By Colleen Cross
By Colleen Cross
In the vending world, going cashless is not about abandoning coins and
bills – the lifeblood of the industry – but about giving younger and
younger customers the payment options they want.
In the vending world, going cashless is not about abandoning coins and bills – the lifeblood of the industry – but about giving younger and younger customers the payment options they want. Though it’s still early days, Canadian operators who have taken advantage of free trials of cashless vending systems are cautiously optimistic about their sales potential but convinced that adding cashless to their arsenal is a way to drive sales and loyalty.
|Cashless options offer convenience for the customer and a chance for the vending operator to enhance customer loyalty.|
“The sector is ready for cashless,” said Darrell Fraser, president of Definite Food Services of Dartmouth, N.S., which has a staff of 16. Definite owns and operates more than 325 vending machines in Nova Scotia in such locations as public markets, sports and recreational venues, companies, industrial and health-care facilities, and colleges and universities.
The company has been trialling debit and credit card payment options and was almost finished with the trial when Fraser spoke with Canadian Vending.
“We’ve finished the trial and now we’ll expand what we’re doing as a result of that trial. We were asked to be part of a national trial with Coinco [Coin Acceptors Canada] and we did a small, random selection of clients in various markets like call centres, the airport, sports settings and a couple universities to see how the reaction would be,” he said.
They had enough success with the trial after six months to move on to Phase 2, which involves rolling it out in 15 cafeterias.
“The next generation doesn’t carry cash like my generation, so it’s inevitable we’re going to go this way,” said Fraser, who has been in the vending business for more than 40 years.
“There’s a sector of the market that is ready for cashless. I always carry cash; my son never carries cash. It’s just a different way of doing business. In the old days, people wouldn’t use a credit card to buy a chocolate bar but nowadays they will.”
The company’s machines accept debit payment, and as of late February, accept Visa and MasterCard payment. In addition to the two main pieces of hardware involved – a bezel and a modem – there are set-up, activation and ongoing fees for using the cards, he said.
Results have varied. “We’ve had very good success to moderate success,” he says. “That’s doing debit only. Now we’re taking credit cards, and if what we’re seeing holds true, we expect to get another bump from credit cards.”
Interestingly, call centre machines’ sales outperformed other locations by about two to one, he said, speculating that this may be due to a younger work force. University locations showed the second biggest increase in sales.
Following the trial, which was at no cost, the biggest challenge will be rationalizing the expense.
“The tests have given us some insight into what markets are more receptive, Fraser said. “I think it’s going to be a work in progress for the next year, to be honest, and we will go forward in little bumps, doing six more here, six more here, keep adding them in groups of six. So we’re not going to go out and spend money converting every machine we own; we’ll just see what works and build on the successes. It makes it more manageable cost-wise.”
Advertising so far has been through machine-adhering facsimiles provided by the vendor. They may investigate digital screen technologies that tell customers about the capability when they walk up, Fraser said, but for now the signage seems to be doing the trick.
What technologies interest him down the line? He said they are considering using a mobile wallet app because it’s the same technology.
“A lot of people use their phones for many things. And based on the initial costs we’ve been given, it seems very affordable to use a phone app, so it may have some advantages that way.
“We’ll try to take advantage of what we’ve done to see if we can open more doors,” he said.
Ottawa-based Ventrex Vending, which has been in the business since 1987, operates distribution centres in Ottawa, Kingston and Montreal and serves a national market. Ventrex has 50 staff and 3,500 vending machines serving hospitals, secondary and higher education facilities, retail and business accounts.
The company trialled 10 machines with Interac through Coinco beginning in early December 2014 and has since moved into credit cards by activating that function in the bezel mechanism.
“We consider ourselves a leading-edge company and we thought it was time to try it out,” said owner Francois Bastien.
Among the advantages of offering cashless options is convenience for the customer and a chance for the vending operator to enhance customer loyalty, Bastien said. “Another benefit for Ventrex is the ability to connect to its existing remote monitoring system to feed it data. “We think having access to that data will be a real advantage.”
