When you think about vending machines, the first thing that comes to mind is picking through your pocket for change to buy a candy bar or drink.
While vends have traditionally always been associated with coins, most transactions today are made with various cashless payment systems. In fact, transitioning to cashless payment systems directly increases revenue for vending machines and customer satisfaction.
That being said, many vending machine operators still rely on cash as the primary payment method.
In this article, we’re going to tell you what to consider when picking a cashless payment system for your vending machine fleet.
1. Understand Different Types of Flexible Cashless Payment Systems
There are two essential types of cashless payment:
Closed-loop Payments
Closed-loop payment systems are transaction setups designed for controlled environments, such as universities, office buildings, production plants, and workspaces, where the user population is fixed.
Instead of relying on cash, users get preloaded funds on RFID items such as wearables, token rings, or prepaid cards.
Closed-loop payments enable customers to simply tap their wearables on the machine to purchase products, which is extremely convenient and incurs no transaction fees for the vending machine operator.
Closed and open-loop Payments
Closed- and open-loop payment systems are card readers and terminals that support both closed-loop payment options and digital wallet and card purchases. Popular payment options include:
- AMEX, Visa, Maestro, Mastercard cards
- Google Pay and Apple Pay
- Mobile apps
- Digital wallets
- Various prepaid devices
Their main benefit is the outstanding flexibility for vending machine customers, since they eliminate all purchase barriers and enable one-second transactions.
2. Choose a Cashless Payment System Based on Location
The advanced cashless payment system you choose for your machines should match your customer preferences at a specific location.
Most people in open locations are vending out of convenience.
They need a payment system that allows them to pay in seconds and supports multiple payment options, so they can pick up the products they need and be on their way.
IMC Newsdesk reported that 3 out of 4 transactions in unattended retail are cashless.
Another 2024 report from AVA confirmed that cashless payments dominate the UK vending market.
Interestingly, 57% of cashless vending transactions in the UK were completed via mobile apps, with contactless cards second at 38%.
For open locations with high foot traffic, you should opt for a system that covers multiple payment systems, including contactless cards, digital wallets, and mobile apps.
Additionally, solutions such as mobile apps enable vending operators to transition to cashless payments without an expensive hardware upgrade.
If you have machines whose monthly sales don’t justify the costs of installing a POS device, the easiest way to go about it is to opt for app-based payments.
For example, by placing a QR-code sticker on the machine, customers can pay using a mobile app. The sticker costs only a fraction of a POS device, the setup is extremely straightforward, and the solution actually allows operators to take out their coin mechanism and transition to a fully cashless system.
This is just one of many benefits of mobile payments.
For closed locations, such as offices, universities, or work plants, you can either opt for a flexible system that supports multiple payment options for each customer or a closed-loop payment system.
The latter is extremely popular for companies that like to incorporate vends into their employee benefits programs.
A survey of over 1000 businesses and industry workers published by the Compas Group found that subsidized foods and beverages are the biggest attractors of employees to the workspace. 77% of employees would come to the office more often if they were given free vends.
For example, solutions like TPAY100 are affordable and enable employees to pay for their vends with their RFID cards, token rings, and other wearables.
The employer simply preloads funds into their employees’ wearables, and they’re free to get any item they want at the vending machine. For vending operators, this is a convenient way of securing sales every month, with a simple hardware setup.
3. Pick for a Card Reader with PIN on Glass Support on Your Busiest Sites
The silliest way vending operators lose money is by not having PIN-on-Glass (PoG) support on their vending machines in high-traffic locations.
In the European Economic Area, credit card systems like Visa and Mastercard use the 5-tap PIN rule as a key security feature to protect cardholders against potential theft.
The feature requires users to enter their PIN after five consecutive contactless purchases (each below 50.00 EUR).
Imagine a customer trying to buy something at your vending machine, and they’re making their sixth consecutive contactless purchase.
If your credit card reader doesn’t give them the option to enter their PIN manually when the rule is triggered, the sale won’t go through. Your customer will think something’s wrong with the vending machine, their customer experience will suffer, and you’ll lose revenue.
This issue can easily be solved by opting for a credit card terminal like TPAY300, which is easy to install and supports PIN on Glass.
In case the 5-PIN rule is triggered, customers can easily type their PIN and complete the purchase.
This will directly salvage any lost sales.
4. U.S. Operators Should Pick a Cashless Payment System that Recovers Lost Sales Tax
Lost sales tax is an industry-specific problem that every vending operator has faced many times. Whenever your machine dispenses products, but the payment doesn’t settle, you’re still obliged to pay taxes, because a sale is recorded.
This is called ghost vending.
