile payments over credit cards doesn’t factor into the equation, because many machines don’t take credit. This puts vendors in a prime position to get a jump on the smartphone payment system. It could be a promising investment for the future.