The obvious initial challenge is the capital expense involved, but beyond that the main cost is labour as the cashless-enabled machines are rolled out, something they are doing 10 machines at a time.
For Bastien it seems to be a matter of faith. “There is no sure sign of return on investment. But if we don’t do it, do we risk losing customers? It’s something that’s difficult to know,” he said.
“It hasn’t caught on fire yet, but after eight weeks we’ve seen a 10 per cent increase in sales,” he said with cautious optimism.
The credit card is only tap-and-go at the moment, so time will tell if this will help sales as people switch to Flash-enabled cards with that capability, he added.
Because most of the trial machines have been in hospitals and universities, there is little basis for comparison of results in different location categories.
“It’s too soon to tell,” he said. When they see sales numbers a year from now and can compare then year over year, they will have their first concrete evidence of how the change has affected sales.
The point-of-sale material provided gives a visual boost to the machines, he said, but they’ve not yet engaged in any other promotion of the new options.
As for trying future technologies, Bastien can envision incorporating mobile wallet technology such as Apple Pay. With the cards NFC-enabled, mobile wallets would be the next step, he said, adding that when and if Apple Pay comes to Canada, that will be the next logical option for customers.
Ryan Vending began trialling credit card payment in 2010, said Rob Oughtred, partner and director of operations for the B.C. company.
Ryan operates more than 3,800 vending machines in a variety of locations throughout B.C.’s Lower Mainland, including ferries, schools, colleges, universities and health authorities. The company employs approximately 75 staff.
They started with six units that had credit card capability as part of a trial program with with MEI (now Crane Payment Innovations – MEI), Apriva and First Data Canada, Oughtred said.
Ryan took a different approach from Definite by starting out with credit card acceptance then venturing into debit cards.
Over the last couple of years, they bought more debit-ready machines. They now have more than 100 cashless units: 125 accept credit cards, 15 accept both credit card and debit, and they are in the process of purchasing more units that offer both options.
“The cashless machines are a very small percentage of what we do. We slowly and methodically purchase more every year.
“As a vending operator, we buy the hardware that goes on the machine. We have to buy the connectivity because it’s all done through cellular transactions when you swipe your card. You have to buy a telemeter. So you have to buy these two pieces of hardware to transact,” he explained.
“It’s more to satisfy our clients – the people we have the contracts with – because they think it’s important. But there’s not a business case to warrant it yet, so we’re doing it because the customer is expecting it.”
With debit, you’re able to accept more forms of payment from your consumer, he said. Someone walking up to your machine may not have a credit card but may instead have a debit card or cash.
“You’re just trying to be like a regular retailer and take all forms of payment,” he said.
However, the process has its challenges.
“As an operator, you expect to invest in hardware. You’re buying an asset and it has a shelf life. One of the things we find extremely challenging is the monthly connectivity. Your machine has to be connected all the time. You’re basically putting a cellphone into these machines, so that has a tremendous cost. If you want to have 500 machines each costing you x amount of dollars each month just to be connected, the revenue uptick has to be significant.
“We’ve found that the telemetry fees in Canada are prohibitive compared to what they are in the rest of the world.”
The company has waded into cashless vending with some caution. “We liked it, but we didn’t really see a huge uptake. We never really invested or got deeper into it, just kept it at that original trial level,” Oughtred said.
Locations with higher traffic have had the greatest increase in sales, he said, citing BC Ferries and airports as examples. There they have seen a tremendous increase in activity compared to activity at schools, colleges and universities.
Something oughtred would like to see is more marketing support from the processor down the line.
“A couple of years ago, Interac did a rather lengthy ad campaign for vending which they launched at the Calgary Stampede but now it’s out of people’s consciousness,” he said.
As for future technologies, he sees the mobile wallet as promising. “My understanding is that the hardware has the capability to accept all different forms of payment. The near-field communication technology in these pieces has mobile-wallet capability, so that’s good.
“When it actually gets to the vending industry is another matter,” he said. “It’s pretty slow.”