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With $12 million in new funding, PayRange Inc. wants to place more of its Bluetooth-equipped dongles inside vending machines to enable more consumers to make contactless, and cashless, payments.
The funding, announced Thursday by Portland, Ore.-based PayRange, will be used to expand its staff and increase the number of PayRange-equipped machines, says Paresh Patel, founder and chief executive. Palo Alto, Calif.-based Matirx Partners, a venture capital firm, led the funding round, PayRange says.
PayRange enables consumers using PayRange, when near a PayRange-equipped vending machine, to make a contactless payment using the PayRange app.
To use PayRange, the vending-machine operator pays $49 to get a PayRange device that is attached to the vending machine’s internal wiring harness. A decal advertising PayRange acceptance is fixed to the exterior of the machine.
PayRange also charges 3.95% per transactions, which Patel says is below the industry average of 6% to 7%. Typically, these charges also cover costs, such as cellular service, in addition to payment-processing fees, he says. One competitor, Crane Merchandising Systems, advertises a 5.4% transaction rate.
PayRange uses Stripe for its payment processing in the United States, and Moneris Solutions Corp. in Canada, Patel says.
The PayRange device transmits a Bluetooth low energy signal that most recent smart phones can detect. The device does not send notifications from PayRange-equipped machines because it might be too intrusive, especially if there are multiple nearby machines, Patel says. And there is no device pairing between the vending machine and smart phone, and no bar codes to use.
To make a transaction using PayRange, the consumer opens the PayRange app—available for iOS and Android smart phones—and it finds the nearest machines. The consumer selects the appropriate one and makes her selection on the machine. When ready, she swipes up in the PayRange app to make the payment. She also can swipe down to cancel or use the machine’s payment-acceptance device.
Consumers load funds into the app with a credit or debit card, or they can use Apple Pay, and eventually Android Pay, Patel says.
While the payments industry may be excited about displacing cash in vending-machine transactions, the payoff for the operators is in increased transaction volume, Patel says.
Many times a consumer wants to make a vending purchase, but doesn’t have the correct cash on hand. “It wasn’t the fact they didn’t want to buy,” Patel tells Digital Transactions News. “It was simply they couldn’t make the payment.”
Adding card readers and near-field communication (NFC) readers to machines eliminates the cash-on-hand concern, but they are expensive to install across multiple machines, he says. PayRange does not require a cellular connection for the vending machine because the service relies on the consumer’s mobile handset for that. “Why connect the machine when the user has everything,” Patel says. “They have the interface, the network connection, and the personal connection to the device.”
Currently, PayRange is selling direct to vending-machine operators, and has reseller agreements with suppliers to the industry.
PayRange’s strategy makes sense, analysts say.
With no more than 600,000 vending machines already equipped for cashless vending out of the 6 million to 7 million machines overall, the opportunity is vast, says Joshua J. Elving, senior research analyst at Feltl and Co. Inc., a Minneapolis-based equities research firm.
“Cashless has been available for a decade,” he tells Digital Transactions News. “The problem was costs.” Now wireless service and hardware costs are decreasing, and vending-machine operators are better able to make a return on their investments, he says. “If you add cashless with the ability to accept mobile payments or contactless payments it’s a no-brainer,” Elving says.
Because of the convenience of paying electronically, consumers typically are more willing to pay slightly higher prices, says Kevin Dede, senior technology analyst at H.D. Wainwright & Co. LLC, a New York City-based investment firm. “That has to put vending-machine operators at ease,” Dede tells Digital Transactions News.
With less reliance on catering to even price amounts—to accommodate cash-only consumers—vending-machine operators can set prices to reflect their costs, and reap more profits, Dede says. Consumers also tend to buy more using cashless.
Cashless vending also means operators often get more data about transactions, something PayRange provides to its operators, Patel says. That can help them manage inventory, learn what’s selling, and track purchasing habits, he says.
In the six months since shipping its first device, PayRange has signed up more than 680 operators that manage more than 1 million vending machines in the United States and Canada.
