From Smart Cards To Cell Phones, Cashless Payment Systems Offer An Opportunity To Redefine The Operator-Player Relationship

U.S.A. - When it comes to most consumer retail purchases outside the amusements industry, the debate over cash vs. non-cash payment is increasingly being settled in favor of plastic. This trend has crept up on amusements somewhat slowly, but with increasingly significant results. In past years, many industry members viewed cashless systems as too complicated and expensive. Today, cashless payment systems represent the best-kept financial success stories for a growing number of leading North American branded facilities. These include Jillian's, GameWorks, Dave & Buster's, Playdium, and others. This feature will examine the technology currently being applied to cashless payment, the benefits of the technology, and future applications.

Why have top amusement chains embraced cashless payment? There are several reasons. First, management has realized that the most desirable customers - those with the biggest entertainment budgets - are most likely to respond well to non-cash payment options. Indeed, heavy-duty credit card users who are looking for an out-of-home entertainment are prepared to pay a higher premium for the better experience which cashless technology engenders.

Second, the major chains are moving away from dependency on handling coins and tokens, which are cumbersome, expensive in their own right (labor-intensive), and come with inevitable security and theft problems.

Third, the application of cashless payment systems is a crucial first step toward eventually creating an all-encompassing machine management model. The promise of such a "total solution" offers the most intriguing - yet least discussed -- possibilities for the future. Cashless amusement operation implies the ability to micro-manage the whole way that players pay. (More about this later.)

Accordingly, with a new look and theme to the next generation of updated facilities, the adoption of cashless payment systems has been embraced as the core payment technology by the leading chains. Three major types of noncash systems are currently employed by the leading chains in the U.S. They are barcodes, magnetic strip cards, and smart cards (the kind with a chip).

Meanwhile in Japan, leading chains are also beginning to address cell phone and mobile payment operations, as well.

Barcode

Highly versatile and proven in the retail sector, a simple barcode attached to a card is the cheapest non-cash payment. Barcode technology makes the cards highly durable, and easy to distribute. With no retained data, other than that imparted at the time of issuing, this low-cost system also requires a very simple reader (scanner) based on the same technology used in the retail application of barcodes.

Applied Resource, Inc. (ARI), with their "Blinkee" card reader, and similar companies have brought a strong element of technological improvement to the application of card less systems. ARI has a versatile infrastructure that is able not only to use barcode but other card reading systems, as seen with the new "Maggie" reader. Utilizing their card development experience the company has created its own cost-effective version of the cards used for SEGA's "Initial D: Arcade Stage" and "Derby Owner's Club." Other system providers that favor barcodes include Coin Tech S.A with their Game-System.

Magnetic Strip

The use of a recordable strip on the card is the next derivation of the technology, and one of the most widely implemented. Mag-strip cards offer the ability for minimal data to be stored on the card. This capability has its benefits for site management software that does not offer a detailed tracking database of the casual player. Aspects of security are also combined into the recordable data, though mag-strip cards do need more elaborate readers than barcodes.

Companies providing this technology include InterCard, Sacoa Entertainment and their "PlayCard," Magnetic Cash and the "Box," or the 'Embed' Card System. The durability of card-swipe systems with magnetic technology mimics that employed in travel cards, phone cards and credit cards. Amusement applications benefit from the high security applications of other variants.

Smart Card (Chip)

The new technology enables the storage of considerable amounts of player details on a special integrated chip (IC) that is mounted directly on the card. More hi-tech also means a higher priced unit cost for the card, but yields higher levels of protection against fraud. Smart cards also offer the ability to upgrade as a VIP card, linked to detailed software tracking.

The Smart IC operation also means that the chip can be imbedded into anything, as has been seen in the retail sector -- especially in bars. Many waiters and waitresses have their own personal key (usually a small magnetic button, or card) that grants them access to the tabs they are running around the facility. The amusement sector has also seen the application of key-based game systems such as one offered by Innovative Concepts in Technology and another by Wallace Distributing.