It forces operators to pay taxes for products they’ve never made money on.
According to statistics reported by Neurashop, 23% of vending transactions can fail because of payment issues and product jams.
Since vending sales are primarily high-volume, where reconciliation is done manually (using historical data and spreadsheets), mistakes are common.
If there’s a 3-5% mismatch across thousands of transactions, the lost revenue tax can easily add up to a significant amount.
Let’s say your vending machine records £15 000.00 in sales, but only £14 200.00 is settled.
If the VAT is calculated on £15 000.00, it means you overpaid taxes on £800.00.
This is why it’s critically important to pick a cashless payment terminal with a display that’s connected to your billing center and can integrate with your accounting software.
Prioritize cashless payment devices that enable you to add sales tax to transactions on checkout, bottle deposits, and change pricing based on cash vs digital payments.
In case the VAT is already accounted for in sales data, you can match it to transaction data and show it to tax authorities to reclaim lost sales tax.
This means you get to keep more income, which you can reinvest in more cashless payment solutions for the rest of your machine fleet.
5. Consider the Depth of Telemetry Data Offered by the Cashless Payment System Provider
If you’re adding cashless payment to your vending machine fleet, you’re going to be collecting transaction data. However, this is just a fraction of the valuable data points your vending machines produce every single day.
Modern card readers can integrate with software for telemetry, monitoring, and remote machine management.
Superior telemetry and payment solutions offer in-depth data that goes beyond machine performance and transaction details.
The goal is to consolidate all major operational data points under one VMS.
Since you’re already committing resources and time to integrate a cashless payment system, it would be a missed opportunity not to leverage your machine data to reduce monthly spending and boost sales.
All of Televend’s cashless payment solutions are connected to the telemetry box inside the vending machine.
The box mounts between the vending machine’s control board and the payment system and transmits real-time telemetry data directly to your Vending Management System.
This allows you to process data with powerful AI algorithms to:
- Forecast sales in advance
- Plan dynamic refill routes
- Track machine performance
- Automatically plan product purchasing
- Set different commissions based on products and location
- Shuffle products
6. Check for Installation Compatibility
The last thing you want is a cashless payment system with a complex integration process that causes more headaches than processed transactions.
MDB is the most common protocol for all vending machines produced from the mid-2000s onwards. You can check whether your machine has an MDB by looking for a 6-prong MDB connector socket inside the machine.
If a machine has the MDB protocol, you can connect it to most modern cashless payment solutions on the market.
However, this is where it becomes important to think a few steps ahead.
As we mentioned before, since you’re already upgrading your vending machine fleet and committing to new hardware, you should consider cashless payment solutions that provide access to high-quality telemetry data alongside cashless transactions.
There are two ways cashless payment solutions connect to the vending machines:
- By plugging the card reader or contactless terminal directly into the control board.
- By mounting a telemetry box between the control board and connecting the cashless payment system to it.
Rather than reporting batched DEX files, the telemetry box streams real-time transaction data, critical machine performance data, machine inventory, and other business intelligence that directly impacts daily revenue.
In addition, Televend telemetry boxes can also work in offline mode so that the vending machines can work continuously even in case of emergency internet connectivity blackouts.
According to data from Kiosk Industry, 44% of vending machines were connected to the Internet in 2023.
That number is expected to reach 77% by 2028, which is less than 2 years from now.
Many vending machines that are still in circulation today are not up to modern standards and are keeping their operators from working efficiently.
One way to go about it is to replace a part of the fleet with smart vending machines, which can be costly since new ones range anywhere between a couple of thousand and ten thousand dollars.
The other way is to fit your machines with telemetry boxes and upgrade them for a few hundred dollars per machine so they have all the necessary smart vending features with the cashless payment capabilities.
After you’ve checked the installation compatibility of your machines, connect a cashless payment system to the telemetry box and get more out of every machine transaction.
Conclusion
While vending machines have always been associated with coins, there’s no coming back from cashless vending.
Back in 2017, the share of cashless transactions at vending machines was 37% according to the 2020 AVA report. The same publisher revealed that the share of cashless transactions went up to 80% in 2024.
That’s a stunning 135% growth share in cashless transactions in just seven years.
It’s clear that cashless payments are the future of vending and a must for any operator who wants to increase sales of their vending fleet.
However, the significance of cashless doesn’t stop at transactions.
Thanks to the digital transformation of vending, all machines have become incredible hubs of data that most skilled operators use to cut costs in running their day-to-day operations on an unprecedented level.
In this article, we’ve given you six critical tips that you need to consider before picking a solution for your machines.
Once you find the best cashless payment option and combine it with real-time data, your entire operation will experience an upgrade in sales and efficiency.