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Soft-drink makers add credit card vending to machines

By Alisa Weinstein
Jan. 7, 2002

Much like paying for gas at the pump, credit card vending is expected to become a fixture on machines at amusement parks, malls and college campuses.

Hoping to snare consumers searching for convenience, Pepsi-Cola is one of the first to make the credit card payment option available. It began testing new wireless technology in 24 Memphis, Tenn. machines in late December, and plans to expand to 200 machines over the next few weeks, Pepsi spokesman Dave DeCecco said.

The Coca-Cola Co. (KO: news, chart, profile) also is at work on a similar technology, company spokesman Dwight Williams said. The soft drink maker hopes to roll the service out in five years.

"People are just generally used to paying with plastic for everything these days, so why not soda?" said Greg Prince, executive editor of Beverage World. "As we move into a wireless society, there's no reason soft drinks shouldn't be right there with it."


Soda, water and juice purchased with credit cards at Pepsi's machines will be the same price -- 75 cents to $1 for a can and $1 to $2 for a 20 oz. bottle. Coin and bill payment still will be an option, but the new technology will not accommodate debit cards.

Many consumers will likely have no qualms about using credit cards for small purchases, especially younger ones who are accustomed to paying for purchases with debit cards, said Rob Rubin, a director at Forrester Research.

"People who are 25 and under now are comfortable with paperless transactions," Rubin said. "They're going to be much more comfortable using a card to make a $1 purchase."

Dehydrating finances
Still, what may seem convenient for consumers now may end up hurting them later, especially those who abuse their credit cards, said April Lewis, director of education for Consolidated Credit Counseling Services, Inc.™, a nonprofit credit counseling organization.

Since most vending machine soda bottles cost $1.50, and the average annual interest rate on a credit card is 18 percent, the price of one soda could balloon to more than $3 after five years and more than $7 after 10 years.

While that doesn't seem like much, every purchase adds up, especially for college students, who run a high risk of building credit card debt, said Lewis. Sixty percent of undergrads have credit cards, and they carry an average balance of almost $2,000, according to student-loan provider Nellie Mae.

"In theory, it's not a bad concept, but from our perspective, people haven't been taught how to use credit," said Lewis. "This is just another easy way to say, 'I want this now, I don't have the money, but I'll borrow the money."

Convenience
Pepsi hopes to see the credit card option on all of its vending machines within 10 years, DeCecco said. But for now, the company sees the technology, which costs between $300 and $500 to install on existing vending machines, working well in theme parks, movie theaters, gas stations and university settings.

Other possible applications include Pepsi cards that would offer special promotions and discounts, as well as tie-ins with universities that allow students to use their identification cards to pay for soft drinks at machines.

But DeCecco says these developments are "way down the road."

"It is just a matter of what makes sense and what will help consumers out the most," he said.