Cashless is Coming; Some Tips on How to Get Started

Will cashless vending increase the bottom line, or is it just an added expense?

The answer to this question is that it will increase the bottom line in more ways than you might think. It is helping operators and bottlers right now in several ways including:

• Raising prices without the typical decrease in unit sales.
• Introducing higher priced items.
• Reducing vandalism costs.
• Providing a higher level of accountability.

Our customers, the people who buy from our machines every day, are quickly changing the way they purchase goods and services. Gone are the days when virtually everything was paid for by cash or by check. Now, many people do not even carry cash.

For example, the total amount of goods and services purchased with credit or debit cards in the U.S. in 2000 was $1.552 trillion. In 2005, the number rose to $2.651 trillion (a 70 percent increase) and it is expected to grow to $4.7 trillion (another 77 percent increase) by 2010. The majority of the projected increases are predicted to be in the small ticket purchases (under $5.00).

Here is a good question. Between credit and debit cards, which one has the higher number of transactions? Would you believe that debit cards have passed credit cards by 1.46 billion transactions? Fifty two percent of all cashless transactions are done with a debit card, according to the September 2006 Nilson report, a consumer credit trade journal.

Why the increase in card transactions?

The increasing amounts of credit and debit card transactions are due to a number of factors. First is the increased number of points of sale with credit and debit card capabilities. For example, virtually every gas pump has a card reader. Can you think of the last time you saw a gas pump without a card reader?\

Could vending follow the same path? Fast food restaurants such as McDonald's and Burger King have installed credit and debit card readers at the counters, and guess what? The amount of sales per transaction has gone up! Taxis, toll booths, parking meters, sports stadium concession stands, trains and subways now all provide credit and debit card payment options.

Second is convenience. The card companies are introducing new technology to make the purchase process easier to use for the consumer. MasterCard is introducing their new contactless “PayPass” program which includes a chip on the credit card along with the magnetic stripe.

Rather than giving your card to the sales clerk to swipe the card, the customer can place the card up to the new “tap and go” reader which quickly receives the card information from the chip. The new contactless feature allows the clerk at the fast food restaurant, for instance, to spend time retrieving the order rather than processing the transaction.

The amount of time per transaction decreases, the amount of transactions increases and the restaurant makes more money with a more satisfied customer.

The chips are currently available on credit and debit cards as well as on key chain fobs. In the very near future, the chips will be included on cellular phones in this country. This capability will allow the customer to simply place their cell phone rather than the card to the reader, charge their credit or debit card, and complete the transaction. Credit card companies no longer require a signature for purchases under $25, and the Federal Reserve has ruled that purchases under $15 no longer require printed receipts for these transactions.

The younger generation prefers cards to cash

Third, the younger generation is used to using credit and debit cards to a point where they do not carry cash. And believe it or not, the vending industry had a part in developing this situation.

“Generation P” or “Generation Plastic” is the 18- to 25-year-old age group. And yes, our industry had an influence in creating this cashless generation. Closed card systems have been found on vending machines at college campuses for many years.