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The concept of installing credit/debit card systems in vending machines seems fairly straightforward, but the reality is that these systems have seen very limited deployment in the vending industry. There are several million vending machines in the U.S., yet my research suggests that less than 10,000 of them are equipped to handle credit and debit cards.
My candid assessment is that in the past, technical problems (covered in last month's article) and poor return on investment (because of network and processing fees) have hindered adoption. The good news is that most of the technical problems have been addressed and there is big money trying to make credit cards work in the vending segment. Sooner or later, all vending equipment will eventually take credit cards.
When I say "big money" is trying to make credit cards work in vending, I am referring to the deployment of machines equipped with credit card readers by the largest beverage bottlers. There has been nationwide deployment of cashless vending machines and point-of-sale terminals by MasterCard and USA Technologies.
This represents the impetus of "open" systems, as opposed to "closed" systems. Last month's article reviewed both types of cashless systems.
I spoke to several operators that had deployed credit card solutions in their machines. In general, the systems were cost effective where prices are high, and low commissions justified the added expense. The success was mainly in high price point locations like airports and amusement parks with vend prices at $2 or greater.
Some great examples include high-end glassfront beverage machines that sell 16-ounce soda for $2 a bottle, and higher priced health and energy drinks for $3 or more. The sales lift with credit cards in these deployments was 10 to 30 percent.
Many of these operators were provided the credit card hardware at a highly subsidized cost. These operators found they could cover the communications and per transaction charges based on the sales lift. The jury is still out on whether the upfront $600 hardware costs would have justified the cost of the total solution.
New players enter the fray
Besides the support of MasterCard, several new system providers are also promoting credit card use.
- Automated Vending Technologies is a company that manufactures vending machines as well as a host of vending technologies, including digital touchscreens and cashless payment. The payment solution includes credit cards, bar code cards, and debit cards. The cashless component can be retrofitted to existing machines.
- Heartland Payment Systems will be offering an end-to-end solution for the vending channel. They acquired Debitek (with 20 years of experience providing cashless solutions in vending) in February 2006, and have been working on the solution ever since.
- Isochron has a new solution that involves in-machine hardware and connectivity to support credit cards. Their credit card solution has a display on the credit card reader that supports full-color and advertising.
Thirty five machines in the Atlanta, Ga. airport have Isochron credit card readers with the innovative display solution. Isochron is marketing the solution primarily to larger operators that are using its VendCast solution, which provides machine management and selective remote monitoring of machines. The cost of the VendCast system with credit cards requires a $600 upfront hardware investment and $10 a month in monitoring fees and 5 percent to 10 percent transaction cost, depending on the average vend price and volume.