If you're worried about alienating cash customers by introducing cashless payment to an unattended merchandiser, think again. A recent study of 250,000 vending machines equipped with cashless readers found the technology not only boosted overall machine sales, but cash sales.

The USA Technologies study, performed in partnership with Michigan State University and presented during the recent National Automatic Merchandising Association show in Las Vegas, showed that cashless technology's impact on both cash and cashless spending could hasten the introduction of cashless readers in vending machines.

While cashless payment has dominated retail purchasing for some time, customer acceptance has been slow in unattended retailing due to the need to retrofit machines with cashless readers and the reluctance of consumers to use credit cards for small ticket purchases. Currently, about a quarter of the nation's 4.3 million to 4.5 million vending machines can accept cashless payments, according the study.

Manufacturers of cashless payment technology, such as USA Technologies Corp., have published studies over the past decade quantifying the improved performance of machines equipped with cashless readers. 

Study: Cashless doesn't cannibalize cash

The most recent study found that contrary to some expectations, cashless acceptance not only does not cannibalize cash sales, but actually boosts them. In addition, cashless technology drove top line sales growth more for low-performing machines (generating less than $2,000 a year in sales) on a percentage basis than for higher-performing machines.

The M.S.U. study measured performance in 250,000 machines over an 18-month period following cashless deployment and found cashless sales increased by 131% in low-performing machines compared to 78% of all machines studied. Cash sales improved by an average of 97% in the low-performing machines during that period, compared to 17% for all the machines.

Machines generating less than $2,000 a year in sales had top line sales growth of 110% on average when equipped with cashless payment compared to an average 35% increase on the total population of machines equipped with cashless technology.

The number of transactions also increased in addition to sales volume. Total transactions increased by 26%, as well as 74% for credit card purchases and 13% for cash purchases. 

"It (cashless acceptance) makes sense to do on every machine that you can," said Jim Turner, vice president of cashless deployment services at USA Technologies, who co-presented the research along with Michael McCall, Ph.D., the NAMA-endowed professor of hospitality business at Michigan State's Eli Broad School of Business. "Cash is continuing to grow along with credit continuing to grow." 

Why study said cashless improved cash sales

Cash sales benefited from the introduction of cashless payment acceptance due the improved attention vending machine operators give to machines equipped with new technology, Turner said. Machines with cashless readers are typically equipped with telemetry that enables credit and debit card authorization. The telemetry also supports remote data management, which enables more timely machine servicing, sales reporting and analysis, he said.

"Those machines are definitely benefiting from the (telemetry) connection," Turner said. 

Another reason sales improve with cashless payment capability is that often, vending machine operators introduce more higher-priced products, under the assumption that there is less customer price resistance when paying by credit or debit card. While the intention here is to target the card-paying customer, the higher-priced product can also attract cash customers.

The study found that the technology's positive impact on cash payment addressed the need retailers face to support cash customers. A backlash from cash customers is causing retailers nationwide to rethink their business models, as local and state legislatures have begun to debate the issue as it relates to financial inclusion.

Credit card sales increase more not only because there was less price resistance when using a card, but because it was easier for the customer to purchase more than one item from the machine than when they used cash, Turner said.

"When anybody is using a card, they will always spend more," he said.

The study found there is a 37% increase in dollar spend when consumers pay with a card versus cash.

"The really important piece of it is new consumers," Turner said.

Cashless acceptance continues to grow

Previous studies revealed that blue collar consumers, who were less inclined to pay with credit cards initially, are now using them more, Turner said.

In looking at cashless technology penetration for different types of locations, Turner said 90% of machines at colleges and universities now have cashless readers.

Mobile payment accounts for 5% to 7% of the payments, but is growing, Turner said.

"It's over a billion-dollar opportunity for the industry," he said, given the number of vending machines that don't yet have cashless acceptance.

Cover photo: iStock