The use of a chip also offers a unique means to register credits. Rather than placing some of the systems into special readers (motorized or otherwise), the proximity reader (known as a contact-less reader) allows the player to just pass the card by the reader to confirm the transaction. This saves money on complicated readers by reducing wear and tear on the card and reader.

Cell Phone And Mobile Payment Systems

Beyond credit card or ticket style systems, cashless payment options are also beginning to include paying for amusement machine gameplay via cell phone billing. Again, in such transactions, no cash moves from the player to the machine, nor from the machine to the operator. We've all heard of e-mail and e-money; soon the industry will begin getting acquainted with m-money and m-ticketing (M standing for "mobile," obviously). Today this technology is being explored and deployed for amusement application in Japan, which means Europe and the U.S. will likely follow in a couple of years.

The initial concept is known as the Wallet Phone. A number of manufacturers -- linked to phone service providers -- are actively involved. Here's how the Wallet Phone concept works. The standard mobile (cellular) phone utilizes a SIM Card (Subscriber Identify Module) removal chip that retains the owner's account details. The SIM Card can be stored with contact details and text information. Combined with additional software linked to proximity technology, such a SIM Card equipped phone enables the owner to simply pass their phone next to the machine in question to register credit.

Last year's Asian amusement exhibitions circuit was cluttered with cashless technology. One of the systems that received a good slice of attention was the Sony FeilCa "Contactless" IC Card system. Currently housed on cards, the proximity card reader was incorporated into a phone application, which allowed m-money. The system has been adopted by Sega as the EDY payment system being supported by over 200 Sega amusement facilities in Japan.

The U.S. is following both Japan and Europe in terms of cell phone market saturation and in terms of high-end mobile technology. Today only a small percentage of cell phones actually in use in the States are customers for mobile games and music, for example. But most new cell phones offered for sale today have color monitors and a growing number have Internet capability. Coming soon are 3D monitors, larger memories, and faster CPUs. All this will make the adoption of cell phone payment systems easier and more likely in American arcades, if not inevitable.

One new derivation of m-money systems using the mobile phone as a payment platform is utilizing the phones already-stored payment data (activation code and call charges) which could be used as a form of payment. A number of soft drink machines in Asia have been configured to receive phone calls so that a thirsty patron would literally call the machine to activate payment. At the same time the phone owner could now receive special one-use vouchers that could be read by a special phone screen reader (based on an onscreen barcode). Meanwhile in the States, the Coca-Cola Co. is reportedly doing a tightly controlled experiment with cell phone payment and cell phone activation for drink vending machines.

Observers differ as to how popular such a system would actually be with American consumers, beyond the "cell phone crazy" college generation.

Player Data Storage And POS Operation

Cashless payment systems, in all their variety, have additional important implications that go well beyond changing the medium used to store player credits. Cashless systems also can change how player data is stored, accessed, and used. Previously, some card systems attempted to store the player's game and credit details on the card, as if the arcade were giving the player a sort of beefed-up credit card. But with new technology, the card is just an ID to accessing a "back-of-house" database held on the facility's system, and leading to the creation of a detailed software environment.

Allowing player tracking and revenue gauging over multiple groups of systems (and even facilities) are just some of the clear benefits of installing a cashless payment system.

Point of Sale (POS) operation is greatly improved in facilities that employ a cashless system. A smooth touchscreen data entry procedure and a more-automated, cashless payment counter means that an operator offers a professional and clean presentation. Throughout the facility the utilization of Re-Charge Stations means that guests can actually add more credits to their card without having to revisit the (employee-staffed) POS section.

Downsides: Fraud, Hardwiring And Ticketless Redemption

No system is foolproof. Each of the cashless systems has its own weak spots. For example, if cash leaves operators vulnerable to theft, cell phones may expose players to an equivalent risk. Japan's leading operators are aware that some form of security is needed to ensure that the owner of the phone is the only one that uses the system, and that credits are not deducted accidentally. To this end, a confirmation procedure has to be employed to support the contact-less transaction. Other than conventional number code entry, which slows down application, new systems under consideration include biometric technology such as finger print recognition that will be performed while the player performs the transaction.

