By Jim Chliboyko
2013 is the year of new payment technology
By Jim Chliboyko
Right about this time last year, much of the talk in the vending industry was all about the changeover of Canadian coins and bills
Right about this time last year, much of the talk in the vending industry was all about the changeover of Canadian coins and bills, whether operators and their machinery would be ready for the switch, and what the cost would be for them in both the long and the short run.
But these days, the vending talk may be turning to payment without coins or bills, and perhaps without even making contact. That is, certain industry players are looking to have vending machines that allow Interac Flash transactions.
The push is coming for Interac Flash. It’s a new type of debit card, which allows the user to tap or wave the card over a sensor to complete the transaction. There is no PIN number and no magnetic stripe. As well, purchases are generally limited to amounts under $50 or $100 for contactless credit cards but are limited to only $20 for Interac Flash cards.
In March, there were full-colour ads in national newspapers touting Interac Flash as the “defender of fast and safe checkouts,” complete with a superhero dressed in black and yellow with the Interac Flash logo (similar to a volume symbol, three closed brackets – ))) – of gradually increasing height) emblazoned on his chest. At the bottom of the ad, it says, “Now at: McDonald’s, Petro-Canada and Cineplex.”
The vending industry has taken notice.
Ed Kozma, of payment system giant MEI Inc., says that his company is within months of unrolling contactless credit and debit transaction units for the vending industry.
“We’re 90 days away from an MEI contactless terminal; it’s been a long time coming for us,” Kozma said in March. Kozma explained that the company had to wait for the technology to become more streamlined, adding that most previous debit card setups were too physically big for a vending machine to properly accommodate.
“It couldn’t be chip and pin because cost and space needed inside the machine was prohibitive,” said Kozma. “It’s already an overly cramped space; that’s why contactless makes so much sense. Keypads are not an inexpensive item.”
And it’s not just MEI that’s working on it.
“We’re in certification on two levels, hardware and end to end,” said Coinco’s Chris Stegehuis. “At this point, we’re in hardware certification, the hardest part. We’re anticipating an early summer launch at the operator level. There’s a tremendous amount of money that MEI and Coinco have put into this.”
Stegehuis expects his work to be cut out for him this summer.
“I can tell you, if all the operators I’ve spoken to get on board, it’ll make for a very successful rollout,” he said. “McDonald’s, Tim Hortons, Dairy Queen, The Beer Store: these are big players.”
The country is getting set up for this new technology gradually, said Kozma, who describes the situation as being a chicken-and-egg scenario; people need cards to use the hardware, and businesses need demand for the cards to justify getting the hardware. At this point, it’s just a matter of actually getting the Interac Flash-enabled cards into the hands of Canadians. Not every bank is equipped yet with the proper cards, though Scotiabank, RBC, Royal Bank and TD Canada are already distributing Flash cards, and have sections on their websites about them. Calls were put in to CIBC, Winnipeg-based Caisse Financial Group (a Franco-Manitoban credit union) and BMO, and the employees were unable to pinpoint an ETA for Flash-enabled cards being available through those institutions.
The push for Interac Flash was evidently inspired by security issues, among other factors.
“Really, it’s about secure transactions,” said Kozma. “The industry is moving away from the magnetic stripe. It’s an insecure method for a financial transaction. That fraud has been seen globally. The entire globe has moved to EMV (Europay, MasterCard and Visa). One of the bigger players in the game who hasn’t faced it is the United States.
“In Canada alone, it’s been estimated that once EMV was totally implemented, $400 million of fraud migrated to the United States. The United States is now taking strides to close the gap, but there is still a significant amount of work for them to do to transition to an EMV payment infrastructure.”
Kozma said that there is a push for various companies in the industry to look at vending – and distributors of smaller-ticket items – as a new frontier, as the mid- to high-level ticket price markets have been flooded with payment terminal options. Smaller-ticket items, including those issuing forth from vending machines – an industry that has been generally dominated by cash – is a huge potential growth area.
“The Card Associatons are very interested in the vending industry because it is an untapped opportunity. At sub-$10 purchases, where cash is still very dominant, vending becomes an attractive vertical market,” he said. “They’ve saturated the mid- and high-range ticket price markets with card accepting devices . . . The growth area for MasterCard and Visa and Interac is not in those spaces. The placement of card-accepting devices, in those markets, is primarily tied to the opening of new businesses. As long as the economy is soft, you’re going to see the greater focus on sub-$10 ticket price markets.”
And depending on what kind of card the user holds, there may be a lift in sales figures for operators, too, Kozma suggested.
“When you add credit as a payment option, for instance, you add an average 22 per cent lift in sales. It’s expected to be more with the addition of debit.
“All the vending operators will view that as an absolute positive impact to their business, offering a greater amount of service. It’s a win-win, for customer service and greater sales,” said Kozma. “Besides the uptick of greater sales, you get improved efficiencies with maintenance, filling, etc. It’s a double whammy as it relates to impact on your business, when you can drop the bottom line and raise the top line.”
But introducing something new to the masses and getting them to actually use it are two different things. Will people gravitate towards Interac Flash? Stegehuis believes they will.
“You’ll see more and more people, especially young people, using it, especially if their friends start to use it, too,” he said. “I’m one of those guys; I don’t carry cash. The convenience aspect of it is huge.”
And yet, some may wonder whether operators would want to fork over more money to alter their machines yet again, a year after they invested money to accommodate the new types of Canadian currency.
“A lot of operators spent a lot of money in 2012 and still into 2013,” said Stegehuis, although he articulated a number of different ways that adding Interac Flash would benefit operators. It would hamper both internal and external theft, and the money collected would go directly into an operator’s account.
“And even with things like the costs of handling fees for rolled coins, there’s tremendous service fees attached to that,” he said.
“From a vending operator perspective, they tend to hold on to equipment a lot longer than other industries,” said Kozma. “But from a marketing approach, you definitely want to be able to have all the hooks in that product.”
“To me it goes back to when the $2 coin was introduced,” said Stegehuis. “I think it’ll create conversation. I’m excited for the vending channel. The operators, once they see these results, they will see the sales lift and forget the costs.”
Jim Chliboyko is a freelance writer and a regular contributor to Canadian Vending.