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More Cashless Vending Machines Rolling Out in the US

22 February 2007

Making it easier than ever for Americans to spend their money, and creating new business for credit and debit card companies, three of the biggest snack and soda makers are rolling out more vending machines that take plastic.

Coca-Cola Co, Cadbury Schweppes and PepsiCo are all testing vending machines that don't require cash in various U.S. cities.

"Society is moving towards cashless and we want to be at the forefront of that movement," said Mark Jackson, vice president of Cold Drink Equipment at Cadbury Schweppes. The company -- which makes Dr Pepper, Snapple and 7 Up -- began testing cashless vending machines in Dallas, New York and Chicago last December.

Banks that issue credit cards see the technology as a promising next step on the way to an inevitable cashless marketplace.

"Vending to us represents the next place where consumers are looking to use plastic in order to enact their transactions," said Tom O'Donnell, senior vice president of card services at J.P. Morgan Chase Inc.

Currently, only about 3 percent of the country's 7 million vending machines -- selling everything from Cheetos to condoms -- are equipped to handle swipe transactions, according to the National Automatic Merchandising Association (NAMA).

The companies believe using cashless machines increases sales. 

According to a 2004 report by business research firm Kiplinger, cashless technology will increase vending industry sales from $40 billion to $70 billion (20.4 billion pounds to 35.8 billion pounds) by 2008.

"On average, there has been a 10 to 15 percent increase in sales" in machines with the swipe option, Jackson said in a phone interview. The company will roll out 750 machines by end-February. If sales maintain current levels, the company will consider introducing cashless vending machines nationally, he said.

Last year, the Philadelphia Coca-Cola Bottling Co. teamed up with USA Technologies Inc. and Mastercard to roll out 1,000 cashless vending machines in Philadelphia. Pepsi is also testing 500 vending machines. By 2009, NAMA expects more than half of all vending machines will have a cashless option.

The e-port technology takes about $400 per machine and 5 to 15 minutes to install, said Stephen Herbert, president of USA Technologies, which supplies the technology and devices that can be fitted for existing machines.

Currently, the company supplies e-port devices to around 200 companies in the vending industry, he said.

"Start with the consumer -- it takes half the time to pay (with a card), it's a more convenient method of paying, and you can buy multiple products," said Herbert.

In 2004, a USA Technologies study found that people on average spend as much as 36 percent more at vending machines when they use plastic.

At Texas's Dr Pepper StarCenters, ice rinks operated by the Dallas Stars NHL franchise, people are gravitating to the Dr Pepper cashless test machines, said Dr Pepper StarCenters vice president, Ed Reusch.

"They don't have to worry about breaking a $20 (bill)," said Reusch. He added that people end up buying more with cards. "They'll buy for their friends," he said. 

Vending industry representatives said customers have not yet expressed concern about the security of cashless payments at vending machines.

"The vending industry follows all the normal protocol with encrypted credit card numbers and information," said Larry Eils, senior director of technical services at NAMA. Anyone wanting to steal data "will have to go through the same bells, hoops and whistles to get our data as anywhere else."

Herbert said USA Technologies adheres to a number of security standards including the Payment Card Industry, or PCI standard. "We are vigilant about security," he said.

Vending machine operators are better able to keep track of merchandise because the technology allows remote monitoring. The absence of cash also minimizes vandalism and theft.

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