Transaction aggregation eventually could save the vending-machine industry from the ravages of the Durbin amendment to the Dodd-Frank Act, according to one processor of electronic payments from vending machines.
New Federal Reserve Board rules the amendment prompted that roughly halved the interchange fee on most debit card transactions from an average of 23 cents from 43 cents last year also raised the cost for merchants processing small-ticket debit card transactions.
Nobody’s happy about paying 23 cents to process a transaction on a $1.50 product, Paul Coppinger, Apriva LLC president, tells PaymentsSource.
One vending machine payment-processing company earlier this year stopped accepting MasterCard Worldwide cards in its machines in the wake of chaos resulting from the Durbin amendment.
“Talk about killing an industry,” Coppinger says. “Vending was just getting to the point where we were expecting hockey-stick growth. Durbin put the brakes on it.”
However, aggregation–the practice of combining several small transactions to create a single larger transaction–may offer vending-machine operators a glimmer of hope, he says.
Apple Inc.'s iTunes, for example, holds off until a shopper seems to have finished buying a series of recorded songs before toting up the bill to aggregate many small transactions, Coppinger says.
In another approach to aggregation, turnpike monitors automatically extract a motorist’s toll through a transponder. The transponder carries a balance and may top itself off through a connection to the driver’s checking account, he says.
“Starbucks is a shining example of the latter model,” Coppinger notes. “So there are examples of changes in consumer behavior.”
But the vending industry has failed to do much with aggregation so far, he concedes, adding that changing the public’s habits always presents challenges.
Still, such moves seem “inescapable” for the vending business which needs to move past cash and switch to electronic payments to offer customers a satisfying experience that includes electronic coupons and automated loyalty options, Coppinger maintains.
Vending-machine operators desperately need such differentiators to succeed in a commoditized market, he says.