RePlay Magazine - A cashbox without cash?

The following was taken from a recent presentation to gaming industry conference delegates.

"Please can you all put your hands in your pockets and pull out the change you have on your person. Now, how many of you have enough change on you to buy a bottle of Coke, (currently between $1.50 to $1.75), or to play more than one game on the average video amusement machine?"

The answer to the question is very concerning.

At the event where this question was asked, the most of the delegates did not have enough change (coinage) to actually buy a drink, or play more than one game. Obviously, these executives are not the target audience of the amusement field, but they are the average vending customer. However, the ability to use paper currency and pay at a bill acceptor negates the worries - or does it?

The possibility that the bill acceptor is not the natural alternative to paying with change has proven disconcerting for an industry based on coinage. More than 60 percent of consumers have expressed dissatisfaction with bill payment for small transactions (micro payments below $5). Broken acceptors, unaccepted bills, and other problems have proven the main stumbling blocks, especially considering the impulse nature of coin-op amusements today. The poor adoption of the dollar coin, combined with the poor acceptance of new bank notes in other territories, make this problem doubling concerning.

The video amusement industry has been inexorably linked to the coin-operated machine sector since its first appearance. Nutting Associates' early foray into the deployment of a video amusement game system, which was built on the experience of making flipper games, naturally used a traditional mechanical payment methodology too.

The conventional pinball pay scale was adopted from the beginning. The coin has driven the industry since 1972 when the owner of the Andy Capp's Tavern venue called up Atari to complain about their broken prototype Pong game, only to reveal that the problem was the old paint tin that was used as the proto-coinbox was filled to overflowing to the shortage in Yen coinage in the Japan Treasury caused by the popularity of Space Invaders. Cash has always been King!

Today, though, support of new payment methodologies is being driven by a change in the way consumers use and spend cash. Bally Midway's NFL Football video game in 1983 marked the first appearance of an amusement machine with a paper currency acceptor. For some operators, the move from coinage to tokens (or slugs) has simply been the replacement of one coin for another although the use of tokens helps limit the migration of any change to another business or location. Accordingly, the ability to move away from the tried and trusted coin mechanism has proven difficult.

Innovation in payment technologies has actually been more prevalent in the coin-operated refreshment vending industry. In fact, one of the largest vending operations, Pepsi-Cola, is expected to equip 10,000 cold drink vending machines with wireless transaction terminals by the end of this year.

Transaction Network Services (TNS) and their Synapse wireless transaction data communications platform for vending offers an operator the ability to monitor the vending unit. Plus, the hardware TNS and Pepsi-Cola have used to put 750 machines online in high traffic location enables credit card payments and has driven a 17 percent increase in machine sales volume. By the way, Pepsi operates over 1.2 million vending machines in the U.S.

So the ability to offer cashless payment on vending helps drive sales at the location while also offering a fundamental change in vending higher value merchant goods. In other words, machines with easier payment options offer more opportunities for impulse purchases, especially considering the low levels of cash and coinage that most consumers carry in their pockets today.

In the U.S. amusement market, operations have actually taken the lead in adopting cashless payment technologies. The application of swipe cards as payment systems was championed fairly early on by LBE chains like Dave & Buster's because they offer increased revenue with an easily configurable payment system. At the click of a mouse, machines prices can be changed, happy hours initiated, playing trends charted and exploited.

Multiple facility operators have also embraced swipe card system for another, very important, reason: to deter employee theft, or "shrinkage" of revenue.

Adoption of debit and player card systems has been growing although stabling a single standard, once envisioned, now seems dubious. Instead, manufacturers are using the ability to connect their hardware to centralized databases as a way of participating in the "cash box."

With a connected machine, a manufacturer is much more closely aware of machine revenue, and what was once a hit-or-miss science, obscured by vague reporting from operator to distributor and back to manufacturer, is made crystal clear with a direct link to the machine in question.

To further this trend, at least one manufacturer is moving forward with what might be described as "anytime connectivity" as well as a business model that leverages this technology for, what else, cashless payment. Incredible Technologies' Golden Tee Live depends on wireless modem connectivity, and so credit card payment has become a viable opportunity. With this capability, tentative steps can now be made towards a broader acceptance cashless payment, particular at street location venues where it's impact will be most broadly felt in terms of increased revenue.

The use of player accounts to store winnings also means that players can use accrued winnings from Golden Tee Live in their personal account to pay for additional games. This means players are crediting up the game without cash, paying to play from their so-called banked winnings. I.T. has also just launched its credit card payment system, allowing for micro-transactions with a percentage of that money going back to the processing firm. All of this has resulted in an unusual situation. In some cases, especially where there are top notch players in the area, I.T. winds up cutting a check back to the operator at the end of the month instead of sweeping their accounts when a game is generating more cashless revenue than actual currency or coins fed into the machine.

