07 018 mei special report

© 2007 NetWorld Alliance LLC page 1

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SPECIAL REPORT

Sponsored by MEI Payment Systems

By Travis K. Kircher

HOW TO PICK A CASH ACCEPTOR THAT’S RIGHT FOR YOU

Sponsored by:

Convinced by the many benefits of cash acceptance, you’ve decided to install bill acceptors on your next kiosk deployment. Choosing this option was a no-brainer.

When you realized that almost 90 percent of all purchases less than $10 are paid with cash, it made perfect sense.

As Alec Shekhar, Americas marketing manager for MEI, put it, “If you put two kiosks side-by-side, one with cash tendering and one with no cash tendering, the kiosk with cash tendering always generates more money – 40 percent or more, according to one of our customers.”

Why is this the case? Shekhar said, “Cash volume has not shrunk. There are still a vast number of transactions in which customers prefer to pay with cash. So when you include cash tendering in a kiosk, you not only capture this group, but also capture the 40 million consumers who do not have credit or debit cards.”

But look before you leap. There is a vast array of bill acceptors on the market. We designed this publication to help you decide which is right for you and your application.

First, ask yourself a few simple questions. Do you want the acceptors to take dollars or some other currency? How do you want your accepted bills to be stored – stacked in a standard cassette, stacked in a secure locked box or dropped in a simple bucket unstacked? What about security?

For key insight on how to choose the right cash acceptor for your business needs, read on.

DOLLARS, PESOS AND YEN – OH MY!One of the most important factors that must be decided early on is where you plan to deploy your kiosks. Will they be only in the United States? Don’t think about just today, but also

Cash Acceptance and Self-Service ROI

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CASH ACCEPTANCE AND SELF-SERVICE ROI


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tomorrow. To which other countries might you expand your kiosk deployment? The question is an important one, for it will determine which currencies your bill acceptors will have to take.

“Do you want to accept U.S. currency or international currency?” Shekhar asked. “If you want to accept international currency, then you have to look at different types of acceptors that accept multiple-width bills.”

Sim Bielak, vice president of sales and marketing at CashCode, agrees.

“When you start going into other markets like Europe and others, there’s a challenge there because the notes are multi-width,” he said. “So there’s a different requirement in terms of being able to validate those multi-width notes. It requires a different technology to be able to align and validate those notes reliably.”

As Shekhar said, different currencies have different widths. The U.S. dollar, for example, is 66 millimeters wide, but the Japanese yen is 76 millimeters wide. The euro has variable size bills ranging from 62 millimeters to 82 millimeters. The cash acceptor you choose must be designed to accept the bills you are planning for. It must also be programmed to recognize and authenticate all the international currency you might take, today as well as tomorrow. International acceptors are typically more expensive because they require more complex technology to read the security features on various parts of the bill. Fixed-width acceptors are usually simpler and less expensive.

This is an issue not only for kiosks placed in other countries, but also those deployed in certain border regions of the United States.

“If you’re deploying in El Paso, Texas, or Buffalo, N.Y., you may want to consider being able to accept both pesos and U.S. currency or Canadian and U.S. dollars,” Shekhar said.

JUST A BOX?Once you know the kinds of currency you will accept, you must decide on how the bill acceptor will store that currency. There is a wide range of storage options, ranging from small boxes to lockable removable cassettes. Which one is right for your kiosks? The answer depends first and foremost on the level of security you are seeking and on the amount of money your company is willing to pay.

Shekhar said some low-cost cash acceptors are designed with a very simple bill-collection system.

HOW DOES A BILL ACCEPTOR WORK?All bill acceptors have one basic purpose – to validate and accept paper currency in exchange for a product or service. The consumer inserts the bill into a slot (typically called a “bezel”). The bill acceptor “grabs” the bill, scans it for validity and sends a corresponding I/O signal to record the transaction. All of this takes place in one to three seconds.

