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cashless vending


Will SCA impact vending?


Peter Alcock, head of product marketing at payment technology specialist NMI looks at what Strong Customer Authentication (SCA) will mean for the vending industry.


I


f you accept contactless card payments on your vending machines, you’ll doubtless be aware of the latest change to hit the industry - Strong Customer Authentication, or SCA. What does it mean and what do


vendors need to be aware of? In certain circumstances, when a customer buys something from one of your machines and pays with a contactless card, they may be prompted to insert their card and enter a PIN. This is fine if your payment device has a card slot and a PIN pad included in its hardware but presents a problem if it doesn’t. This could potentially lead to a lost purchase, an unhappy customer, or so the naysayers would have us believe.... To see why this isn’t a new or significant problem, it’s useful to understand


how contactless transactions work. Around five years ago, card issuers had 70 million contactless cards in issue in the UK, and the card schemes made a real push to get retailers to upgrade their card terminals and to encourage cardholders to use them for low value payments. The self-service industries such as vending, parking, tolls and kiosks could take card payments with just a tap, with no need to verify the transaction with a PIN. The only proviso was that the transaction had to be under the contactless limit, at the time around £30, and that there was a limited number of sequential contactless transactions or cumulative value that could be made before re-validating your card through a Chip and PIN transaction. So, all was well, and low-cost card payment for vending was realised. At the time this limit was deemed to be a good compromise between


minimising the banks’ liability for fraud, should a cardholder’s card be lost or stolen, while also minimising inconvenience to cardholders. By 2019 however, banks were finding that they were on the hook for transactions


16 | vendinginternational-online.com


made using lost and stolen cards – even if they had been reported as lost. In order to close this loophole, the banks mandated that all contactless transactions must be online authorised. This slowed transactions slightly but didn’t account for a major loss in vending activity. Separately to all this, the EU Payments Services Directive (PSD2) brought


in new laws in January 2018 to improve consumer rights and reduce many kinds of payment fraud. An important element of PSD2 is SCA, commonly known as 2-factor authentication. It applies to all types of electronic payment transactions, although we’re


mainly concerned with cards. For certain contactless transactions made using a card or smartphone, the cardholder will need to provide additional identification. This could be in the form of a PIN, a biometric such as face recognition or fingerprint or a one-time passcode sent to a phone. Many facility managers and operating companies found themselves wondering why this had to apply to vending. Let’s examine the risks associated with credit card payment:


● The majority of snack and drinks vending is at a very low average transaction value.


● The goods are not normally able to be resold for cash ● All contactless payments are online authorised so a reported stolen card


will not work So, the possibility of someone stealing a card and fraudulently buying the


equivalent of a bulk carton of snacks or gallons of coffee simply doesn’t exist.


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