Cashless Solutions: Effective Models are Emerging

Cashless systems have been available to the vending industry in some form or fashion since the mid 1980s. These systems have offered a variety of ways for the consumer to purchase products from a vending machine without using hard currency, utilizing student ID cards, RFID keys, hotel keys, employee badges, and standard credit and debit cards. Some systems even allow the consumer to be identified using simply a PIN number or a fingerprint (like the security system built into my latest laptop).

Cashless systems have gained traction in several other markets like gaming, laundry, self-serve kiosks, and certainly credit and debit cards are accepted virtually everywhere, even at most fast food restaurants. Cashless is much more widely deployed in Europe and some estimate that 70 percent of all vending equipment in Italy is outfitted with cashless technology.

What has hindered widespread adoption of these systems in North America? Are cashless solutions profitable for vending operators? In what types of locations does the cashless model work for operators and consumers? Does the technology work and can it be easily deployed today?
In reviewing the performance of cashless vending to date, I found some remarkable instances where cashless has not only vastly increased the profitability of the operator, but the success has led to the elimination of all hard currency payments.

After talking to cashless providers and their customers, I believe that most operators could benefit from deploying certain types of cashless systems in specific targeted types of machines. More importantly, I believe selectively offering cashless systems in competitive bids could allow operators to win bids without offering the lowest prices or highest commissions.

This article will examine the different types of cashless systems, focusing separately on closed systems for special applications and credit and debit card systems that are suitable for increasing sales at public locations. It will also examine how advances in technology have solved most of the problems associated with deploying cashless solutions.

Different types of systems: Closed and Open
A cashless veteran will speak of many different types of cashless systems and their architecture, but for most vending operators, cashless systems can be considered in two broad categories.

Closed cashless systems are suitable for closed environments like factories, universities, prisons, or hotels where the consumers are known in advance and have cards, ID badges, keys, hotel keys, or even their fingerprints that are used instead of hard currency to purchase goods from vending machines. Closed cashless systems come in two categories.

Stored value closed cashless systems store the value of money in a chip on a card or key that is read when swiped or inserted into the vending machine.

Online closed cashless systems only need to identify the consumer somehow (i.e., thumb print, PIN, employee ID badge, university ID, etc) during a purchase. The system contacts a central computer over a wired or wireless network to authorize payment. The value of the money in a user's account is stored on the central computer rather than with the consumer.

Open cashless systems refer to standard debit or credit card accepting systems which can be installed in any vending machine to give consumers a common alternative to cash when purchasing goods from a vending machine. These are also "online" systems, but the central computer is the credit card issuer's bank. This article will reference these systems as standard credit/debit card systems.

While these are the two primary types of systems, it is important to note that many cashless systems available today actually provide "hybrid" functionality between the systems. For example:

Most stored value closed cashless providers offer a "recharge" station that can recharge the keys using standard bills or standard credit cards.
Students in a middle school may be able to use their student ID at the vending machines, but these charges may ultimately be charged back to their parents' bank accounts using Web-based software provided by the school foodservice system.