Paying Attention to Unattended Payments

The segment could play a key role in expanding electronic payments as fewer consumers carry cash.

Factors ranging from payments to technology companies to changing consumer behavior are heightening attention to unattended payments.

While electronic payment acceptance in this space, which includes vending machines, parking garages, and car washes, has been available for some time, a rising dependence in society at large on credit and debit cards, and gradually mobile wallets, is creating more interest in the segment.

Witness a few efforts in the segment.

AIR-serv, an Irving, Texas-based automotive-services provider, began installing contactless readers at more than 6,500 self-serve locations throughout Canada. The deployment, continuing through 2018, means contactless-only payments will be possible at these locations for services such as a vacuum cleaner or air pump.

Not long ago, PayRange Inc., a Portland, Ore.-based specialist in contactless payments for vending machines, landed a contract to install its technology in more than 10,000 machines that are in the Canadian National Vending Alliance. Contact­less is an increasingly popular payment option in Canada, where, according to processor Moneris, such transactions increased 36.3% in dollar volume in the second quarter of 2017 compared to the same quarter a year earlier.

Earlier this year, Apriva, a wireless-payments specialist based in Scottsdale, Ariz., integrated its gateway with Parlevel Micro Market, a vending-services provider based in San Antonio, Texas. The integration brings cashless payments to Apriva resellers and self-service operators, and expands cashless-payment options to their clients.

Apriva made a similar deal with On Track Innovations Ltd., an Israel-based contactless and unattended-payments technology provider. The OTI Trio reader is securely integrated with Apriva’s gateway.

USA Technologies Inc. is among the more active companies in the vending and unattended payments segment. Among its notable announcements is the installation of hundreds of the company’s ePort acceptance devices at machines operated by Premier Food Service. It also supplied the payment technology for vending machines operated by rock band Phoenix during the U.S. leg of its world tour.

In August, the company noted the number of connections to its ePort network grew 32% year-over-year to 568,000 as of June 30, and transaction volume nearly as much.

Malvern, Pa.-based USAT also announced this summer it and JPMorgan Chase & Co. signed a strategic marketing agreement to promote cashless payments and provide retailers with point-of-purchase tools.

USAT announced a partnership with Premier Food Service to upgrade hundreds of its vending machines to USAT’s ePort Connect system, which enables payment card and contactless payment acceptance as well as cash. Premier Food Service also upgraded 300 of its Vendors Exchange kiosks to use a customized version of USAT’s More loyalty program

There’s little reason to expect the flow of announcements to diminish. The potential, at least according to USAT, is enormous. “With less than 10% of the addressable market currently connected to cashless payments, the existing opportunity to bring new types of payments to machines in the field is still vast,” says Maeve McKenna Duska, USAT senior vice president of sales and marketing.

‘Portable Department Stores’

A couple of factors are driving a lot of the activity in unattended payments, says Thad Peterson, senior analyst at Boston-based Aite Group LLC, a financial-services consultancy.

One is the notion that many consumers carry less cash than they used to. (For example, the ATM contract at Atlanta’s Hartsfield-Jackson International Airport had to be rebid because only one bank sought it after the incumbent bowed out, claiming its ATM revenues declined.)

That consumers don’t have cash or coins to use vending machines is important for a lot of reasons, Peterson says. “By enabling noncash payments you have the opportunity to create portable department stores,” Peterson says. These might be kiosks where travelers, for example, can buy earphones or a power cord. A chief advantage of such kiosks, he says, is they allow the retailer to save on labor and labor productivity.

“Brick-and-mortar is struggling,” says McKenna Duska. “These traditional brands need to adapt to change in the highly competitive digital age or face the consequences.”

That extends to retailers in the unattended segment. “Unattended retailers are faced with an unprecedented opportunity to fill the gap and meet the needs of consumers in ways that no one dreamed of a few years ago,” she says.

Being able to offer not just conventional card-based payments, but also mobile payments, loyalty, advertising, and one-to-one communication, such as with USAT’s ePort service, “finally brings once-overlooked unattended industries like vending, parking, commercial laundry, and amusement games into the modern era and breathes new life into an existing channel,” McKenna Duska says.

Unattended merchants also desire a complete product that is a simple installation, she says. USAT and Ingenico Group announced such a service earlier this year that combines USAT’s ePort Connect platform and Ingenico’s EMV and NFC/contactless-enabled iUC285, an unattended payments device.

The gambit appears to be paying off for USAT. In addition to its ePort connections topping 568,000—a tally the company met months ahead of a 500,000 goal set three years ago, according to McKenna Duska—it posted a $243,000 profit in the fourth quarter of fiscal 2017, which ended June 30, compared with an $872,000 loss a year prior.

