Where Unattended Checkout Is Thriving

Thanks to cashless payment technology, markets ranging from laundromats to parking lots to vending machines are expanding sales and ushering in loyalty lures.

Dig just below the surface of unattended retail—which is enjoying stellar growth of late thanks to expansion beyond its origins in vending to include laundromats, parking, transit, and retail stores like Amazon Go—and you’ll find a market undergoing dramatic change thanks to advances in cashless-payment technology.

Cashless-payment options, such as mobile payments and contactless cards, increase the speed and convenience of making a purchase. But the technology behind them also enhances the consumer experience in unattended retailing.

Smart technology is being leveraged in vending and laundry machines, for example, to gather data that can be linked to individual cardholders. Operators can use such information on subsequent visits to interact with consumers to try to increase the size and frequency of sales and grow customer loyalty.

“Digital marketing and loyalty experiences are being integrated into unattended merchant environments to engage consumers and keep them coming back,” says Paresh Patel, chief executive and founder of PayRange Inc., a provider of mobile-payment solutions for vending machines, laundromats, and other unattended environments. “Consumers no longer have to be anonymous in this environment.”

The market size of unattended retail is difficult to determine because it is so fragmented, payment experts say. What is quantifiable, however, is that cashless acceptance in unattended retail delivers a substantial sales lift without cannibalizing cash sales.

‘Intelligent Experiences’

After adding cashless acceptance to a vending machine, for example, total monthly sales jump 19% in the first 11 months to $646 on average, according to USA Technologies Inc., a provider of cashless-acceptance technology for unattended merchant markets. Of that total, cashless sales, which are incremental, increase 16% to $171 during the first 11 months, while cash sales grow 8% to $475.

While the increase in cash sales seems counter-intuitive, USA Technologies attributes the jump to the inclusion of cashless payments making vending machines a destination for consumers. Over time, higher-end items will net sales from cash customers, the company says.

“Expanded product offerings make the vending machine more attractive to consumers in general, which improves machine performance,” says Maeve McKenna-Duska, chief marketing officer and senior vice president at USA Technologies. “There are always going to be cash and cashless customers.”

Another aspect of cashless acceptance that appeals to merchants operating in unattended environments is that the technology can also be used to gather machine-performance data.

For example, PayRange uses data gathered from payment-acceptance devices on washers and dryers to notify consumers how many and which machines are available at a given time, and when their load is expected to be finished. Messages are communicated to the consumer through the PayRange mobile app.

“Our aim is to enhance the customer experience by bringing the types of intelligent digital experiences consumers are used to when purchasing online,” says Patel.

PayRange is connected to about 250,000 vending machines and kiosks in more than 350 cities across the United States and Canada. While the company does not disclose its merchant-acceptance fee, which is based on a percentage of the transaction, Patel says it is less than the typical cost of card acceptance.

‘Connected Commerce’

Parking is another segment of unattended retail where mobile payments are predicted to play a major role. Parking payments in the U.S. total $35 billion in the U.S., of which $26 billion is captured by parking lots and $9 billion by street meters, according to Arrive Inc. a provider of mobile-based solutions for the parking industry.

While parking lots have accepted cards through unattended kiosks in the lot or card readers at the gate for more than a decade, the advantage of mobile payments is increased convenience.

“Consumers can pay using a mobile wallet without leaving their car or rolling down the car’s window, says Dan Roarty, president and chief operating officer at Arrive. “That saves consumers time because they no longer have to fumble with a card or call up a bar or [quick-response] code from a parking app and scan it as they enter the lot.” Through the app, he adds, “We even allow consumers to prepay for parking at a discount, which is another convenience.”

Arrive, which was known as ParkWhiz until it rebranded in January 2019, is now mapping out its next step: tying into the smart capabilities of automobiles to enable consumers to load a mobile wallet into the car’s electronics to pay for fuel or to locate, and pay for, parking.

Arrive is making its application programming interfaces available to automakers such as General Motors Co., Honda Motor Co. and Fiat Automobiles S.p.A. for use in computer-automated dashboards.

“Automakers see fueling and parking as part of connected commerce in the automobile,” Roarty says. “Enabling a consumer to make a payment from within her car or digitally locate a parking lot or meter on the street is what automakers are working towards.”

