If you’re an on-the-go person and don’t like waiting in lines for snacks or drinks, or if you’re at work and need a mid-afternoon caffeine kick, chances are you visited a vending machine a time or two. They’re quick and convenient with no human interaction.

Besides the once in a while frustration of trying to shake your bag of pretzels loose from the last rung of the vendor when it gets stuck, the machine is probably pretty stress-free. But what about those times when the machine doesn’t give your change back, or worse yet, doesn’t take your crumpled bills?

Newer vending machines are being equipped with chip card reading technology, and its important to understand the changing technology.

1. You Don’t Need a Chip-Enabled Card to Use a Vending Machine…yet

Not quite yet, at least. Banks are still in the process of completing the switch from magnetic stripe to chip reader cards so vending machines are still equipped with a stripe to swipe your card, a slot for cash and coins and some have been updated to accept chip readers.

Dipping your card in vending machines works the same as it would at a checkout counter in a shop. The screen will prompt you to insert your card, it will communicate with your bank, authenticate your purchase and ask you to remove your card.

One thing to note is that there is no one working a vending machine to remind you that you have to dip. All cards that have chips right now also have the magnetic stripe, but that doesn’t mean you have the option. The magnetic stripe reader in the vending machine is for those who still haven’t been issued a card with a chip in it. So, if you try to swipe your card and it doesn’t let you move forward with the transaction, it’s probably because it knows your card has a chip and it’s waiting for you to dip it.

2. Security Doesn’t Take a Backseat Just Because it’s Unattended

The people who create payment terminals are not going to make vending machine payments any less secure than they would be at a payment terminal manned by an employee. Dipping your card in a vending machine is just as safe as dipping it in the attachment a cashier has on his or her tablet.

Inside the hardware where you insert your card, the process of encrypting your purchase begins. As with anything else, whichever snack or drink you bought has a data code that is unique to your card and your purchase. It will change every time you make a purchase in that vending machine — that’s what makes chip-reading technology so fraud-resistant.

Your transaction code gets sent to your bank, where it will transfer to the receiving bank, and your purchase will be complete. Vending machines typically won’t ask you for a PIN number or signature.

Keep in mind, chip transactions tend to take just a few seconds longer than the magnetic stripe transactions. This is because the payment information is transferring in real-time and the data must be encrypted. A few more seconds spent at the vending machine is worth it when it means your payment is secure and you don’t have to worry about fraud over something as simple as a two-dollar beverage or 75 cent bag of M&M’s.

3. Contactless Payments Might Be an Option

Because many companies are switching to payment methods such as Apple Pay, Google Pay or the like, vending machine card reader technology has to keep up as well.

Think of the last time you went to the mall and craved an ice-cold Coke. Although it used to be as easy as pulling a buck out of your pocket and waiting for the bottle to fall, now there are three ways to pay for such a drink: digital wallet, cash or credit card.

Nowadays, you never know who’s carrying what. Some people prefer cash. Some prefer to make larger payments on credit and smaller payments with cash. And some want nothing to do with either and have downloaded their credit card onto a digital wallet.

If you’re the type who prefers digital wallet, it might be hard to find a vending machine just yet that has frictionless payment options only. Instead, what some vending machine owners are doing is switching out the payment terminal and keeping the machine. This quick update means that cash and magnetic stripe technology is still accepted by the vending machine card reader, but people with chip readers can now use them too.

Now just because chip credit cards are also enabled with Near Field Communication (NFC) doesn’t mean this payment method works at all vending machines. Some vending machine card readers don’t have the technology necessary to complete a contactless payment. You’ll have to look for the symbol on the terminal. If you see a circle with radiofrequency lines and a hand with a card, this means the payment terminal will take a digital wallet payment.

4. Know Your Customer Base

Introducing cashless options might not be a bad thing when it comes to updating your vending machines. But is it worth the cost?

