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Issue Date: Vol. 46, No. 12, December 2006, Posted On: 12/14/2006


New Year Places Payment Issues Atop Problems/Opportunities List


Tim Sanford
Editor@vendingtimes.net

U.S.A. — A number of recent developments are working to make currency the hot topic of the new year for the vending, music and amusement industries. These include a federal court ruling that may affect the size and/or other physical characteristics of banknotes, the arrival of the new Presidential Series of dollar coins, and persistent dissatisfaction – here and abroad – with the continued circulation of notes too worn or damaged to be validated reliably by the best available technology.

The unexpected threat to many existing bill validators is the ruling by Judge James Roberston of the Federal District Court for the District of Columbia that the U.S. system of banknotes discriminates against blind Americans. This, he held, is because all our notes are the same size and otherwise indistinguishable by touch. The ruling was made in response to a suit brought by the American Council of the Blind.


PHOTO:  Presidential Series $1 coins will debut in February; the first three designs (above) were previewed recently by the U.S. Mint. They have the same composition as the Sacagawea $1 coin and also are golden in color, but are imprinted (“incused”) on their edges. The reverse (shown at right) depicts the Statue of Liberty. The electromagnetic signature is identical to that of the Sacagawea and Susan B. Anthony designs, so the coins will work in any vending machine that takes the earlier $1 coins. Four designs will be issued annually, in the order in which the U.S. Presidents served.


Judge Roberston ordered the Treasury Department to begin discussion, within 30 days, of possible remedies for this discrimination. He suggested that these  might include different sizes of note for different denominations, raised numerals and/or perforations. Judge Robertson pointed out that all of these approaches are now commonly used by other nations.

At this writing, the Treasury Department has not commented on the decision, nor said whether it plans to appeal.

The National Federation of the Blind, which is the largest organization of blind persons in America, criticized the ruling as misguided. “The blind need jobs and real opportunities to earn money, not feel-good gimmicks that misinform the public about our capabilities,” said Dr. Marc Maurer, president of NFB. “Blind people transact business with paper money every day. This ruling puts a roadblock in the way of solving the real problem, which is the 70% unemployment rate among working-age blind Americans that severely limits our access to cash.”

National Automatic Merchandising Association senior vice-president and chief counsel Tom McMahon reported that NAMA had filed an amicus curiae brief in support of the Treasury Department’s position, and is disappointed by the judge’s ruling. The association will encourage the Treasury Department to appeal, he added, warning that any physical change to U.S. banknotes that made them unreadable by or physically incompatible with the bill validators in widespread use would impose grievous costs on vending operators and many other users.

On the positive side, plans by the U.S. Mint to launch a series of dollar coins commemorating the Presidents of the United States are proceeding smoothly. The first design, honoring George Washington, is slated for issue in February. Mint Director Edmund C. Moy presented a progress report and overview at the recent National Automatic Merchandising Association National Expo (see VT, November).

The new dollar coins were mandated by the Presidential Coin Act of 2005, which calls for the Mint to produce four designs a year, in the order in which the Presidents served. In 2007, the Washington coin will be followed by designs memorializing John Adams, Thomas Jefferson and James Madison.

These initial designs were unveiled at a ceremony held in the National Portrait Gallery at the Smithsonian Institution in Washington. Doing the honors were mint director Moy and Louise Roseman, director of reserve bank operations & payments systems at the board of governors of the Federal Reserve, along with other federal officials. “The new Presidential $1 coins are an educational and fun way to learn about former Presidents,” Moy said. “Our research indicates that, like the 50 State Quarters coins, the Presidential $1 coins will be popular with millions of Americans.

“Congress recognized that the 50 State Quarters program showed how a systematically changing design can spark public interest in a coin,” director Moy explained. “We’re hoping to build on that success.”

The new coins will have the same physical and electrical properties as the current Sacagawea “golden dollar” and existing Susan B. Anthony coins, and thus will work in modern vending equipment without modification.

While operators who are using dollar coins successfully are looking forward to the increased interest that the new series will inspire, the persistence of the $1 bill remains an impediment to universal circulation of the coins. The vending, amusement and music industries thus continue to grapple with a banknote that has an average life of less than two years, and yet often becomes unserviceable through wear and tear much earlier.

While the United States is the only industrialized nation that has not replaced its lowest-denomination banknote with a coin, the vending industries in other countries also have their difficulties with banknotes. Those challenges were addressed by NAMA’s McMahon in a presentation at the 2006 Banknote Conference in Washington, DC, attended by bankers from all parts of the world.

Speaking on “Future Banknote Needs of the Vending Community,” McMahon addressed the fitness of circulating currency as a prime concern. He reported that the U.S. dollar bill lasts, on average, 22 months. The typical bill suffers continual degrading during this period, from dirt, discoloration, folds and tears. It is important that unfit banknotes be retired promptly, the NAMA chief counsel emphasized; while consumers and merchants may accept small-denomination banknotes of low quality, vending equipment may not.

In countries where the central bank imposes a banknote recirculation policy, McMahon suggested, that policy should be limited to higher denominations – in the United States, for example, $10 and $20 bills. He urged that the fast-circulating $1 and $5 notes be exempted, since high-quality $1s and $5s are good for vending operators. In the United States, he reported, 1% of sales lost because of poor-quality banknotes represents a $300 million loss to the industry.

Moreover, he added, stringent quality control is essential, especially when currency is printed in more than one location. When banknotes are redesigned and put into production, it is important that there be minimum variations in width and length. And the greater the number of designs that must be recognized, the greater the demands on the memory of validation equipment. If those demands become excessive, operators may have to replace perfectly serviceable bill validators at considerable cost.

If new notes are to be introduced, McMahon recommended that the schedule for introduction of the new design allow at least three months between the provision of sample notes to equipment manufacturers and the notes’ issue to the public. Experience also has shown the value of making sure that the sample notes realistically represent the variations in printing that are likely to be encountered in full-scale production.

“The best thing you can do for the vending industry is to keep your coins modern,” the NAMA senior vice-president summed up.

NAMA and the European Vending Association (Brussels, Belgium) are founding members of the World Wide Vending Association, also headquartered in Brussels. Industry statistics estimate that there are 7.8 million vending machines in the U.S., 4.5 million in Western Europe and 4.3 million in Japan. While the great majority of full-sized vending machine installations in the U.S. accept paper currency, only 5% of vending machines in Europe are equipped to accommodate banknotes.


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