Little USAT’s Big Footprint in NFC Payments

With little fanfare, unattended-payments provider USA Technologies Inc. (USAT) has built an outsized share of the still-small but rapidly expanding base of merchant locations in the United States that accept near-field communication (NFC) contactless transactions—the type of transactions generated by smart phones using the Apple Pay, Google Wallet, and pending Samsung Pay mobile wallets.

Malvern, Pa.-based USAT operates a wireless, card-accepting network comprised mostly of vending machines but which also includes laundries, kiosks, and amusement and gaming devices. As of March 31, the network had 302,000 connections, up 24% from 244,000 a year earlier.

In response to an analyst’s question during a May 11 conference call to discuss USAT’s financial results for fiscal 2015’s third quarter, chairman and chief executive Stephen P. Herbert said 100% of recent network additions are NFC-enabled.

“It’s a very rare customer that doesn’t understand the importance of mobile payment and that NFC capability,” Herbert said.

For the entire network with its 300,000-plus connections, the NFC-enabled base is 70% to 75%, Herbert estimated. “We still have a few mag-stripe-only [locations] out there,” he said.

Apple Inc. chief executive Tim Cook said in early March that nearly 700,000 locations now accept the NFC-powered Apple Pay mobile-payment service, up from just 220,000 when the service launched last October. Cook’s updated figure would indicate that USAT, with approximately 225,000 NFC-enabled locations, accounts for 32% of the current U.S. NFC base.

USAT’s network handled 54.8 million transactions in fiscal 2015’s third quarter, up 28% from 42.8 million a year earlier. The company added 475 customers, bringing its total to 8,925 versus 6,650 in the spring of 2014.

In addition to facilitating fast, contactless transactions, NFC technology at vending machines overcomes barriers to a sale when the customer doesn’t have cash or a payment card handy.

Herbert and chief financial officer David DeMedio attributed much of the network’s growth to the company’s QuickStart program, which provides customers with third-party leasing options for USAT’s ePort line of hardware. That gives a vending-machine owner a third option to acquire USAT’s hardware, the others being actual purchase or rental through an older program called JumpStart.

Earlier, USAT announced that JPMorgan Chase & Co.’s Chase Commerce Solutions unit, which includes merchant acquirer Chase Paymentech, would be its new payment card processor. Chase will replace U.S. Bancorp’s Elavon acquiring subsidiary once the agreement takes effect at the end of the fiscal fourth quarter.

Asked by an analyst if Chase was offering better pricing, DeMedio said “we do expect efficiencies in terms of our cost,” but that the main reason for the deal was the “strategic relationship” with Chase. USAT said in an April release that Chase’s scale could help it grow both domestically and internationally.

—Jim Daly