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Issue Date: Vol. 46, No. 11, November 2006, Posted On: 11/30/2006


NAMA Seeks To Resolve Ongoing Coin, Currency and Cashless Issues


Thomas E. McMahon, NCE

HERNDON, VA — All business revolves around one thing: making the sale. In the vending business, making the sale requires the customer to select a product, insert the money, press the right button, and receive the product and change.

Throughout most of the second half of the 20th century, when the vending business was growing and prospering, millions of Americans every day made their selection, inserted a coin or coins, pressed the button and received their product. Factory and office workers, government employees, soldiers and sailors, doctors and nurses inserted their coins, pressed the button and received their snack or candy bar, coffee or cold drink, virtually trouble-free.

Thanks to the superb quality control program of the United States Mint, making billions of coins a year at its state-of-the-art facilities in Philadelphia and Denver, and the close cooperation between NAMA, its equipment manufacturer members and Mint officials, American workers confidently made their purchases with coins. The industry bragged, and rightly, of a trouble-free vend rate of 99.9%.

Today, we can’t make that claim. The dollar bill is the new quarter. A great many purchases are now made with the greenback, and a rapidly increasing number of machines now accept $5 bills. Almost every adult American has had the frustrating experience of rejected banknotes. Yet advances in bill validator technology over the past 10 years have improved the acceptance rate to about 98%.

Still, in a $40 billion dollar industry, the difference between 99.9% acceptance and 98% acceptance is a staggering $760 million a year in lost sales. Even beyond those lost sales is the public image hit our industry takes when a customer, valid currency in hand, is unable to make a purchase. Not only is the currency rejected, the customer himself feels rejected. Imagine what your reaction would be if you walked into a convenience store, selected a candy bar from the shelf, gave the clerk a $1 bill and had the clerk reject the bill: “I know this is a valid $1 bill,” the clerk says, “but the bill seems a bit old to me, slightly discolored, and one corner is torn. Take it back and give me a newer bill.”

You’d take the bill back, and you’d return the candy bar to the shelf, never to shop in that store again.

The problem of rejected currency is not the fault of the manufacturers or operators. Bill validators embody the state of the art; they’re well made, and operators work hard to keep them clean and functioning properly. The fault lies with the United States Government. We’ll never know how much our industry has lost in sales over the years because of Congress’ refusal to do the right thing and eliminate the $1 bill.

But we do know that Congress has authorized a new dollar coin, the third one in 27 years. The first of these new Presidential dollar coins will be issued to the public this February. Four new dollar coins, each bearing the image of a President in the order in which they served, will be issued each year for the next 11 years.

The details of the program were announced in a terrific speech delivered by the Mint’s new director, Edmund Moy, at our general membership session in Orlando. Director Moy, who until July had served in the White House as Special Assistant to the President for Presidential Personnel, showed a keen appreciation of our industry’s ongoing need for a successful dollar coin, and he committed the Mint to doing everything possible to make the new coin a success. Of course, NAMA will work hand in hand with the Mint to push these coins into wide circulation.

But for the time being, the $1 bill will remain in circulation, and thus will continue to pose a major obstacle to the coin’s circulation. As long as the $1 bill is around, NAMA will work to preserve the current design of the bill, the same design we’ve had since 1929. Redesign would be very costly to our operator members. And equally important, we will work with the Federal Reserve to improve the quality of the circulating greenback.

There’s work to be done here. It is troubling to us to learn that the average life of a one dollar bill has increased from 17 months in 1995 to 22 months in 2005. Hence, a crucial element of the effort to improve the quality of the greenback is to convince the Federal Reserve System to conduct a study of the quality of circulating currency. Right now, the Federal Reserve only inspects the quality of currency deposited with it by commercial banks.

Without a study of circulating currency – the last such study was conducted in 1991 – no one knows how many unfit ones and fives are in the hands of the American people. These notes are now the mainstay of the vending industry, as the dime and quarter were in the 1960s. It is well understood that retail clerks, bank tellers and the general public have a lower standard of fitness for the $1 and $5 notes than for higher denominations.

With a coin and currency system that’s better suited to the dear, dead days of the 1960s, and with younger customers accustomed to using credit/debit cards for low-priced purchases, it’s not surprising the industry is exploring cashless options. But here again, the industry faces a government-imposed barrier.

Regulation E, promulgated by the Federal Reserve, governs credit and debit card transactions. It now requires that a paper receipt be issued to all customers in the case of debit card transactions. This requirement poses obvious cost and operational problems for our industry. We’re working with officials at the Federal Reserve to see if some relief from this obligation could be achieved, relief that would serve the interests of both the industry and consumers.

NAMA will continue to keep a close eye on coin, currency and cashless issues and advocate for the industry as effectively as possible. We want to make it as easy and as efficient as possible for our members to make the sale.


THOMAS E. McMAHON is senior vice-president and chief counsel for the National Automatic Merchandising Association. He served in the infantry branch of the U.S. Army in Vietnam, and took a BA in Political Science from the University of Notre Dame in 1970. He was selected for Notre Dame’s first sophomore-year program at Innsbruck University (Austria), and authored an award-winning short story set during the Vietnam War. McMahon earned his doctorate from Loyola University School of Law in 1974. In the same year, he joined NAMA, having previously been associated with the law firm of Hubachek, Kelly, Rauch and Kirby (Chicago). He has been admitted to the practice of law in the Commonwealth of Virginia, and is a member of the Virginia State Bar Association and Fairfax County Bar Association. McMahon is based in NAMA’s Herndon, VA, office, 30 miles from Washington, DC.


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