Vending operators interested in understanding the costs associated with cashless vending had the opportunity to hear from an expert in this field, Stacey Finley Tappin, vice president of sales and marketing for Apriva Vending, during the recent Southeastern Vending Association Convention in Destin, Fla.
Tappin spoke at a two-part presentation on bill recycling and cashless, sharing the stage with Chuck Reed, marketing director for vending at MEI. Reed’s presentation was reported separately in VendingMarketWatch.
Before handing the presentation over to Tappin, Reed noted that cashless in combination with bill recycling results in higher sales than just cashless or just recycling. He noted that a study of a 2-case-per week machine selling product at a $1.25 vend price experienced the following annual sales lifts: $507 with a credit card reader, $470 with a bill recycler, and $615 with both the card reader and the bill recycler.
The annual sales lifts were greater for a 2-case-per week machine selling product at a $2.50 vend price: $1,970 for a card reader, $1,859 for a bill recycler, and $2,349 for both a card reader and a bill recycler.
Tappin spent much of her time focusing on the costs involved in cashless vending.
A show of hand in the room indicated that only a few of the operators in attendance already offer cashless.
By contrast, she said all major beverage bottlers are offering cashless.
Cashless service providers charge subscription fees to enable the service, Tappin noted. She said there are multiple providers for operators to consider.
In trying to explain how the fees are structured, Tappin said cashless “brands” such as MasterCard and Visa collect interchange fees for taking card payments.
“Interchange is the foundation of the cashless ecosystem,” Tappin said.
The interchange rate is a percent commission charged by the brands for the ability to accept card payments.
The interchange rate varies based on the brand (Visa, MasterCard, AMEX, etc.), the type of card (standard, corporate, etc.) and the acceptance process (swiped or non-swiped).
She noted there are two types of interchange scenarios: fixed and pass-through.
She said fixed interchange is based on determining the average rate for cashless transactions. She said the brand “bundles” the interchange fees and the merchant bank’s processing fees.
Some merchant service providers offer an “averaging” scenario which results in a fixed rate for most transactions, Tappin said. Fixed rates “bundle” interchange fees and the merchant bank’s processing fees.
Under a fixed system, vending operators can better forecast their costs, she said. In addition, the monthly statements are easier to understand.
Under the “interchange plus” scenario, interchange rates are separated at the transaction level, with the merchant account provider assessing their fees by line item. This is the preferred method for large merchants, Tappin said. The benefit to this method is that it provides a clear breakdown of the various interchange rates by card type.
She said MasterCard and Visa disclose their interchange rates twice per year.
Tappin said operators should consider if they prefer a simpler pricing model to more accurately forecast monthly costs, or if they prefer a more detailed pricing model to better understand fees at the transaction level.
Tappin suggested vending operators who prefer a fixed system ask the provider what their rates are and if there are any additional transaction fees.
Those preferring an interchange pass-through system should ask the provider what the additional fees are after the interchange fee is assessed.
She said operators should also ask providers if there is a monthly statement fee, if there is a fee for breach insurance, if there are charge-back fees, and how quickly they get funded for transactions.
Tappin noted that cashless works best in the right locations: those with high traffic, high prices, and consumers who are more likely to use cashless.