While many people still shy from using credit cards for small purchases, it’s still nice to offer the option if they forget to take cash out or forgot their wallet before they made the trek to the vending machine. In recent years, because credit card spending has become more mainstream due to the ease of use, it might even boost sales for your vending machine if you add the option. Customers are increasingly choosing options that take less time. They are also feeling much more comfortable making credit card transactions because EMV is taking such strides to keep personal information safe and encrypted.

If you have many different generations visiting your vending machine, chances are high they want to pay in many different ways. If your vending machines are located in offices where most people are used to them for example, and know they take cash only, it might not be worth the expense of refitting your machine with vending machine card readers. Alternatively, if your vending machine is located in an area full of young professionals that rarely carry cash, a retrofit may have excellent ROI.

Choose the Right Design

Updating your vending machine with new payment terminals means keeping with simple designs. You don’t want your customers to be intimidated by a vending machine card reader. It should be as straightforward as it can be. After all, vending machines are all about convenience.

When something looks easy to use, customers will also be more trusting of how secure the kiosk or vending machine is because it won’t be difficult for them to figure out such as where the card actually goes and whether or not they should leave it in or pull it out before the transaction is complete.

At ID TECH, we offer various options to keep your vending machines running efficiently and accepting payments securely.

Whether you choose to use a digital payment option or a chip card reader without NFC capabilities, we can help you choose the one that will keep your customers satisfied and your business running.

We have over 30 years of experience with payment terminals and we know how much a contactless or card reader machine can boost business nowadays. Reach out if you have more questions or want to look through some of our products. Read our other blogs about payment terminals to find out just how much is changing in the world of digital transactions.

What are Mobile Payments?

Mobile payments are defined as transfers of funds using mobile telecommunications networks or diverse mobile devices in both the initiation and confirmation of the payment.

The location of the payer and the supporting infrastructure are not the key factors characterizing mobile payments. The payer may be on the move or at a Point of Sale (PoS). The payment may be processed by credit cards or by a prepaid wallet. Funds can be transferred and deducted from the prepaid amount or billed by the mobile network operator. Mobile payment solutions often add more value to the payment and bundle loyalty offers, advertising platforms, and other value-added services to the payment transaction.

Consumer use of mobile banking applications for mobile payment solutions is accelerating at a rapid pace. In the U.S., nearly one-third of people (31 percent) use mobile banking more than any other app on their smartphone. Only logging onto social media (55 percent) and checking the weather (33 percent) are more common mobile activities.

This is according to the 2018 Mobile Banking Study from Citi, which revealed that 46 percent of U.S. consumers have increased their use of mobile banking in the past year. Eight out of 10 people (81 percent) now use their phone to manage their money on nine days in every month, on average. Nine out of 10 mobile banking users (91 percent) said they preferred using apps over going into a branch, while 68 percent of millennials said they could see their smartphone replacing their physical wallet.

Consumers’ use of banking apps continues to increase, with usage increasing from 46% in 2015, to 63% in 2017. Most people use mobile banking apps to verify balances and transactions and transfer funds. Our study found consumers increasingly use banking apps to verify investments and contact customer service.

Mobile Payment Solutions are changing the way businesses operate and continue to shape how payments continue to evolve. With smartphones, consumers can perform almost any task, anytime, from anywhere. With the advent of banking apps and loyalty programs, financial institutions engage consumers through mobile device experiences.

Remote consumer-to-consumer mobile fund transfers include services to transfer money remotely from one account to another. These services can transfer money stored directly in bank accounts or in other virtual wallets. Remote business-to-consumer payments include mobile online payments and mobile banking.

Mobile online payments are payments initiated through the mobile device for purchasing goods delivered at a later moment or for paying for digital goods which become available immediately.

Mobile payment solutions often add more value to the payment and bundle loyalty offers, advertising platforms, and other value-added services to the payment transaction.

Mobile Payment Methods, Categories, and Examples

The methods cannot be categorized by the technology on which they are based since that technology is always evolving. They can be categorized by the parties involved in the payments. This can be businesses to consumers and consumers to other consumers.

