The Payment Breakdown

May 11, 2016

Micro markets mirror many other retail locations in the amount of ways a consumer can pay for products. In most micro markets consumers can pay with cash, credit/debit, and stored value accounts – just like they would at the grocery store, convenience store or local restaurant. From an operator’s perspective should it really even matter how consumers are paying in the micro markets? As it turns out, yes! Here’s how consumers are paying in the market… 

Stored value accounts reign

Stored value accounts, or pre-paid accounts, are one of the most common ways consumers pay in the micro market. They make up nearly half of all payment methods in micro markets. Stored value accounts let users sign up and log into their specific accounts where they are then prompted to load funds from their debit/credit card (or cash) into their stored value accounts.

For consumers it’s simple. They load the funds and then every time they visit the micro market they have an easy way to pay that doesn’t involve remembering a wallet or purse to make a purchase. In fact, consumers can access these stored value accounts through a physical micro market card, key tag, employee badge with linked micro market accounts, pin code and password, and biometrics such as fingerprints. Consumers can view their purchase history and see what they are spending as well, a feature not available with cash or debit/credit options.

Another reason stored value accounts are so attractive to consumers? Loyalty rewards points. Oftentimes consumers can participate in micro market deals only through their user accounts. And the more they buy, the more they are rewarded.

Stored value accounts are great for operators, too. Micro market operators gain capital upfront when consumers load money on their stored value accounts. Stored value accounts can also offset credit card fees –a relief for many operators. There is also the ability for operators to track consumer purchase history and make suggestions and pairings based on what they’ve previously purchased. This can be a great asset in increasing the sales ticket and leading to higher customer engagement.

With a stored value account, users can also utilize payroll deduct which gives them the ability to load funds onto their market account from their paycheck, meaning that they don’t have to think about doing it themselves. With payroll deduct operators pay less credit card fees and, according to micro market provider Avanti Markets, payroll deduct has proven to increase sales 25 to 30 percent. 

With one swipe

Despite the advantages of using a stored value account in a micro market, many consumers still like to pay with their debit/credit card, to the tune that around 49 percent of all transactions are made with a swipe. This depends a lot on the location type. Millennials don’t mind using their card for small item purchases, which may mean that operators see larger credit/debit card usage in places like technology firms.

There is a credit and debit card fee for the operator who offers this payment method, which is why many micro market providers have been encouraging operators to help consumers make the switch to stored value accounts.

With the recent launch of EMV (Europay, MasterCard and Visa) in the U.S., too, operators may see in the future, more consumers using mobile over a card.

In November 2015, some vending operators reported receiving chargeback fees on cashless transactions where an EMV card was used to pay on a non-EMV compliant device. Automatic Merchandiser reported that the chargeback fees were sometimes more than 10 times the cost of the product being purchased. This appeared to be a direct result of the EMV liability shift that occurred in October whereby credit card processors switched the liability for fraudulent credit and debit charges from themselves to banks and merchants who did not offer EMV cards or card readers, respectively.

The chargeback fee issue, according to industry experts, may be limited to a small number of transactions and operators, however, some believe the switch to EMV may drive consumers to mobile. EMV cards can be confusing for consumers, who are tasked with inserting the card into the device and oftentimes having to enter a PIN in addition — this, some argue, will drive consumers to a quicker, simpler transaction of tap and pay using NFC or mobile wallets that are quick and just as secure.

Cash isn’t king

In vending, cash has been the primary way many consumers pay, but that’s not the case in micro markets. In fact some in the industry report cash usage in markets to be just 2 percent.

Cash can be nice for consumers, but go by the numbers – Automatic Merchandiser reported last year that micro market stored value accounts create a higher spend per transaction than cash in the market; up to 10 percent higher.

While cash isn’t a popular payment method in micro markets, it’s important for operators to understand who is utilizing it. Is one location using cash more than others? Operators can use data to find out where employees are using cash – it could be a great opportunity to go in and encourage stored value account usage. Operators can do that by incentivizing consumers to use their account. Try giving more loyalty points to those employees who use their stored value account. Implement a campaign such as “Spend $XX, get $X added to your account.”  Or, it might be a good idea to offer bonus funds of $5 for every $50 an employee adds into their account. Offering bonus funds to employees who load large amounts of cash into their stored value account is a great incentive to use the feature.

Operators can also use clings and digital signage to promote stored value account promotions such as “Buy 1 Get 1 20% off” that is only valid using a stored value account.

The ability for a consumer to pay in multiple ways sets the micro market apart from anything else in the industry. Operators who haven’t yet looked at their micro market payment breakdown should do so soon in order to find out how their consumers are paying.