Vending Machines Use Mobile to Overcome EMV, Cash Woes

Vending machines were among the first categories to accept contactless mobile payments, but they still rely heavily on cash for impulse snack purchases — at least for now.

USA Technologies is working hard to provide more payment options at vending machines, a strategy that is fueled in part by its planned $5.6 million acquisition of assets from VendScreen, a cashless payments technology company. The deal, announced Monday, will add about 4,200 active vending machine connections to USAT's NFC-enabled fleet of 300,000 machines nationally, out of 350,000 total acceptance points.

It will also add VendScreen's interactive media and content delivery system. This will enable third party mobile wallet compatibility, refunds, couponing, advertising and customer feedback.

These services are consistent with the loyalty and marketing services that are considered vital to convincing consumers to use their mobile phones instead of cash or cards to make payments.

Eventually, paper money will become obsolete in the marketplace, and that 'smart' machines including telemetry, cashless and NFC acceptance will become the rule rather than the exception, said Jim Turner, vice president of deployment services for USAT.

"Even the large industrial accounts are beginning to ask for cashless to be deployed on all machines," Turner said.

The VendScreen acquisition follows quick on the heels of USAT's signing of the Cuyahoga Group to add USAT's ePort connect gateway to its vending machines.

"With the change in credit cards with the [EMV] migration, people didn't want to punch cards, so it's an ease of use thing," said Vince Variglotti, a vice president at Cuyahoga. "We're finding more people want to use their phones to pay."

But the company has a long history with contactless mobile payments. USAT partnered with the telco-led Softcard mobile wallet as early as 2012. It later added cross-channel marketing and customer service through a partnership with Byndl. Other initiatives enabled acceptance of both iOS and Android payment systems at USAT's contactless machines.

This early adoption has helped the vendor see firsthand which types of transactions are most amenable to phones.

"We're getting a lot at colleges and universities," said Maeve Duska, senior vice president of marketing for USAT, adding about 10% of payments at USAT's college contactless vending deployments are contactless NFC payments. Other verticals are also doing well, with fitness center contactless vending machines at about 30%. This uptake may seem relatively low, but it's healthy adoption, particularly when compared to Starbucks' 22% U.S. mobile payment volume, generally considered the U.S. market leader.

"It makes sense given people at a gym would be more likely to have their phone than their wallet," Duska said. "Of course, the Apple stores come in really high, at about 53%."

Since the EMV migration is still underway, it's an obvious time for self-service operators to consider ways to "future proof" their business by embedding contactless capabilities, said Nick Holland, a payments consultant. "While the usage of mobile NFC payments has yet to truly ignite, there is a steady adoption of mobile wallets," Holland said.

Issuers in the U.S. are also re-evaluating contactless cards based on the slow times users are experiencing with EMV at the point of sale, Holland said, adding a dual interface EMV card would reduce the time at the point of sale to less than a second.

"With the rise of NFC mobile payments and the distinct possibility that contactless cards will be widely embraced in the U.S. it should be a no brainer for vendors evaluating investment in upgrading their self-service technology," Holland said.