(April 16, 2009) Contactless payments took another incremental step recently when USA Technologies Inc. struck an agreement with Visa Inc. under which Visa will subsidize the deployment of up to 4,000 of USA Technologies’ card-accepting devices for vending machines. The agreement, potentially worth $800,000, is significant because it is the first between Visa and USA Technologies, a hardware and processing firm that has done similar seeding deals with MasterCard Inc. to promote acceptance of MasterCard’s PayPass contactless card.

USA Technologies calls its card reader the e-Port, and it reads both magnetic-stripe and contactless cards that use radio-frequency identification, or RFID, technology. Under the new agreement, Visa, sponsor of the payWave contactless card and fobs, will pay $200 to USA Technologies for each e-Port USA Technologies deploys before Dec. 31. USA Technologies will deploy the first 1,500 e-Ports in the Chicago area, according to a regulatory disclosure the company filed this month.

The agreement calls for owners of the vending machine locations to enter into three-year, exclusive processing agreements with USA Technologies. The company has a suite of products and services it calls e-Port Connect, which besides hardware includes back-office processing services and a data-transmission network for unattended devices called USALive.

Malvern, Pa.-based USA Technologies did not respond to Digital Transactions News requests for comment. Through a spokesperson, Visa said in an e-mail that, “We are working closely with many merchant segments such as vending, taxicabs, and convenience stores to provide a quick and convenient method for consumers to pay with their Visa cards today and with their mobile phones or other Visa payWave-enabled form factors in the future. The addition of Visa payWave acceptance in the vending machines enabled by USA Technologies fits within our strategy to enhance the payment experience.”

Like MasterCard, Visa refuses to reveal the number of payWave-accepting locations in the U.S. Worldwide, about 130,000 merchant locations accept all brands of contactless cards and devices, Visa says. The spokesperson would not give details about why the Chicago area is the site of the initial deployments.

“What this tells me is that we’re still at a point that subsidization is key for [contactless card] acceptance,” says Bruce Cundiff, senior analyst at Pleasanton, Calif.-based Javelin Strategy & Research. But he adds that the card brands are “again, little by little, building out the acceptance network for contactless.” The fact that the e-Ports read mag stripes, which most contactless cards have, is a big plus for winning the favor of cardholders and merchants, Cundiff says.

USA Technologies also announced this week several enhancements to e-Port Connect, including server-to-server capabilities, improved integration with back-office software programs, faster credit and debit card authorizations, and other features.

The USALive network connected about 38,000 devices in fiscal 2008 ended last June 30 and processed 11.3 million transactions worth $34.4 million. Besides vending machines and kiosks, the network links machines in commercial laundries as well as office equipment such as personal computers and fax machines in hotel business centers and similar locations. In addition to MasterCard, USA Technologies has done deals with banks such as U.S. Bancorp (Digital Transactions News, June 4, 2008). The company also offers energy-conservation products.