Verizon Wireless and USA Technologies are teaming up to enable mobile payments at vending machines nationwide.

The deal is further validation of the growing market for cashless payments. At the same time, it shows that wireless carriers such as Verizon Wireless are looking for ways to insert themselves into the mobile payments value chain.

“The deal signifies that mobile operators are moving into these new revenue streams where they can act as a facilitator of payments,” said Nick Holland, senior analyst at Yankee Group, Boston. “Consumers are getting more comfortable with mobile payments and operators see an opportunity they don’t want to be disintermediated from.”

Many of the large wireless carriers are looking for ways to be a part of mobile payments.

Recently, AT&T Mobility, T-Mobile USA and Verizon Wireless formed a venture called Isis to build a mobile payment network.

In addition, Sprint, in partnership with Cardinal Commerce, is allowing subscribers to purchase items discovered on a mobile device by charging the transaction to a credit card stored in the Sprint mobile wallet.

In the deal announced yesterday, USA Technologies will add the Verizon Wireless network to its ePort Connect Service, which enables wireless point-of-sale payments at vending machines via credit and debit cards. USA Technologies currently has more than 100,000 connections to its ePort Connect service, including kiosks and vending machines.

For Verizon Wireless, the deal gives its business customers a new payment method they can offer.

“We have invested billions in building a reliable, high-performance wireless communications network,” said Harry Martin, director of Advanced Wireless Data Services at Verizon Wireless, Basking Ridge, NJ. “We are also driving innovation by continuing to open our network to new devices and applications.

“The direct result is making it easier for our business partners to bring solutions to market rapidly,” he said. “USA Technologies’ Cashless Payment application is one such example.”

The deal includes a sales arrangement to have the ePort Connect cashless payments service included in the services Verizon Wireless offers to businesses.

USA Technologies already has an arrangement with AT&T for wireless connectivity that is not as comprehensive as the deal with Verizon Wireless. It also broadens USA Technologies’ wireless reach.

“This deal with Verizon is more strategic,” said Dave DeMedio, chief financial officer of USA Technologies, Malvern, PA. “It’s more of a collaboration to go after the marketplace together.

“With the addition of Verizon Wireless, we believe we’re going to have the majority of the U.S. covered [with wireless connectivity],” he said.

There are currently between 7-8 million vending machines in the U.S., per Mr. DeMedio. The annual cash and coin volume generated by these machines is estimated at between $40 billion and $50 billion annually.

Cashless payments are growing as consumers become more comfortable with them and discover the added convenience.

“Everyone can relate to the difficulty of feeding dollar bills into a vending machine and having it spit your money back out at you,” Yankee Group’s Mr. Holland said. “We’re not going to have a cashless society but, there is this new means for payment that may be very convenient in certain situations.”

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