The future is cashless: what’s in it for vending machine owners?
According to a recent study, every American citizen owns nearly 3 credit cards. An overall contactless card saturation ranking (which takes into account the number of debit and credit cards issued per capita, usage of cashless methods, growth of cashless payments, and the proportion of the population that is aware of what mobile payment services are available) shows that along with the US, among the top 10 cashless economies are also Canada, UK, Sweden, Australia, France, China, Germany and Japan. It seems inevitable that we are to become a cashless society and the digital money in e-wallets will soon replace physical cash.
When we say cashless we often think of card payments, however, there’s a strong likelihood that card payments will be soon overtaken by the accelerating trend of device payments and portable payment devices. Having said that, for the retail sector, and particularly for the vending machine industry, the payment system is an integral part of the product offering, so they have to adequately respond to all emerging e-payment solutions such as Google Pay, Apple Pay, Samsung Pay, and PayPal. For example, vending machines advertising the option to pay via Apple Pay have accounted for 22% overall revenue growth, New York Post reported. In some countries, the government plays a significant role in supporting these trends by “bringing in legislation that states that all payment devices in the sector must include the ability to transact via contactless means”. Some vending operators have gone even further by offering their customers the opportunity to pay with cryptocurrency too.
As a result, a whole new universe of hardware and software innovations have sprouted out to accommodate the new trends. Smart technology like NFC (Near Field Communication) has been integrated into a variety of wearable payment-ready devices – smartwatches, fitness trackers, wristbands, key holders etc. – all of them growing in popularity among millennials. This technology, despite being still niche as it’s expensive, is gaining momentum and is expected to grow steadily over the next years. The US wearable market alone is expected to reach 181 million devices sold in 2020, while wearable payments are estimated to represent 20% of the total NFC transactions by that time.
The applications of technology for payment purposes are immense, and the potential benefits for both consumers and retailers are significant. With all that said, however, in an industry such as the vending machine one where everything is about controlling costs and where every dollar counts, most vending machine operators would probably be quite skeptical of the bright cashless future as they know that cashless payments don’t come for free. A major component of the cost that should be taken into account is the expense for buying or leasing the credit/debit contact/contactless card reader units. If you decide to buy the hardware that brings the cashless transaction technology to your machine, be prepared to spend some $40 to $200 per machine. For some of us who own just a couple of vending machines, that could present a significant upfront capital expenditure. This is why most vending operators prefer the leasing or financing options which often come in a variety of bulk offers. If you choose the latter, be sure to factor in the monthly flat communication fee, which is the cost for data transmitting from the reader, as well the credit card transaction fee, which is a percentage of the total transaction amount. The National Retail Association suggests that the swipe fees are usually between 2% and 4% per transaction and can vary depending on a merchants’ card volume and other factors. Applied to millions of transactions each day, fees total approximately $80 billion a year nationwide and while going cashless is supposed to be a safer and quicker option for both customers and vending operators, that expense will undoubtedly heavily impact VM operators’ bottom line. With retail industry profits averaging only about 2 percent, there is no room for retailers to absorb the expense, so vending operators are hedging this constraint by passing swipe fees on to customers in the form of higher prices. Clearly, this isn’t the best solution, because as prices are going up, the consumers will buy less.
If you decide to offer cashless payments with your vending machines, you have to be aware of another disadvantage: on top of the higher cost in comparison with cash payments, don’t forget that kids don’t have credit cards and it might make no sense to equip a machine with telemetry if it is located in a school or is offering specific kid-oriented-products. Before deciding if you are going to accept coins or cash you better check if there are any legal constraints posed by your state, which is the case with Massachusetts, for instance.
On top of the above-mentioned pros of cashless transactions - safety and swiftness - there is another one, probably the most significant and valuable from the business point of view advantage, and this is the real-time data collection capability that comes as a result of cashless payments. Instant data gathering gives you the opportunity to analyze and understand your customers’ buying patterns, to plan more accurately your tactical moves, or to reward the customers for their loyalty, for example. Furthermore, real-time data collection offers you the unique chance to monitor your inventory levels and dynamic changes per machine and per location, specifically for machines with telemetry. You will be able to react immediately in case of a sudden increase in sales and to prevent empty trays and missed business opportunities. Finally, it will give you the ability for precise pre-kitting and more efficient inventory management. Those of you who’ve tried to slice and dice all the data collected from vending machines by using a spreadsheet know it all too well: numerous hours can be wasted that lead to dubious results. Only when using vending management software you can quickly analyze the incoming data, and take better-informed data-driven decisions about your business. You can read more on how cashless technology integrates with vending machine software via telemetry (DEX data) to offer a 360 look at your business real-time here.
If you are willing to gain momentum ahead of your competitors, don’t hesitate. Start your free trial of VendSoft VMS now.