With the groundwork for automotive commerce being laid, Roarty predicts card acceptance at parking lots and meters will become obsolete. Some cities, such as San Francisco, accept credit and debit cards at street meters. Others, such as Chicago, allow consumers to pay for street parking at kiosks servicing an entire block.

Machine Intelligence

Like parking and vending machines, public transit is enjoying rapid growth in cashless payments. In December, New York’s Metropolitan Transportation Authority announced that riders had used contactless cards 4 million times to pay for subway and bus fares since it began accepting general-purpose cards at the turnstile last May. Visa Inc. predicts the success of the New York MTA’s card-acceptance program will pave the way for other transit authorities to follow suit.

In 2019, Visa helped launch 60 contactless transit projects, including Miami-Dade Transit, and is working on 180 projects globally. Live transit projects are seeing a 40% year-over-year rise in contactless transactions, Visa says.

“The speed and convenience of cashless payments is catching the attention of consumers for transit-fare payment,” says Julie Creevy Scharff, vice president, consumer products for Visa. “Cashless payments are deeply woven into unattended payments because of the speed and convenience they provide.”

As cashless payments expand into unattended retail, loyalty programs are expected to pay a prominent role. PayRange uses incentives to get consumers to use machines within its network more frequently. Consumers can earn points redeemable toward discounts and other incentives on future purchases. Machines in PayRange’s network see a minimum sales increase of 5% and as much as 20%.

USA Technologies offers a closed-loop loyalty program that rewards users with discounts and other incentives to make future purchases. To join, consumers enroll a credit or debit card. Purchases are tracked and earned rewards are delivered to the consumer’s account. Registered cards are tokenized to protect cardholder data.

Consumers not enrolled in USA Technologies’ loyalty program can still earn rewards, since networked vending machines can identify and track cards used to make a purchase. When a reward is earned, the consumer is notified by a message on the machine’s screen.

“One thing we can do with our loyalty program is flash a message on the machine’s card reader promoting a discount for using a certain type of payment, such as Apple Pay or the option of earning a reward with X number of purchases,” says McKenna-Duska.

Greater machine intelligence also brings operating efficiencies. Merchants can identify best-selling items, the frequency at which consumers buy, when it’s time to restock, when a machine has broken down, or when a consumer’s account needs to be refunded because an item got stuck in the machine, says McKenna-Duska.

At the Pump

Like vending machines, gas stations were early adopters of unattended card acceptance at the pump. With the deadline for converting to EMV chip card acceptance looming in October, an opportunity exists to bring new EMV-compliant technologies, such as contactless cards and mobile payments, to pumps.

Still, adding these options on top of EMV card readers can be costly for small station owners. Bringing a fuel pump, which typically has four nozzles, into EMV compliance costs $25,000 to $30,000, on average, fuel industry experts say. The price can rise to $40,000 by adding loyalty, fleet card acceptance, and third-party marketing/discount programs.

Absorbing those costs can be financially painful for small station owners, which is why a larger portion of them have yet to become EMV-compliant, payment and fuel industry experts say.

One option is to retrofit in-pump card readers. Sound Payments Inc., a Jacksonville, Fla.-based provider of payments technology, has developed an EMV-upgrade kit for fuel pumps that bypasses the forecourt controller, which is middleware through which card data gathered at the pump passes on its way to the processor (“Options for EMV at the Pump,” p. 34).

Instead, Sound Payment’s technology encrypts cardholder data at the pump and transmits it directly to the processor, which eliminates the risk of the forecourt controller getting hacked. If a criminal tampers with the device, it stops working. The retrofit kit costs less than $1,000 per fueling point.

Digital marketing and mobile payments are also part of the equation. Houston-based P97 Networks Inc. has struck deals with a variety of players, such as Verifone Systems Inc., Mastercard Inc., and JPMorgan Chase & Co.’s ChasePay, to support its PetroZone application. That application enables mobile payment at the pump and in-store and consumer registration of loyalty cards.

With advances in payments technology enabling a richer customer experience, don’t be surprised to see unattended payments become a bigger piece of the payments pie.