Guest Column: Great expectations
By Paul DeRosse
Canadian unattended payments set to take off in 2012
By Paul DeRosse
After much anticipation, it appears that cashless technology for
unattended payments – which have long been positioned by leading
industry pundits and vendors as a viable, secure and cost-effective
solution to help vending operators increase sales and reduce operating
expenses – is now ready for prime time in Canada.
After much anticipation, it appears that cashless technology for unattended payments – which have long been positioned by leading industry pundits and vendors as a viable, secure and cost-effective solution to help vending operators increase sales and reduce operating expenses – is now ready for prime time in Canada. And for many good reasons: The inherent business benefits that cashless technology delivers have never been more compelling, and each day there are an increasing number of consumers who are comfortable with – and, in many cases, actually prefer – the notion of buying small-ticket items with credit and debit cards. In addition, the recent technological advances that major card providers such as Interac have been delivering seem to address the issues and concerns that have continually hindered the adoption rate of cashless technology, most notably the complicated interchange fee structures that have confused and alienated many operators. With all of these stars aligning, it appears that cashless vending may indeed gain momentum, and begin living up to its promise after a number of false starts.
Tangible benefits take centre stage
From the perspective of vending operators, the benefits of integrating cashless technologies into their business operations are becoming more obvious and thus the technologies are more readily accepted. After years of contending with diminishing sales, tightening margins and reduced profits, many operators are now coming to the conclusion that accepting card payments at their machines will breathe new life into their businesses. Recent industry studies have demonstrated that operators who have implemented cashless solutions have been able to successfully raise prices for their merchandise, reduce shrinkage, lower operating costs, and most importantly, improve profitability.
In the highly competitive world of vending, this is certainly welcome news. Operators have long been seeking ways to break out of the mode of commoditized sales and differentiate their services. Accepting card payments will allow many operators to finally raise vend prices for existing products, as well as expand their offerings to include higher-priced inventory. In addition, the ability to conduct cashless sales allows operators to expand their customer base by serving a growing market segment of consumers who are quite willing to make purchases, but are limited by the amount of cash they have in their pocket. Card-based payments offer an excellent solution for satisfying these consumer demands.
On the expense side, cashless vending has proven to deliver a number of compelling benefits. For example, the costs for operators to support cash payments have become staggering in recent years. The expense and time spent collecting, counting, bagging and depositing currency and coins takes a huge cut from the bottom line. In some reports, analysts estimate that as much as five per cent of all operating expenses are spent on the cumbersome processes of supporting cash payments.
And then there is the vandalism and shrinkage factor. Removing – or, at least, minimizing – the amount of available cash in vending machines intuitively reduces these inherent risks.
While the operational arguments for integrating benefits into a vending business are becoming more apparent to operators, other recent developments in the Canadian market may provide even more impetus for operators to take the plunge into cashless solutions.
EuroPay, MasterCard and VISA (better known as EMV) – a technology that uses embedded chips on credit and debit cards – is now being touted as a highly secure and reliable method to conduct card-based payments. While the continued roll-out of EMV is all well and good, the biggest story is the recent news that Interac, the major debit card provider, will use its EMV-based contactless debit card payment solution called Flash, as a conduit to accept card-based payments at vending machines. While EMV previously required operators to install expensive PIN entry devices that in reality cancelled out any financial benefit advantage from cashless technology, Interac’s Flash product works independently of that hardware. In essence, the introduction of the Flash product alleviates a significant financial burden from the operator who is looking to leverage cashless solutions.
Better business models
While the elimination of the PIN reader is certainly good news for the vending industry, the fixed interchange structure that Interac is bringing forward may be the most important argument for operators to jump into cashless vending.
Historically, the biggest pushback from vending operators has been their lack of understanding the costs associated with these solutions. Concepts such as interchange rates and rolling fees – almost all of which are out of the control of operators – are complicated, vague, and still the source of apprehension for many operators.
Interac’s flat fee approach essentially takes the guesswork out of cashless technology. It is a flat-fee, easy-to-understand structure that allows operators to estimate their cashless vending-related costs much more accurately, and plan accordingly. Moreover, leveraging Flash can only accelerate the adoption rate in Canada. The product is one of the most recognized brands in Canada, and attracts a young demographic that is already comfortable with using the card to make small-ticket purchases.
After years of false starts and missed targets, it appears that 2012 may finally be the year when cashless vending takes off in Canada. The combination of several factors, including the increased comfort level of operators with the technology, the removal of the cumbersome PIN reader requirement, and the fixed fee structure of Interac, should all play a strong part in increased adoption of these powerful solutions.
Paul DeRosse is the vice-president of business development at Apriva Canada.