In prior years, hardwiring requirements have represented a major disincentive to wide adoption of cashless systems in many arcades. But this requirement is shrinking steadily as new technology options become more widely available and less expensive. No longer is it absolutely necessary to link every credit-oriented system (machine) into a central server. Wireless (wi-fi) has been employed by some systems to connect machines in a site, which means there's no need for cables and socket systems, and no need to reconfigure the floor layout to meet connection requirements.

Another potential obstacle to the adoption of cashless systems in many arcades is the presence of both video and redemption games. Some managers prefer to deploy cashless systems across the board. Others insist that tickets remain a vital part of the redemption experience and appeal. Between these two camps, a constant argument rages. Passionate claims are made for the importance of the "heft" factor in redemption for certain age groups.

(In other words, most children enjoy the activity of collecting tickets in its own right, as seen at Chuck E. Cheese and Dave & Buster's facilities. Youngsters rush around the site, excitedly clutching wads and wads of tickets.) Old school redemption operators maintain that it's equally vital to supply the tokens and redemption tickets, as it is to offer attractive prizes. Operations that have removed the ticket element from their redemption experience, have seen mixed results. Clearly, there is a need for extreme diligence to ensure that if tickets are removed, the fun element is retained.

Comprehensive Remote Facility Management

The "total solution" of top-to-bottom computerized (and even remote) management becomes a genuine possibility, when an amusement center integrates all aspects that the cashless system touches, with a management software program. This begins when fun centers use player data not just to select and rotate machines, but also to design marketing strategies and programs. For example, the collected data supplies valuable site information about player preferences and trends that can never be gauged even by the most diligent venue manager. The element of marketing is a feature often missed when considering cashless adoption. Putting the company logo on the card is just a start. Detailed evaluation of buying habits, already employed through card-based data tracking by most gambling casinos, will find an equally compelling application in amusement sites. In addition, cashless technology means that electronically stored credits can facilitate not only gameplay, but also food and beverage sales. Moreover, cashless systems lend themselves to flexible discounts at the site restaurant (or may even be linked to discounts at adjoining premises).

Further marketing opportunities include the ability of cashless systems to help management develop special events and promotions. The most likely successes will be based on guest patterns within the site that are revealed through play tracking on cashless systems. Successful promotions will also be linked to sponsorship from food and beverage providers. Such promotions can be seamlessly combined with private parties and special events through a cashless system. The ability to change the credit structure of all or a group of machines in a site, at a click of a mouse, makes private parties easy to control. Structuring of the credit ratio at certain times (offering half price plays during slow periods of the day) is another obvious ploy that becomes much easier with cashless payment systems. In collecting basic visitor data for the issuing of the standard payment system, leading operators will offer incentives to encourage facility or online registration (full personal details) in order to receive a VIP card that brings with it special privileges.

The application of a cashless system, coupled with a comprehensive remote management system, is increasingly more affordable and simpler to execute. Accordingly, such applications are increasingly a reality in individual arcades and multi-store arcade chains in North and South America as well as Europe. This means that one manager can oversee the operation of multiple venues and can evaluate the machines' best revenue opportunities. With the data from such a sophisticated yet affordable system, the manager can review player utilization patterns and realize it will boost profits if he changes machine placement in a particular site.

Or, revenue increases could be generated by the changing of payment times (i.e. low price during off periods) with a single executive able to change pricing, the attract mode, and even the parental settings on certain games at the flick of mouse.all on a chain-wide basis.

Live site and guest evaluation is another possibility, with a manager able to instigate very advanced customer tracking by following a player's habits. Current systems even make it possible for managers to review this data and understand a player's favorite games and activities. A nice element with the "contact-less" readers (depending on players card proximity) is the ability of proximity systems to passively track guests as they walk by, rather than when they register a transaction.