After the bill is validated, it is either stacked into an attached bill cassette (also called a cashbox) or pushed out the back to be placed (unstacked) into any container that is behind it. For added security, the cashboxes attached to stacking bill acceptors can be “lockable/removable,” which keep the money locked and secured after the cassette is removed from the bill acceptor.




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“On the low end of the scale, there are acceptors that you can buy for less than $200,” he said. “They’ll just take the bill and then shoot the bill through the back of the unit into whatever container is in the back of the unit.”

Referred to by the industry as “stackerless” cash acceptors, these acceptors have no mechanism available to organize the bills. The kiosk manufacturer simply installs any container it chooses to hold the bills, ranging from a small box to a bucket.

“It has its advantages and disadvantages,” Shekhar said. “The biggest advantage is the low cost. But the drawback is that bills are all over the place.”

The other drawback, he said, is a less secure cash collection system. The cash is open and available to anyone who opens the kiosk door.

One alternative to the stackerless system is a more secure cassette. Shekhar said MEI offers bill acceptors with lockable removable cassettes for companies that want to provide an extra layer of security around their cash.

“What this means is that, when the dollar bill is stacked in the cassette, it’s locked away into the cassette,” he said. “If you take the cassette out of the bill acceptor, that cassette remains locked; you cannot get to the cash inside it.”

According to Scott Parker, sales manager for International Currency Technologies Inc. (ICT), “As with anything in life, security must be paid for. The lockable removable cassette, compared with the stackerless system, is a more expensive option. Deciding which option is right for your needs depends on your kiosk’s application.

“If you have something in Vegas, like on a casino, where you’re dealing with all cash, these machines have double-locked cassettes and they have a non-accessible product,” Parker said. “For video games, it’s not as major. If you’re not dealing with huge amounts of cash or a highly valuable product, the cost of extra security often can be a breaking point.”

CAPACITY MATTERS

No company should purchase a bill acceptor without knowing the maximum number of bills it can accept before the collection device needs to be emptied. Some cash




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acceptors can take 200 bills, while others can collect up to 1,200.

“When the cash box is full, you’ll have to go out and empty the cash box,” Shekhar of MEI said. “If you want to be able to leave the cash box alone for a longer period of time, then you will typically want a larger cash box that can take a little bit more cash before it becomes full. So you can buy a larger cash box and, typically, that will cost a little bit more.”

An example of a kiosk that might contain a larger cash box could be a bill-paying kiosk located far from the deployer’s offices. The lack of any “inventory” inside such a kiosk means that it would rarely (if ever) have to be restocked with goods. The only required visits would be regular service calls and cash collection – the latter of which could be done less frequently.

Conversely, a kiosk that dispenses soft drinks or perishable goods would probably have to be restocked on a weekly basis. The manufacturer of one of these kiosks can afford to install one of the low-capacity cash acceptors, since the cashbox could be emptied during regular visits.

ACCEPTANCE AND REJECTION

According to Shekhar of MEI, “Your tolerance for acceptance, security and jam rates will, to a large degree, determine the price range of the bill acceptor.” Unfortunately, all manufacturers typically claim high security and reliability rates, making the selection task difficult. Here is the lowdown.

Most manufacturers will tell you that they will reject all known counterfeits. While this may be true, Shekhar said, “The problem is that, in rejecting counterfeits, most manufacturers also sacrifice acceptance rate; that is, their products end up rejecting many legitimate bills.”

This leads to the stereotypical bill acceptor that refuses to take a good bill.

“Even differences of 1 percent in acceptance rate can have a big impact on the consumer,” Shekhar said. “MEI bill acceptors use proprietary software algorithms to maximize security without sacrificing acceptance rates.”

When it comes to bill authentication, the ability of a cash acceptor to spot a counterfeit bill is paramount. There are two main methods for authenticating a bill: the optical scan and the magnetic scan.

The optical scan authenticates the bill by seeking out and verifying certain subtle “identifiers” hidden throughout




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the bill by the mint. The metallic scan looks for magnetic signatures given off by various inks used in certain bills.

Some bill-acceptor manufacturers use magnetic scans in combination with partial optical scans to verify the authenticity of a bill.

