Canadian Vending

Features Payment Technology
Cashless by choice

June 15, 2015
By Michelle Brisebois


Vending machines and cold hard cash go together like peanut butter and jelly. Money goes in – stuff comes out. 

Vending machines and cold hard cash go together like peanut butter and jelly. Money goes in – stuff comes out. 

If we in the vending industry are bemoaning the fact that consumers “just aren’t that into us anymore,” perhaps we’re looking at it all wrong? Are we making it too difficult for them to give us their money?

It’s estimated that most of Canada’s vending machines still accept only cash. That’s a problem, because, increasingly, Canadians are moving away from cash as a preferred form of payment.

Canada is one country leading the trend towards cashless transactions. A 2013 study by MasterCard reports that non-cash payments account for 90 per cent of the total dollar value of consumer payments in Canada. Looking at the total number of transactions, 40 per cent are cashless – because small purchases still tend to be cash based – but nevertheless, cash-only machines are missing out on almost half of all transactions.


The trend towards cashless payments for small purchases will continue to accelerate. If we in the vending industry are bemoaning the fact that consumers “just aren’t that into us anymore,” perhaps we’re looking at it all wrong? We might be the ones not working hard enough to keep the relationship alive. Are we making it too difficult for them to give us their money?

Vending machine sales lagged during the recession as consumers watched their pennies and companies with active vending machines downsized. A study by IBISWorld indicates that vending industry revenue declined by an annualized rate of 1.5 per cent from 2008 to 2013. Many operators didn’t survive the recession. There are now about 1,118 operators in Canada, down more than five per cent from the pre-crisis level.

If you own machines still in operation, you are in a good position to grow because you face less competition in a more stable economy. Business growth depends on having the right product mix and on being easy to do business with. Offering more than one way for the consumer to pay for their purchase is an important way to facilitate the transaction.  More importantly, the trend towards cashless payment for smaller-ticket items is on the upswing.

“We’ve seen an increase in credit cards for small purchases,” Denis Robert of CT Payment confirms. He postulates that a consumer desire to tap into loyalty programs by accumulating points is perhaps driving this behaviour. Younger consumers (under age 30) are definitely more comfortable navigating life without a silver dollar in their shoe for insurance. PayPal commissioned a study with Leger Marketing that reported 71 per cent of Canadians indicate they are comfortable with never having to use cash to make purchases. This is an increase of 44 percentage points from 2011, at which time 27 per cent of Canadians indicated they were comfortable not using cash very often. That’s a lot of people you can’t do business with if your machines still accept only cash payments.

There’s another reason to offer cashless payment options – a larger average sale.

According to online magazine Mobile Commerce Insider, cashless vending transactions do indeed generate greater revenue than those involving cash. “Perhaps more important to those who are owning and operating a vending machine is that the average amount of transaction was more than $0.50 higher when using cashless payments,” reports VendScreen in the U.S. in its review of cashless vending transactional data. VendScreen says that the average cash payment transaction “was $1.16 while cashless payments were an average of $1.71.” That’s a 47 per cent increase per transaction. The return on investment (ROI) on installing cashless options can easily be calculated using 55 cents per transaction.

While these statistics may be convincing, it may remain difficult for most businesses to decide which payment options to embrace. For those of us who bet that the Beta videotape format would prevail over VHS back in the ’80s, deciding which technology to go with may be daunting.

The big three cashless payment options to watch appear to be debit, credit and smartphone. Chip and PIN debit transactions are declining in favour of “contactless” payment options such as Pay Pass and Interac Flash. These tap-and-pay technologies are collectively referred to as NFC (near field communications). It’s a technology that allows the transaction to take place with a tap of the card, avoiding the need to insert a chip card and punch in a PIN. According to Interac, there were 12,000,500 contactless enabled cards in the Canadian market with an average sale of $11.50. “In Canada, debit is cheaper for the merchant than credit. That two per cent charge on a smaller-ticket item becomes hefty,” Denis Robert says.

Technology such as cards and smartphones can only be read when they’re 0.5 inches away from a secure terminal, according to Moneris Payment Solutions. For this reason, contactless technology may be less susceptible to fraudulent activity than other technologies. The technology uses a special encryption process that protects it from fraud.

According to PriceWaterhouseCoopers, since the implementation of EMV security technology, data breaches have dropped by 22 per cent. Fraudsters can no longer clone a card and go shopping with it, says Doug Hatton, vice-president of payment solutions for Moneris Services Corp. Other solutions that protect data include the company’s proprietary end-to-end encryption solution, which ensures cardholder data is encrypted and secured during a transaction, and tokenization, which assigns a unique “token” reference to a card number to ensure its stored securely, Hatton adds.Mobile wallets and smartphones are also growing as a preferred method of payment for many Canadians. Oakville Ont.-based TSI (Technology Strategies International) states in their report “Canadian Payments Forecast – 2013,” that more than 50 per cent of Canadians have already used their smartphone for a payment. More Canadians are embracing smartphones, and TSI also reports that “by 2017 more than 50% of the smart phones in Canada will be NFC-enabled. Cash will lose its position as the most frequently used form of payment in Canada over the next five years.”

A discussion about smartphone payment wallets wouldn’t be complete without acknowledging the elephant, or rather “apple,” in the room.

The most popular form of smartphone is the Apple iPhone. Media Technology Monitor surveyed more than 2,000 Canadians and found that 42 per cent of smartphone owners used an iPhone. Androids were used by 39 per cent and 14 per cent reported using a BlackBerry. With the launch of iPhone6, Apple introduced Apple Pay, an NFC application in the U.S. that operates only on an Apple device. Overall, Apple reported revenue of $74.6 billion, an increase of 30 per cent from a year earlier, and earnings of $18 billion, up 38 per cent. It was considered the most profitable quarter of any company ever. While at this writing the Canadian launch of Apple Pay is undetermined, the Apple Watch is expected to offer wearable cashless payment applications with game-changing potential.

In the five years to 2018, the Canadian vending machine industry’s revenue is expected to grow at an annualized rate of 1.9 per cent to about $715.8 million, driven by products such as coffee, tea, juice and healthy snacks, according to IBISWorld’s report.

Achieving or exceeding that growth will depend significantly on our willingness to get paid.