‘Significant Impacts’

The second piece is contactless. Peterson notes that USAT touts vending as an easy way for consumers to try contactless payments with no anxiety that their inexperience using the payment method might delay a checkout line at a conventional point-of-sale counter.

“What they’re saying is it’s perfectly safe to try on vending machines,” Peterson says. By offering cashless payment options, unattended-payments specialists will benefit from incremental volumes, he adds, “because people who don’t have cash will be more likely to use vending machines and people who don’t use cash tend to spend more.”

Indeed, Apple Inc. thinks highly of the vending and unattended payments segment. It has worked with USAT in the past to study the impact of marketing programs on Apple Pay usage at USAT-equipped machines. Digital advertising on USAT’s ePort Interactive platform produced a 36.5% increase in overall sales during a 24-week test period, and a 6% increase in the total contactless average ticket.

Earlier this year the two companies announced that USAT’s More loyalty program would be integrated into Apple Pay, enabling consumers to easily enroll in the program using data stored in their Apple Pay wallets.

Unattended payments is one of the bright spots for cashless payments, especially contactless ones. Peterson suggests, in his “Mobile Wallets: News from the Front” report released in August, that contactless cards could affect mobile wallets if an issuer launches a so-called dual-interface card.

“Once a contactless card enters the market, expect a rush from other issuers to get contactless cards in their portfolios,” he wrote. “This will have significant impacts, both positive and negative, on mobile wallets.”

Contactless, in particular when affiliated with a mobile wallet like Apple Pay, Android Pay, and Samsung Pay, holds much promise, and could benefit from unattended payments.

Apple, for example, wants Apple Pay to be available for any kind of purchase a consumer wants to make. It has focused on everyday transactions, and views unattended retail as helping form purchasing habits among consumers.

For this to work, unattended POS devices have to be near-field communication-enabled. NFC technology enables a two-way data connection between a smart phone and a compatible POS reader. The bulk of USAT’s ePort connections are NFC-enabled.

The availability of this technology—especially as younger consumers come along who already are more likely to use mobile wallets and are comfortable making online transactions—could be a boon for unattended payments, especially when coupled with loyalty. All three of the major wallets have some sort of loyalty integration.

‘A Perfect Storm’

Where’s the potential? Aside from traditional vending machines, other unattended merchant types are ripe for cashless payments.

One company, Washlava, began testing a way to reserve washers and dryers, and pay for that use, at the University of Florida in Gainesville, and opened a second location in Tampa. Eventually, it wants to add mobile-wallet integration, but for now users load their credit, debit, or prepaid card details directly in the Washlava app. Other markets include parking, car washes, and amusement centers.

There’s a lot of potential with kiosks and micromarkets, too, McKenna Duska says. Notably, Three Square Market, a River Falls, Wis.-based kiosk supplier, is supporting a very personal form of payments in the unattended segment. Several of its employees volunteered to have a microchip implanted in their hands so they could wave their hands near a POS reader to pay for merchandise.

And, as Aite’s Peterson suggests, traditional retailers are eyeing the space. Best Buy Co. Inc. has had self-serve kiosks for a few years now, and others are intrigued.

“Companies like Wal-Mart, who are competing with new business models set by companies like Amazon, are looking at other ways to grab consumers who are looking for quick-turnaround transactions and convenience,” McKenna Duska says.

Wal-Mart this summer installed kiosks, which it calls Pickup Towers, in several of its stores that enable consumers to pick up online orders by scanning a barcode on their smart phones, she says.

Peterson says the practice of unattended payments could extend even to traditional merchants like grocers. “A venue that doesn’t require human interaction is ripe for this,” he says.

The best example so far, at least among traditional merchant types, is Amazon Go, a convenience store for Amazon’s Seattle employees. The technology enables automatic payments by mobile app after the customer uses the app to enter the store and select items.

This convergence of comfort with self-serve commerce, fewer consumers carrying cash, the rise of mobile wallets, and a growing generation of consumers using new payment technologies bodes well for unattended payments providers, says McKenna Duska.

“The convergence of a consumer now trained to serve themselves and looking for that instant gratification (without having to talk to anyone), and an unattended market that finally has access to technology and payment methods that create a more retail-like experience, is a perfect storm for the markets we serve,” she says in an email message.

As Peterson says, “What it does, it plays into the movement in any time, anywhere, any kind of transaction being available to consumers. The expectation among consumers is ‘If I want it, I get it when I want it.’”