Contactless payments are coming like a freight train

Contactless payments using “electronic wallets” and cell phones will in 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.

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.

Payments industry drives change

Companies in the payments industry, including MasterCard, Visa and Discover, are enabling the transition to contactless and electronic wallets, along with a new set of entrants, including the ISIS group: Verizon, AT&T, and T-Mobile, Google, Apple, and PayPal. These companies are aggressively targeting vending, kiosk and other unattended point-of-sale self-serve markets.

Cashless grows in vending

USA Technologies has been tracking the cashless trend closely since 2008. Average cashless sales in machines equipped with cashless have 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 ensures our customers they should never lose a sale.

However, there are situations where customers have decided to go all cashless where cash payments did not make sense. 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 overriding goal is to improve the consumer’s 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.

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.