There’s a few payment methods that can be used to buy items from vending machines, but everything other than cash is lumped into “Cashless vending”. You could pay for a snack on your phone, with a loyalty card, bitcoin or other cryptocurrency, a pre-paid gift card, or any number of futuristic options. To bring us back down to earth, the most common for of “cashless vending” is a credit card or debit card, but how do vending machine credit card readers work?
Credit and debit card processing can be pretty mysterious if you’ve never dug into it before. You know that the vending machine credit card reader needs to read data from your card and then somehow take that data and transmit it to a credit card processor, but how? Simply put, the data is transferred through a signal just like how a cell phone transfers data (like 3G/4G/5G). Before cell data, vending machines needed to be connected to phone landlines to be able to accept credit cards.
Shop Credit Card Reader VS. Vending Machine Credit Card Reader
It’s relative simple for a store to set up a credit card processing account. The credit card processing hardware and banking programs are available local bankers and warehouse clubs like Costco and Sam’s Club.
Unfortunately, a vending machine credit card reader is slightly more difficult. Since a vending machine is not typically overseen in real time, issues and unfamiliarity with particular credit cards readers can be points of frustration for consumers. Also, a telephone line or Internet connection is can be tough to get in some remote vending machine locations. Not to mention that since a snack is at most a few dollars, the purchase is is usually considered a micro-transaction.
So it takes a bit more work to set up a vending machine credit card reader than an brick and mortar point of sale.
Luckily, since credit card readers for vending machines are in high demand – and the demand is being met with even greater supply and competition from manufacturers – the hardware, transaction fees and monthly network charges are not as expensive as you might anticipate.
Vending Machine Card Reader Hardware
This is super obvious, but for your vending machine to be able to read a credit card, you will need to make sure that it has a credit card reader or combination point of sale (POS) that it can be modified to work with a credit card reader. The card information is read from either the good old magnetic strip and/or a proximity reader. Proximity readers are extremely common these days and save precious seconds in a transaction.
Card Reader Transmitter
The transmitter device is often called a “telemeter.” The card reader will read and encrypt the credit card data, but then the credit card information needs to be transmitted from the vending machine to a payment gateway. Since vending machines are often in locations that do have easy access to an phone or cable to send the info to a payment gateway, the most practical way of sending data is with cellular modem similar to what is in a cell phone.
The network that the cellular modem uses to send the data is called a Wide Area Network (WAN), and allows the transaction to be confirmed and completed. A WAN works like most cell phones, via a “SIM” card. If there are multiple vending machines in one area it is possible to create a Local Area Network (LAN) that would then send the transaction data through one WAN connection.
By using a LAN and reducing the number of WAN connections it is possible to save money, since there is only a hardware cost for LAN connections, but WANs require the hardware and a monthly service fee – similar to a cell phone bill.
Transaction Payment Gateway
Okay, but where does the transmitter transmit to? The answer is to a payment gateway. The payment gateway is a fancy data processing center that receives the encrypted credit card data. Then the credit card data is sent from the payment gateway to the credit card processor where the payment can be approved.
It is possible that the payment gateway receives more than just credit card data. Some vending machines transmitters can send all or some of the DEX data stream also.
Payment gateways could filter out the sales data and that could be used to help re-stock vending machines more efficiently. The DEX stream could also have alarm codes that could be used to automatically notify the vending machine owner of maintenance issues. Thought the main point of the payment gateway is to process the credit card payment and allow or not allow the transaction to proceed, the other DEX data can help the vending machine owner avoid fast selling items from going out of stock, re-routing stock and employees on the fly (dynamic routing), and take care of maintenance.
A CREDIT CARD PROCESSOR
A credit card processor is who/what approves all the credit card and debit card transactions. The credit or debit card processor says the transaction is okay, and then a notification of whether or not the payment should be accepted is sent to the vending machine through the payment gateway and the transmitter (which is now acting as a receiver of data).
Then the vending machine actually vends the item! It’s pretty amazing how all of the above data transmissions occur in a matter of seconds, and that the vending machine credit card reader and associated systems can work faster than physical cash!