Skip Cash at Vending Machines, Charge a Soda

July 3, 2006 — -- It used to be it was all about the Benjamins -- all about cash.

But you'll no longer need to scramble for the right change or a crisp dollar bill when technology further sidelines cash at a new batch of vending machines.

This week MasterCard and a Philadelphia Coca-Cola bottler will begin to equip 1,000 vending machines with the means to accept credit and debit cards.

To make that soda purchase even easier, the souped-up machines will also take MasterCard's PayPass, a "contactless" card that consumers place in front of a sensor to process payments.

It's another sign of dollar bills going the way of all things paper as credit and debit cards take over.

In 2003, debit and credit card swipes numbered more than 34 billion in the United States. Experts predict that by 2010, card transactions will surpass those made by cash and checks combined.

Charging Gum and Fast Food

While cards were once whipped out mainly for big-ticket purchases like airfares and televisions, now few consumers bat an eye at using a credit card to charge a couple of dollars' worth of tomatoes at the grocery store.

Aarti Reddy, a recent college grad living in New York, uses her credit card for almost everything. "You can charge gum at the deli," she said.

Indeed, cards are welcomed at the most unlikely of places -- the coffee shop, the sports stadium, the fast-food drive-through, and now the vending machine.

MasterCard's new machines in Philadelphia go a step further, employing the contactless technology that uses radio frequencies to transmit payment details wirelessly between card and sensor. There's no signing or swiping -- just tap or wave the card over the sensor and the transaction is recorded.

Cardmakers hope "contactless" will become the wave of the future. It's as secure as traditional credit and debit cards but faster and more convenient. Both Visa and American Express have contactless cards similar to MasterCard's PayPass.

But the technology need not be confined to a square of plastic -- the chip that makes a card contactless can be implanted in any device.

In June MasterCard and Taiwan's Chinatrust bank created a watch with an alter ego -- a credit card.

Visa, which has 5 million contactless cards on the market, is testing the technology in a cell phone. Earlier this year, Visa partnered with Cingular wireless and awarded the James Bond-esque phones to 150 season ticket holders to Atlanta's Philips Arena.

In addition to speeding the ordeal of getting snacks and drinks, the phone has opened up a world of interactive features. People could walk up to "smart" posters embedded with sensor chips, hold the phone up to a target and buy songs, video clips and ringtones.

The benefit to fans is obvious. "You can take your mobile phone and go to the Atlanta arena and not only pay for concessions, you can go to these posters and download information about the team, get information about ticket sales," explained Paul Cohen, Visa's senior vice president of corporate communications.

Visa plans to make the phone widely available in late 2007 or 2008.

Of course, a cell phone turned credit card is only as useful as the stores that accept it, so cardmakers are installing sensors anywhere and everywhere.

"We see the biggest opportunity for growth by targeting areas that traditionally use cash or checks," said Visa spokesman Will Valentine.

Fast-food restaurants, coffee shops, movie theaters and convenience stores are at the top of the list. In 2005, consumers spent more than $17 billion on Visa cards at fast-food restaurants, a nearly 63 percent increase from the previous year.

MasterCard has forged into New York City's subway system. The company plans to install contactless sensors on turnstiles, allowing commuters to pay their fares as they run to catch a train.

Where else will contactless go?

"Any place where a line forms is an ideal environment, anything that can provide speed and convenience for the cardholder. It's about enhancing cardholder and customer experience," said a MasterCard spokesperson.

Budgets Beware: Spending Too Easy?

Not everyone believes consumers stand to benefit from easier, faster forms of payment. When people pay with plastic, they tend to spend more than they would with paper. Hence, the approximately $800 billion in credit card debt that consumers have accumulated.

"Retailers know that many consumers will spend more when they have plastic. These cards encourage you to use your credit on impulse purchases on the spot," said Travis Plunkett, legislative director of the Consumer Federation of America.

He cautioned, "As it becomes easier to purchase something that's gone by the time you leave the coffee store, you're going to end up paying interest on a latte."

While the number of credit and debit transactions continues to climb, thanks in part to contactless technology, consumers still have reasons to reach for the green stuff.

Law school student Devin Kosar stays away from cards so he can stick to a budget.

"I try to use cash because you can actually see it leaving your wallet. If you're not seeing the money go and you're not keeping track of your funds, you're much more likely to spend," Kosar said.

And in a city of street vendors, greenmarkets and cabs, Aarti Reddy admits she can't use plastic for everything.

"In New York, I feel naked without cash," Reddy said.

Even cardmakers concede to that, although Visa has thought about testing contactless technology in New York City cabs.

"We'll probably never be a cashless society," said Visa's Cohen. "But we'll be a less cash society."