While this kind of connectivity and transparency has proven valuable to manufacturers of online equipment, it has proved equally disconcerting for operators, who feel their proprietary information is now at large. As noted earlier though, the benefit the security benefits for multi-venue operators often outweighs some of the data mining concerns.

Development of an independent network for game, tournament, prize and payment connectivity, separate of any one manufacturer and distributor control, has drawn some interest with at least one developer known to be proposing to release an independent portal infrastructure by 2006.

Cashless payment has also found a new home in the jukebox business. Broadband music provider Ecast Inc. has embraced the application of credit card payments. So far, it seems like a good fit appealing as it does to the impulse nature of entertainment purchases and the dwindling of walk-around cash and coin. In Europe, the application of credit card payment has exploded with the Chip & PIN credit card infrastructure taking the grocery store style swipe and pin-number payment methodology and applying that in bars, restaurants, retail or wherever money is needed.

Chip & PIN also offers a level of security that ensures stolen cards cannot be easily used on machines; and that's just the start. A number of technology firms are working on biometric applications to prove who is paying to play or purchase. For amusement machines, the cost of processing 'micro-payments' (sub $2) has initially hindered the application of credit card payment but technology and fee handling has improved.

Cashless payments systems are also a hot topic in Asia, where the amusement industry is rapidly embracing a new payment infrastructure that also uses innovative network technology. A joint effort by Sammy, Sega and Namco has developed the Amusement Linkage Live Network (ALL.NET) environment. Offering high-speed fiber-optic connectivity between company-run amusement locations, the technology also incorporates an IC Card architecture that can be connected to a centralized database, making Internet player ranking a viable reality. The only aspect that had not been fully defined was payment.

However, news reports from Japan suggest that later this year the ALL.NET environment will incorporate the EDY (Euro-Dollar-Yen) electronic payment system, which was originated by Sony and now run by the FeliCa operation. The EDY system offers an e-payment service that allows the individual to pay either via an EDY Card or mobile phone using a wireless Radio Frequency Identification (RFID) technology. Linked to an IC Card storing player data, a RDIF system allows payment via the EDY system.

The new LEDZONE, large-area-network based amusement operation launched by Namco last year, is the first amusement experience to deploy the EDY e-payment system. The game Counter Strike Neo, a first person PC shooter, has been developed into an amusement terminal package, which combines the EDY contact-less payment, and special player account method.

As with all opportunities to create or control a standard protocol, there are others hoping to establish their foothold in the cashless amusement scene in Japan. Beyond the traditional credit card companies, there is the NET-CASH system. The system originated as an e-commerce service that works via a pre-paid card. The service is used in the retail sector much like the TNS service in Japanese convenient stores. Of late, though, it has evolved into an online NET CASH web service that is also deployed through payment terminals.

Game maker Taito has deployed the NET-CASH as a tournament prize payout system for its latest driving video. Battle Gear 3 Tuned uses NET-CASH to collect the player's games winning in tournament competition and covert those into prize money.

Specialty payment cards and tournament infrastructures are also being joined in today's high tech environments through one of the most prevalent card systems currently in use, one that that the majority of consumers unknowingly carry with them everywhere.

The use of the mobile phone, with its installed SIM card (plugged straight into the owners bank account), is well underway in Japan. Vending machines customers are able use their phone to debit money from the account and transferred directly to the vending unit. At present, arcade machines in Japan also link to players mobile phone to supply ranking details, but companies like Sega are also looking to tap into that resource for payment as well, particularly through their involvement with the EDY system using FeliCA's so-called imode.

As impulse payment migrates to cashless applications, the amusement scene will need to be at the cutting edge of this application. Embracing connectivity will help maximize game and jukebox revenue.

We have moved well beyond that first cashbox at Andy Capp's with a proverbial second cashbox needed for tournament fees. In the future, a third and fourth cashbox will be needed to collect fees for other gaming features. But in reality there may be very little cash in the box. Instead, future operators won't see their net revenue until it appears in their corporate bank account, radically changing the dynamics of the business for every tier of the industry.

Contributing editor Kevin Williams is founder and director of the out-of-home leisure entertainment consultancy KWP Ltd. His extensive years in the amusement and hi-tech attractions industries includes top management and design posts, with special focus on new technology development and applications. A well-known speaker on the industry and its technology, he also pens extensive articles for leading trade publications. Williams is editor and publisher of The Stinger Report, a leading industry e-newsletter and web-based information service (www.thestingerreport.com ).

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