The voltage generated by the interconnectivity of signals provides power to the embedded microchip. Without this power process, the transactional media would have to possess its own power supply (i.e., battery), thereby adding onboard weight and density. Once the media is powered by the reader, it is able to encrypt and transmit settlement data. The reader is equipped with small lights that blink to acknowledge successful transaction completion.
With a contactless transaction, processing time is reduced and security enhanced since the payment media never leaves the sight or possession of the account holder. A contactless reader is designed with a series of small lights that blink, and may also emit an audible beep while processing a transaction. This feature is often used to promote the technology.
Wave More, Swipe Less
Contactless payment solutions are aimed at traditional cash-only merchant locations where fast customer throughput is essential, such as quick-service restaurants, vending machines, fuel stations, convenience stores and movie theaters. Contactless transaction technology allows customers to authorize and settle transactions by holding, taping or waving RFID media near a special reader designed to capture radio wave transmissions.
Consumers' buying habits are undeniably changing in favor of cashless payments, and the process has been made even simpler as contactless settlements allow buyers to wave more and swipe less.
Proximity payment technology, available to the vending industry, enables consumers already accustomed to multiple payment options at most retail locations to select among payment options to complete a vending transaction. Account holders simply wave or tap payment media near or on the reader mounted on the vending machine and the transaction is automatically initiated and completed. Contactless microchips can be embedded in such media as plastic cards, key chain fobs, mini-cards, tags, stickers, printed labels, cell phones and other media.
Vending will be impacted in several ways
Contactless technology can contribute to enhancing consumers' perception of vending. The combination of new product offerings, convenient methods of payment and overall improved machine servicing can increase revenues.
With a contactless transaction, the vending consumer enjoys the extra convenience of faster transaction speeds (as little as a few seconds), while the vending operator benefits through reduced cash management and increased average purchases (reported at 15 to 20 percent).
Similar to the way cashless transactions positively influenced speed and convenience at the machine, contactless can take business to the next level.
Incentives for vending operators can be found in recently reduced credit card interchange rates and transaction fees being offered by electronic payment providers. It is no coincidence that these new rates and fees, focused on generating significant increased volume in small dollar transactions, are being introduced at the same time as contactless credit and debit cards.
Card issuers offer incentives
MasterCard and Visa have long sought to expand acceptance in quick payment or small-value payment environments.
Visa stepped up its efforts in November 2005 when it introduced procedures to make the payments process faster and easier for cardholders and merchants. This includes offering lower debit interchange rates to merchant acquirers in order to help lower costs for a broader set of eligible merchants.
For example, Visa allows eligible merchant categories, where fraud has been low, to forgo obtaining a cardholder's signature on a receipt for authorized transactions less than $25 to speed up settlement.
First, it is important to consider the account as a whole instead of machine by machine. For example, adding cashless payment systems to individual machines will not always be successful on their own. If consumers have to pull cash out of their pocket for a snack, they may be less likely touse their credit card for a soda.
Operators should target accounts and locations with machines that are already doing well with an average of at least $100 per machine a week in sales and ideally that have vend prices over $1. Generally, the higher the price point, the greater the usage of cashless. For example, we see machines selling beverages at $2.50 or even $3 with large numbers of multivends once cashless is available. Some have experienced very high sales growth where machines had previously been continuously out of change.