Vending machines have been around for almost 140 years and remain little changed, yet these rather low-tech machines are far from dying out. Acting on a tip-off that adding value to the little-disrupted vending machine sector would pay off, Xavier Sans founded Barcelona-based hardware startup Orain to enable mobile payments for vending machines.
Knowing the tastes and habits of machine users would be a major customer need, so Orain has since grown into a chat-based, interactive app and SaaS with IoT and AI capabilities, on top of allowing digital payments.
“Our vision was to make machines sociable so that users will have a great experience and want to buy from machines again,” Orain CFO José Luis Montero said in an interview at last year's Smart City Expo World Congress. “We started with vending machines, but saw that there were other verticals – laundromats, petrol stations, arcade gaming centers and many others – whose services we can also attend to with the same product."
Users can even ask an Orain-equipped vending machine to tell them a joke or send feedback to the machine operators. If users consent, they will receive push notifications from the Orain app installed in their phones about promotions targeted at their individual spending preferences and habits when they are near any Orain-powered machine.
Go beyond payments
Sans first got the idea of mobile payments for vending machines at the Computer Vision Center, an incubator at the Autonomous University of Barcelona (UAB), where he was working on another startup.
“The Computer Vision Centre saw the opportunity in enabling mobile payments for automated machines, especially for the millions of vending machines worldwide; it was something that was not possible then,” Montero said. The global vending machine market, valued at $30.30bn in 2018, is forecast to grow 9.4% between 2019 and 2025.
After several months of working on an app for this, Sans discovered something else was missing. "Unlike at a store, customer relationships are not possible with vending machines, so that's where we wanted to start,” Montero said.
By then Sans had seen sufficient potential to found Orain, which means "now" in Basque, where the founder hails from. In total, it took about two years from the founding of Orain in 2016 to the development of its first prototype.
In 2017, Orain secured €1m in seed investment, allowing the startup to employ Montero, a graduate in finance and labor and human resources from the University of Catalonia, as CFO. The company was also able to afford to move into its own office. Unnamed angel investors provided the first tranche of €400,000; they also introduced Orain to another investor and industrial partner, Italian plastic cups-vendor Eurovending, which led to the startup's first pilot in 2018.
Making machines sociable
Montero said: “Our ultimate aim was that when users leave home, our app would be the only app they would need to access all types of automated services.”
When a user with the Orain app nears a vending machine, it will send a greeting to the user via the app's chat function. Once the user selects a product, the machine will dispense it and simultaneously deduct the cost of the product from the virtual wallet. Users can also send messages via the Orain chat function to report any problems to the vending machine operator, thanks to the app's natural language processing (NLP) capabilities.
The hardware, connected by cable to the vending machine's cashier system, communicates via Bluetooth with Orain's app downloaded to the user's mobile phone. The hardware, consisting of a series of metal plates, works with any brand of machine and facilitates payment from the wallet feature of the app. The virtual wallet can be topped up via credit card or with coins at vending machines.
For the pilot, Orain installed its hardware in dozens of vending machines belonging to Eurovending's customers – with their consent – across Spain. Enthused by the trial's results, Eurovending made its first ever investment in a startup.
“Securing an industrial partner served us very well because their clients became our clients and we could share databases,” Montero said.
As Orain is not a registered financial organization, it formed a partnership with Barcelona-based fintech startup Socialpay. "All transactions go through an interface in our application that belongs to Socialpay,” Montero said. “We need this interface for the payment and wallet to be virtual.”
With the tech team expanded to a total of seven following 2017's seed investment, Orain was able to add NLP capabilities to its app to “give sociability to the machines and further avenues for revenue,” Montero said.
Useful data for clients
A recent addition to the app is a map that informs users which vending machines, including ones that are not powered by Orain, are nearby.
“We want our customers to maximize the revenue from their machines so we suggested launching promotions during off-peak hours,” Montero said.
Orain's harvesting of user data is valuable to its clients. The startup makes all data related to purchases available to the machine operators as part of its SaaS package. “This helps operators to manage their stock, especially with perishable products, so they don't get wasted,” the CFO said.
The company now has approximately 5,000 machines in Spain, France and Italy, and 50,000 users using the Orain app. “We have a 25% rate of daily active users, so we know that people don't just download the app and use it only once,” Montero said.
Most users are currently office workers with an Orain-registered machine on their premises though the company eventually wants to cater to consumers across multiple verticals.
Five-year lock in
Besides Orain's home market of Spain where it has three sales staff, its other key markets are Italy, the home of Eurovending, where it has two commercial staff, and France, where it has just begun sales. It is focusing on the Eurozone exclusively because the app works only with the euro at present, though the startup has identified Latin America as its next possible market.
Apart from sales-generated revenue, Orain has also received €250,000 funding from Spain's Center for Technological Industrial Development (CDTI) and has moved into larger premises. It currently has 30 staff and is looking for further financing of at least €1m to consolidate its key markets, and to enter other verticals, like laundromats, car washes, photo machines and arcade games.
The company uses a SaaS monthly subscription model with a five-year contract. The tariff varies according to the number of machines in use. “The five-year contract was selected in case we develop a new hardware design, and it is long enough to develop lifetime brand loyalty,” Montero said, explaining that this ensures its business clients will automatically continue with any new or updated product without Orain having to sell them the new product.
Orain offers two types of subscription to its business users, who are first given a free trial. Once on board, they can choose between a basic rate, where the machine operator manages communication with users itself; and a premium rate, where Orain handles communication with machine users on the operator's behalf.
