Peppercoin Pursues Opportunity in Contactless, Vending

Peppercoin Inc., which started out as a processor of so-called micropayments for online content but soon began to embrace small-value point-of-sale transactions, now sees opportunity in both contactless technology and vending markets, its top executive says. “We've set bigger sights for ourselves,” says Mark Friedman, chief executive of the Waltham, Mass.-based processor. “Today we're a small-payment technology company.” Friedman says merchants contemplating whether to accept contactless payments, which depend on radio waves to replace conventional card swipes and require specialized POS gear, confront several issues (Digital Transactions News, Oct. 28, 2005). Among these are high transaction costs, a high cost of customer service, and the need for return business to boost profitability per customer. Most sellers of small-ticket items?the usual target of acquirers selling contactless-payment–are heavily cash-dependent and typically can't afford card acceptance or loyalty programs. Contactless, also known as radio-frequency ID (RFID) payment, gained momentum last year and is now accepted in about 30,000 locations. “There is an initial set of merchants that have adopted [contactless] and a set of merchants on the sidelines trying to figure out whether to adopt it and when,” says Friedman. “We can help them adopt it.” Peppercoin last month launched a loyalty module for its small-value payments engine that allows merchants to track transactions and offer rewards for certain types of spending and for return visits. The module relies on cards already held by customers, and so doesn't require an enrollment process. The engine is based on technology that allows merchants to aggregate credit card and signature-debit card transactions over time to reduce acceptance costs as a percentage of sales. Payments can be handled as stored value, pay-as-you go, or subscriptions. The software also offers so-called self care to customers via a Web interface to hold down service costs. Peppercoin charges a nickel per transaction regardless of how many modules, including the new loyalty module, are used. Two merchants, Toscanini's Ice Cream and Utah Transit Authority (Digital Transactions News, May 1), have so far signed up to use Peppercoin in conjunction with contactless payment. “We are very focused on contactless,” says Friedman. To that end, Peppercoin is courting the reseller channel. It cut a revenue-sharing deal with acquiring giant Chase Paymentech Solutions this spring. Earlier, it made a deal with MasterCard Worldwide to promote both transaction aggregation and the bank card network's PayPass contactless program among merchants. “We see the acquiring space as very much our conduit to the market,” says Friedman. Now the company hopes to bring the same approach to the so-called unattended point-of-sale market, which includes vending machines, parking meters, and other devices that dispense low-ticket goods. It currently counts Rowe International, a jukebox manufacturer, Synergy Media Group, which operates a network of store-based kiosks that download digital media, and Duncan Solutions, a maker of parking meters, among its customers. “Prepaid and loyalty are very interesting in this market,” says Friedman. “It's very hard to establish a relationship with the customer. We want to make it simple.”