One difference between mobile payment solutions and other payment methods is the location of the involved parties. The location of the payer and the supporting infrastructure are not the key factors characterizing mobile payments. The payer may be on the move or at a Point of Sale (PoS). The payment may be processed by credit cards or by a prepaid wallet. Funds can be transferred and deducted from the prepaid amount or billed by the mobile network operator. So in the case of mobile payments, they can be either transacted in proximity to each other or remotely.

Remote consumer-to-consumer mobile fund transfers include services to transfer money remotely from one account to another. These services can transfer money stored directly in bank accounts or in other virtual wallets. Remote business-to-consumer payments include mobile online payments and mobile banking.

Mobile Banking is an extension of online banking which the consumer uses to initiate a mobile banking payment which results in transactions carried out via the same payment instruments of online banking payments. Proximity consumer-to-consumer payments are payment methods for contactless transfer of funds which is possible only when the payer and the payee are close to each other.

Another group is the proximity business-to-consumer group which is the most interesting one from a business perspective because there are a lot of payment solutions in this group and they often bundle other services which add value.

One mobile payment solution deals with mobile devices – usually mobile phones – used by merchants as POS terminals. This is possible with dongles attached to Internet-connected smartphones which the merchants use for credit card payments. The consumer doesn‘t need a mobile device. He can just swipe his card into the dongle. This solution lowers the costs of the merchant because the mobile devices are usually much cheaper than terminals.

The other subgroup of proximity business-to-consumer payments are the contactless payments. They are possible only when the consumer uses a mobile device at the POS and holds it in proximity to the reader. There are different technologies enabling this type of payments.

Mobile Payment Processes

Mobile Payment: A payment, defined as a transfer of funds in return for goods or services, where the mobile device is involved in both the initiation and confirmation of the payment.

Mobile Authentication: The use of a mobile device to authenticate the user either as part of a payment transaction or to give access to some information or functionality.

Mobile Ordering: Transactions where the mobile phone is used to initiate the order but not to make the payment.

Mobile Delivery: Transactions where the mobile phone is used to receive delivery of goods or services without making the payment.

Mobile Banking: Access to banking functionality via the mobile phone.

Mobile Loyalty: The use of a mobile device for storing and redeeming loyalty points.

Mobile Payment Technologies

Radio Frequency Identification (RFID) is an application of contactless technology for both proximity and vicinity communication. It refers to small electronic devices that consist of a small chip and an antenna. The RFID device serves the same purpose as a bar code or a magnetic strip on the back of a credit card or ATM card; it provides a unique identifier for that object.  

Near Field Communication (NFC) is an extension of the radio frequency identification technology. It’s a radio frequency technology that allows different devices to communicate with each other wirelessly within a short radius allowing faster data transfer speed and increased data security in the payments domain.

Another application is smartphones with NFC-technology. They can work as substitutes for payment cards. Mobile applications securely store the payment information in a certified environment. The smartphone can be used like an NFC-enabled payment card. Accordingly, users pay by holding their smartphone close to a reader at the point of sale.

Mobile Payment Efficiency

Mobile payments are an efficient and hassle-free way to pay, and they benefit both consumers and businesses. They allow businesses to establish easy-to-use accounts and rewards programs, creating a customer incentive for future visits. Also for businesses, mobile payments eliminate the need for renting or buying payment processing equipment.

Customers will enjoy the streamlined transaction process as well. All their info will be stored digitally, making checkout a quick and painless experience. Plus, it is safer to carry your phone than cash or a credit card. In today’s environment of identity theft and fraud, this consolidation of financial information is good news for those concerned about financial data and its security.

ID TECH is a leading payment peripheral provider with a magnetic stripe, EMV contact, and EMV contactless expertise. It was established in 1985 in California and opened its Asia headquarters in Taiwan in 2016. For more information about its mobile transaction payment product, visit https://idtechproducts.com/products/mobile-payment/