The Next Technology: Radio Frequency ID

Beyond proximity accreditation, the most advance of today's cashless payment systems deploy Smart Tags, also known as Radio Frequency identification (RFID). Currently being used in the retail sector, the RFID Tag is similar to any barcode label stuck on goods in a store. Like the barcode, the tag can be interrogated when in the sphere of influence from a reader which in some cases can cover a whole store. The retail sector uses the tags as a means of security and stock control (knowing when a item is resident in the store).

The tag can also be tracked physically, a feature that offers interesting possibilities. For example, blending Smart Tag tracking of players with electronic redemption credits could negate the need for ticket counters. Or, Smart Tag utilization could lead to special "reusable" poker chip style redemption tickets that are linked to automatic prize dispensers.

Another area of growing interest is electrical communication, or the ability to send signals down the power cables connected to a machine. That is, data literally is transmitted through the machine's power supply. Negating the need for additional cables and complicated servers, this low-cost approach has been seen used in the retail sector. Before it's widely adopted by the amusements industry, however, it could be superseded by the application of wi-fi units within machines.

How Street Operations Could Benefit From Cashless Systems

As noted, cashless payments systems have chiefly been adopted so far by arcades and fun centers. But the street operator's turn may be coming soon. As amusement machines progress towards a greater application of online ranking and tournaments, it would seem a good time for street operators (who arguably support most of the online tournament machines) to get in on the action. With cashless payment systems it is a short jump for the operator to offer the guest to his facility a VIP feature. This would give the operator the ability to collect data on the playing habits and point the player to games he would like. This would be the amusement equivalent to the preview, recommendation and voucher schemes employed by the online book retailer Amazon.

Cashless payment through a phone system offers such a wide opportunity for greater utilization of player data. This is true for arcades and street locations alike, and we'll provide examples of each. To begin, imagine an arcade management system that detects a playing pattern and food purchase pattern by player John Doe.

As a result, one day John automatically gets a cell phone message informing him that his favorite game is now on discount pricing mode at the local fun center.and by the way, there's also a special deal for the next two hours on his favorite brands of soft drink and pizza, too. And, John can pay for it all on next month's cell phone bill. It's like having a credit card that is dedicated to the amusements and the food/beverage industries. Such promotions will certainly drive more traffic to malls, prompting mall management to view arcades as premier guest attractions and as catalysts to encourage greater guest spending.

Street locations could benefit equally from cell phone marketing that is tied into cashless payment and player tracking systems. A music lover could be notified by cell phone when an online jukebox is offering a "sneak preview" of the newest CD by his favorite artist.a preference that the jukebox tracked through use of cashless payment systems with player data storage capability. In Japan, cell phones are already beginning to play a role in promoting the new online tournament networks. American players already use cell phones to make play dates with each other. Players in the U.S. will also someday be notified by the network of when a tournament is going to happen. And finally, the game network will eventually notify U.S. players via cell phone when their individual scores have been bested. This prompts the player to rush to the nearest tavern, where he logs onto a networked game and reestablishes his leaderboard position.

This detailed "guest targeting" strategy will become the envy of other entertainment-related sites. Where retailers look towards smart tagging and customer loyalty schemes to be able to gather the data for customer evaluation, the amusements industry could become the first providers of a full visitor experience that is uniquely customized and specifically targeted to their individual needs.

In other words, the full adoption of cashless management systems - and their integration into today's communications and arcade management technologies - could totally redefine the relationship between the amusements industry and its customers. Rather than remaining in the backwash as a mere "impulse activity" and incidental offering in locations, music and games could step forward as a leading exponent of hi-tech, state of the art, "reach out and touch someone" marketing. The profit potential is as high as next year's collective U.S. cell phone bill.

(First published in the March 2004 issue of Vending Times)

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