Securing Unattended Retail Payments

Unattended retail will be a $275 billion-a-year industry in three years. Once the purview of soda machines and candy dispensers, the unattended environment now includes everything from non-bank ATMs to parking kiosks to coffee machines to fancy vending machines that dispense electronics and even cars.

Which Mike Keegan, CEO of Transaction Network Services, said can only spell trouble for consumer adoption unless consumers are convinced that interacting with them digitally is totally secure.

In this week’s Data Drivers installment, Keegan joined Karen Webster to discuss the data that’s driving both innovation and growth across the unattended space as well as how operators are overcoming the payments security challenges in this fast-changing marketplace.

Here are the three data points they dug into.

Data Point Number One: 61 percent

To gain some insight into the unattended space, TNS surveyed consumers across the U.S., the U.K. and Australia to better understand the consumer experience of interacting with unattended terminals. The first data point — 61 percent — reflects the number of these respondents, ages 25 to 30, who would rather use payment cards instead of cash when buying items at unattended terminals.

It’s no surprise that these global consumers also believe that the ability to use credit cards and other alternative payment methods at vending terminals will continue to be an important factor going forward.

Keegan said that three biggest factors driving this payment preference are convenience, control and choice.

“Those three factors in that age group seem to be driving the uptick in unattended devices and the use of those unattended devices globally,” he explained.

If a consumer is at a vending machine that only accepts cash, the requirement of having to search for coins or figure out if they even have enough money to buy something can be stressful.

This is why Keegan said the payments experience in the unattended environment must be both convenient and simple.

But …

Data Point Number Two: 67 percent

In what seems almost a little counterintuitive, the next data point underscores the optionality that consumers really want and expect when it comes to paying at these kiosks: 67 percent of respondents want unattended vending machines and kiosks to accept both payment cards and cash.

While consumers want the option of alternative payments, this data point shows that cash is still relevant in the unattended space.

While Keegan admitted this may seem almost contradictory, it’s actually driven by cash still being utilized heavily in a number of geographical markets and the fact that people are still concerned about privacy and fraud.

“They know if they use cash it’s an anonymous transaction,” he explained, adding that with cash consumers are free from the security concerns that are inherent with alternative payments.

While the marketplace is working on a number of solutions, including encryption and tokenization, to make transactions more secure, Keegan said payment security remains a big obstacle that vending operators will have to overcome.

“As people get more comfortable using [unattended terminals] and fraud is mitigated, I think you’ll see a significant uptick in people using more credit and debit cards and moving away from cash,” he added.

Which all comes down to …

Data Point Number Three: 66 percent

This is the percentage of respondents who expressed a serious concern that using cards in these unmanned, unattended terminals would put them at risk for fraud or other security threats.

With different data breaches making the headlines, it’s no surprise consumers are concerned and even a little nervous about their security in this new channel for digital payments.

When it comes to vending machines, Keegan said consumers have many questions about how secure they really are, who is operating the machine, if operators can be trusted and what to do if something goes wrong and there is no one in person to talk to.

Many unattended terminals have internet connectivity via VPNs, which TNS advocates against because those networks can be easily hacked into.

Instead, Keegan said operators can ensure more secure connections by establishing a direct link between the machines and the payment environment. Securing these connected with encryption and tokenization can then help to prevent situations where identity or card data is breached, he added.

Not only is there a security risk of machines being hacked into and taken over, but the unattended terminals are also vulnerable to card skimming on payment card readers.

“Security and data breaches are going to be there, but what we have to do is try to secure that environment. As we secure it the best we can, I think more people will use vending machines going forward,” he explained.

Keegan expects that as time goes on and the payment experiences in the unattended space become more frictionless and secure, consumers will get more comfortable and their fraud and privacy concerns will lessen.

Operators must focus on not just making it a simple transaction, but also a secure transaction in order to drive increased adoption alternative payment methods in vending.

“It’s a market that’s exploding, but it does have the problems that any payments market or service has, which is privacy, security, making sure that the transaction goes through and that it’s simple and time-sensitive,” Keegan said.

“It’s an industry that’s going to have to really focus on the customer experience, and the ones that do focus on the customer experience over the next three to five years are going to win.”