Scott Parker of ICT said his company uses both methods to employ more layers of scanning. “One of the things that you can’t see with your eye is the magnetic properties of the ink,” he said. “They carry a slight magnetic charge and when they go near a magnetic sensor, they trigger it. The downside is that it’s not denomination-specific and magnetics are easy to counterfeit. It’s only when you have that in combination with something else that you have an effective means of validation.”

Shekhar said magnetic authentication methods are easy to fool and are redundant if the optical technology on the bill acceptor is robust.

“It’s like listening to a ball game on the radio while you are watching it on TV,” he said. “You get all the information and a whole lot more on TV. The radio is redundant.”

“We decided to go to an all-optical technology for several reasons,” Shekhar said. “The optical components never touch the bill, which is much better for jam performance.”

THOSE DREADED JAMS

Many of us have experienced the frustrating phenomenon of losing a bill in a bill acceptor without getting credit for it. This is typically due to the bill being jammed inside the bill acceptor. In industry jargon, this is known as “jam rate.” Jam rate is a customer-facing performance criteria, so you want to minimize it as much as possible.

“Jam rate is a big differentiator between low-quality and high-quality bill acceptors,” Shekhar of MEI said. “Low performance can result in lost customers. Our SC bill acceptor is designed with a short and low obstruction bill path. When combined with our authentication software, it accepts all street-grade bills, including those that are crumpled, worn, torn or even wet without jamming.

“When customers test this claim on our bill acceptor, they are usually amazed,” he added.

When comparing jam performance, you should not only look for the jam-rate specification of the bill acceptor but also ask the manufacturer for the in-field jam-performance rate.




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KEEPING UP TO DATE

As counterfeiters redouble their efforts to create the perfect fake, the U.S. Bureau of Engraving and Printing (BEP), as well as banks worldwide, is using more technologically advanced methods for creating bills that are virtually impossible to forge.

With new bill designs being printed frequently, software for bill acceptors must be constantly upgraded to be able to identify the bills.

“There have been a lot of changes in the past few years,” Shekhar said of U.S. currency. “The U.S. government finally decided to redesign our currency to make it much more difficult to counterfeit. Ours was the most counterfeited in the world, but, in 2003, the BEP began a redesign program to stay ahead of the counterfeiters.”

Shekhar said those looking for bill acceptors should choose a solid manufacturer that can quickly upgrade their acceptors in an efficient manner. That means working closely with the government.

“MEI has a close relationship with the U.S. Bureau of Engraving and Printing,” he said. “Before a new bill is introduced, the BEP provides MEI with a test set of bills and the MEI R&D team writes new software that can recognize them. Before the bill is released, MEI provides the software to our customers, who can upgrade their bill acceptors in the field so they are ready to accept the new bills.”

These upgrades, Shekhar said, are typically installed via a handheld software download tool. MEI devices also are capable of remote download if the kiosk is networked.

CUSTOMER SERVICE

Last, but by no means least important, is customer service. Shekhar said customers should demand timely and effective technical support from the manufacturer.

“Is the manufacturer willing to stand by their cash acceptor?” he asked. “What kind of warranty are they going to provide? Is labor included? Are parts included?”

Ted Furkin, sales manager for Pyramid Technologies, agrees.

VALIDATION: OPTICAL VS. MAGNETIC

True multi-wavelength optical technology, pioneered by MEI in 1992, currently is the industry’s most effective method for simultaneously achieving excellent security and high acceptance rates while maintaining low jam rates.

Magnetic heads require pinch rollers that lightly pinch the bill as it enters the cavity, dramatically increasing the chances of the bill being pulled or ripped or otherwise jamming the bill acceptor.

Pure optical systems, on the other hand, beam frequencies of light through the bill without ever physically touching it. The result: significantly lower jams.

Unlike magnetic technology that only detects the presence of magnetic ink, multi-wavelength optical technology measures the various properties of that ink. These optical properties are the “signature” of the ink. Optical sensors are able to identify fraudulent bills that may contain the same color inks (to the naked eye) with the same magnetic properties as authentic bills, but will pick up subtle differences in its optical properties and thus are likely to detect even sophisticated counterfeits.




