Payments

Watershed year for cashless vending expected to continue

2020 marked a watershed year for cashless vending transactions as the number of digital payments per machine exceeded cash payments for the first time. The growth is expected to continue.

Image courtesy of Cantaloupe Systems Inc.

June 22, 2021 by Elliot Maras — Editor, Kiosk Marketplace & Vending Times

Cashless has been on a roll since the technology was introduced to vending more than a decade ago.

2020, however, marked a watershed year, as the number of digital payments per machine exceeded cash payments, according to a joint study by Cantaloupe Systems Inc. and Michigan State University. In April of 2020, there were 137 digital transactions compared to 135 cash transactions per machine.

Cashless transactions might not have been significantly higher, but the volume was a different story.

In April 2020, digital sales volume per machine was 47% higher on average than with cash — $235 versus $160.

But that's not the end of the story.

By November of 2020, the average number of payments made in cash had decreased from 52% November of 2019 to 40%.

Contactless transactions rise

Meanwhile, as a percentage of digital payment transactions, usage of contactless credit cards increased 57% from 14% percent in November 2019 to 22% that same month in 2020, with a 9% dip in magstripe credit cards during that same period — 86% to 78% of total payments.

The study evaluated sales and transaction data from approximately 122,000 vending machines connected to Cantaloupe's digital payment platform across the U.S.

Elyssa Steiner believes cashless vending will continue to grow post-pandemic.

"We have been reporting the growth in digital payments and transactions at vending machines for years. However, our research shows that as consumers sought touch-free payment options during the pandemic, digital payments became the preferred method overall, which is evident by the particular growth in usage of contactless credit cards," Elyssa Steiner, Cantaloupe's vice president of marketing, said in a prepared statement. "Now, we believe vending operators connected to our digital payments platform will benefit even more from not only greater sales and transaction volume, but increased insights from consumer data which can guide better decisions on products and pricing, streamline operations, and ensure operators are better equipped for the future of self-serve and unattended retail."

Hospitals, military lead growth

Hospitals and military locations showed the largest annual increases in digital and contactless payments.

The percentage of contactless sales within military locations was roughly 11% in November 2019 but jumped to more than 32% in November of 2020. Hospitals increased from 15% in November 2019 to 27% in November of last year.

Low volume machines, or those with less than $2,000 in sales per year, showed increases in digital payments also, led by growth in contactless. While 46% of sales in 2019 were made with magstripe credit cards and 15% were made using contactless cards, in 2020, 57% were magstripe credit cards, and 25% were contactless cards. Meanwhile, cash sales fell year over year as a percentage of sales, representing 48% of sales in November of 2019 and only 36% in November of 2020.

Interestingly, transactions per machine for magstripe credit card and contactless payments increased about the same amount — 11% within low volume machines between November 2019 and November 2020. In November of 2019, 43% of transactions were magstripe credit card, with 20% coming from a contactless form of payment. By November 2020, 55% of transactions were magstripe credit card, while 31% of the 55% were contactless.

Executive insights

Following are excerpts from a Vending Times interview with Steiner regarding the study.

Q: Cantaloupe has been studying the growth in cashless for several years. Was the growth rate in 2020 over 2019 higher than in prior years?

A: In September 2019, we saw the average cashless transaction volume surpass cash for the first time, making up just over 50% of the total transaction volume performed at a vending machine. We'd seen cashless continue to grow at a steady pace prior to the 2020 calendar year when the COVID-19 pandemic impacted consumers use of cash. In 2019, the students reported cashless volume growing at a rate of 11% between January to December 2019.

In 2020, we see cashless accelerate off the heels of the pandemic, growing in January 2020 to November 2020 at a rate of 18% in just 11 months. In all of our years analyzing cashless trends, we've never experienced an instance where cashless usage began to a decline, so we anticipate that these trends will only continue or steadily balance out at some as we move beyond the pandemic.

Q: Did the study break out contactless credit cards from mobile/app based payments?

A: Yes, the students analyzed the data set for trends across cash, credit/debit, contactless and mobile wallet. While mobile wallet continued to be a smaller subset of the total transaction volume analyzed in the study, the students did find that mobile experienced the biggest percent change in average transaction ticket from January to September 2019 (pre-COVID).

Q: Does Cantaloupe believe the gain in cashless since the coronavirus pandemic will sustain itself post pandemic?

A: Absolutely, we believe cashless will continue to sustain or rise even post-pandemic. More than ever, consumers would rather not carry cash, pay with cash or handle cash. What we're experiencing is an acceleration in consumer behavior to digital payments that include not just magnetic stripe cards, but tap to pay (contactless cards) and mobile wallet. We anticipate that as more and more technology seeks to enhance the consumer experience through digital forms of payment, we'll continue to see cashless serve as the number one, preferred payment method of choice by consumers.

Q: Did the study break out cashless use by machine type, i.e., cold beverage, hot beverage, snacks, refrigerated, frozen? If so, can you give any numbers?

A: No, it didn't analyze by machine type, but it did look at location type. Students looked at location data that the operator fills into the ePort platform and derived major categories of 70-plus location types. These were then analyzed further to see how cashless and cash growth trends varied across the different locations. What they found that was interesting was that some locations like hospitals saw digital sales up 15% from November 2019 to November 2020, and contactless payments increasing by 12% year over year as well.

Q: Has Cantaloupe studied payment choices in micro markets?

A: We have not studied micro markets. I can see it being beneficial, however, to see if the trends vary in micro markets from traditional vending. It is likely that you'll experience higher digital payments in micro markets since consumers are driven to use credit/debit cards and app-based loyalty programs. In most micro market applications, cash is only accepted by loading it onto a stored value card "market card" to complete a purchase — dispensing no change back to the consumer.

Q: How high will cashless payments rise in the next two to three years in vending?

A: Based on the study and the machines analyzed, the students projected digital payment usage across total machine volume to increase at a rate of 0.63% per month in 2021, and likewise digital payment usage across total machine transactions increase at a rate of 0.62% per month during 2021. I believe we'll see these numbers eventually level out, but continue to sustain themselves as consumers just prefer a safer, faster and more convenient way to pay.

Payments