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“The only thing we actually have to sell is service,” he said. “They can get a bill acceptor anyplace. There are over half a dozen manufacturers.”

Furkin said he prides himself in the fact that each of his customers is assigned to a specific engineer who can provide technical support if any issues arise. He added that it’s important for the manufacturer to be able to provide replacement parts quickly and easily.

A ‘RECIPE FOR SUCCESS’Ultimately, Shekhar said the type of bill acceptor your company chooses to purchase will depend on the specific application in which it will be used. But all good bill acceptors should have three characteristics: They should have a high acceptance rate, provide solid security and be reliable. Together, these technical traits form the recipe for success.

“If your cash acceptor isn’t working, your kiosk is not making money,” Shekhar said. “Choose a manufacturer that knows what they’re doing, has the industry experience and the infrastructure in place to make solid, reliable products, and you can’t go wrong.”

SUMMARY: HOW TO CHOOSE A BILL ACCEPTOR – A STEP-BY-STEP GUIDE

Step 1: Do I need a bill acceptor?

• Consider percentage of cash transactions – at least 65 percent of customers prefer to pay in cash for ticket size of $20 or less and 90 percent of customers prefer to pay with cash for ticket size of $10 or less.

• Will the kiosk serve a portion of the 40 million Americans who do not have credit or debit cards?

• Kiosks with cash acceptance generate more revenue than kiosks without it.

Step 2: What currencies do you need to accept: U.S., international or both?

Choose a fixed-width or multi-width acceptor depending on the size and variation of the currencies in the country of deployment.




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For example:

U.S. – Fixed-width OK. All currency is 66 millimeters wide.

Euro – Multi-width needed. Currency width 62 millimeters to 82 millimeters wide.

Step 3: What is the form factor available/needed for bill acceptor component in kiosk?

• Stackerless or neatly stacked bills inside a cassette – determined by space availability and desire for easy storage and collection.

• Unlocked cassette or lockable/removable cassette – determined by low- vs. high-security needs.

• Front-access cassette or rear-access cassette – determined by kiosk access door location and maintenance considerations.

• Upstacker or downstacker – determined by space inside kiosk and ergonomic considerations of bezel placement.

• Capacity: 300-, 500-, 700-, 1000- or 1200-note storage in cassette – determined by volume of transactions and cash pickup frequency.

• Interface – RS232, USB or Pulse – determined by computer interface needs.

Step 4: What is your tolerance for acceptance rate and jam rate?

Look for the highest acceptance rate and lowest jam rate that you can afford. These performance criteria are important to consumers. If possible, gather and compare the in-field jam-performance rates of the various bill acceptors you may be considering. These will help you narrow the types of bill acceptors to consider.




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Step 5: Customer service, warranty and reliability:

• Look for a low MTBF (mean time between failure) specification.

• Jams can result in field service calls, so look for a low-jam-performance design as well as specification.

• What are the warranty terms for the product? Look for products that carry at least a one-year parts and labor warranty.

• Ask the manufacturer what the process and procedure is for updating software for new currency sets.

• Ask who services the product when it is in and out of warranty. How quickly will you be able to get a repair or a replacement if needed?

About the sponsor

MEI holds the world’s largest installed base of unattended payment systems, handling more than 1 billion transactions per week in 90 countries. The company developed the first electric coin mechanism in the 1960s, followed by the first electronic non-contact bill acceptor and, more recently, its credit card capability and vending management solutions software.

MEI Payment Systems’ technology is considered the most reliable choice in hundreds of real-world applications and has earned the best performance rating in the market. Through its commitment to quality and innovation, MEI continues to provide the highest reliability and state-of-the-art products for the vending, gaming, amusement, transportation, retail and kiosk markets.

MEI is headquartered in West Chester, Pa., with sales offices and manufacturing facilities worldwide. For more information on MEI and its products, visit www.meigroup.com or call 1-800-345-8215.


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