Article

Cash dispensers go topless!

Going topless is generally a guaranteed way to get attention and -- depending on the circumstances -- a real crowd pleaser as well. Witness the De La Rue MiniMech, a cash dispenser that has...

April 29, 2003

Going topless is generally a guaranteed way to get attention and -- depending on the circumstances -- a real crowd pleaser as well.

Witness the De La Rue MiniMech, a cash dispenser that has won more admirers than a Vegas showgirl in the retail ATM world since its late 2001 introduction.

At last November's ATM Industry Association (ATMIA) Summit in San Diego, Calif., De La Rue presented Triton Systems, one of its best customers, with the 10,000th MiniMech. At the same event, Mike Lee, ATMIA's international director, called the MiniMech "a research-based innovation" when presenting De La Rue with an award in the Best ATM Technology category.

In perhaps the surest sign of its popularity, a number of other companies have introduced dispensers that, like the MiniMech, feature an open rather than an enclosed cash cassette. An open cassette is usually referred to as either a tray- or drawer-style dispenser.

Tranax Technologies began offering an open dispenser, supplied by its partner Hyosung, last spring. At about the same time, Triton introduced its own TDM, a dispenser that can be used with or without a lid.

"Well, they do say it's the sincerest form of flattery," said Steve Copestake, OEM manager for De La Rue Cash Systems.

Other manufacturers have opted for dispensers with enclosed cassettes but no locking mechanisms, buying them from a new wave of suppliers that began flowing into the U.S. market in 2001.

The introduction of topless dispensers -- and closed dispensers with no locking mechanisms -- was driven by the same two factors that define the overall retail ATM market: cost and convenience.

De La Rue's MiniMech cash dispenser

Prior to the introduction of the MiniMech, the de facto standard dispenser in retail ATMs was De La Rue's SDD 1700. Introduced in 1988, the dispenser was designed to hold 2,000 notes of a single denomination. (Thus the name -- single denomination dispenser.)

Before retail ATM manufacturers such as Triton and Tideldiscovered it in the mid-'90s, the SDD's biggest customer was manufacturers of self-pay parking systems. It was also used in change machines and for casino redemption and ticketing programs, Copestake said.

While the SDD traditionally did not generate as much business for De La Rue as its multi-denomination dispensers, which were used in high-end ATMs as well as other products, its fortune grew right along with the U.S. retail ATM market.

Something's got to give

As the market matured, however, their distributors pressured ATM manufacturers to shave the costs of machines. Because it generally accounts for at least a third of the value of a typical retail ATM, the dispenser was an obvious target for cost control.

"To continue to bring the cost of machines down, something had to be done with the dispenser," said Danny Langston, national sales director for GTI. "You'd already gotten all the cost you could out of the other components. The difference between a mono and a color screen is only about $100. You'll find maybe a $50 difference in most printers. Modems are the same way. You can get one of those at Radio Shack."

Mark Levenick, president and chief executive of Tidel Engineering, said it was a "natural evolution" for less expensive dispensers to enter the market. "It's your single most expensive component, so you're going to need some price relief."

Triton, Tidel and others began pushing De La Rue, their primary dispenser supplier, to lower the price of the SDD. At about the same time, Copestake said, De La Rue became aware of the growing practice of merchant cash replenishment, an increasingly popular way of cutting costs from retail ATM deployments.

By asking a merchant to keep the machine filled with cash from the till rather than using an armored car service and/or vault cash, most ISOs can save at least $200 a month.

What De La Rue found, Copestake said, was that some ISOs were modifying the SDD by removing parts so that merchants could open the cassette more quickly and easily. Some merchants found the jig that was needed to open the cassette cumbersome and even a little scary.

"Because they had to have that jig when they went to open the cassette, there was concern in some locations that carrying it around was a tip off to would-be thieves," Copestake explained.

Blowing their cover

De La Rue decided to remove the top entirely, creating an open, tray-style dispenser that merchants pull out, fill with bills and slide back in, generally never removing it from the ATM. The company also halved the capacity, to 1,000 bills, because it believed that few merchant-fill locations needed or wanted more cash than that in an ATM.

Cutting capacity and going "topless" allowed De La Rue to sell the MiniMech for several hundred dollars less than the SDD, a move welcomed by manufacturers.

Triton adopted the MiniMech in early 2001, shortly before introducing its TDM, which it had been developing for about three years.

Bill Jackson, Triton's chief technology officer, said that while some distributors had been asking for an open cassette, Triton never believed that it would catch on. That was why the manufacturer designed its TDM with a removable lid, so it could be used with either an open or closed cassette.

"We were surprised by the uptake of the MiniMech," Jackson said. "We thought the locking cassette was very important."

Wide open spaces

Not so, said Neil Clark, vice president of sales and marketing for ATM Express, Inc., a Billings, Mont. ISO with about 5,000 ATMs under contract. "At your standard merchant location, unless it's a super, super busy 24-hour store where they just don't want to have the money out in the open, most merchants are fine with the open cassette. A lot of them seem to prefer it."

According to Clark, most of the ATMs his company sells with closed cassettes are used for placements, in which the ISO maintains ownership and provides the cash. "Even though it's going to cost a little bit more, the placement guys want it for the extra security," he said. "For $250 more, that isn't going to make or break anybody."

While Clark estimated that only about 600 of ATM Express' current machines have tray-style dispensers, he said that about 60 percent of its most recent sales have been "topless."

The largest armored carriers such as Loomis Fargo and Brinks insist upon a closed cassette with a lock, but some smaller companies are willing to fill ATMs with open containers -- a practice that concerns Hansup Kwon, Tranax president.

"That is not how the open cassette is intended to be used," said Kwon. "An armored location is not the right application for it, and it's up to the distributor to educate the merchant."

However, Kwon said that security has not been as big of an issue as Tranax anticipated. Tranax's flagship MiniBank 1500 is offered with either an open, drawer-style dispenser that holds 1,000 notes or a pricier enclosed cassette with a 2,000-note capacity.

The LG-N-Sys Mini CDM

"The money is still protected by the cabinet," Kwon said of the drawer style, "and most merchants try to fill the machine outside of business hours when no one else is around."

In late 2002, Triton began offering the MiniMech on its 9100, which until then had been sold only with the TDM. Both dispensers, as well as the SDD 1700, are options on Triton's flagship 9700. Jackson said that while De La Rue counts many fans among Triton distributors, the TDM has been well received.

"The people who have tried it have been overwhelmingly enthusiastic about it," he said, noting that there at least 5,000 in the field today.

Jackson said the TDM is simply the most cost effective dispenser for Triton. "You don't have to pay yourself a margin," he said.

Tidel's Levenick said that most of his company's sales are of its flagship is2000, which has a Fujitsu F100 dispenser with a locking cassette and 2,000 note capacity. For its low-end is800, Tidel uses a 1,000 note, tray-style dispenser manufactured by LG N-Sys, one of several South Korean companies to enter the U.S. retail market in the last 18 months. Tidel adopted the LG N-Sys dispenser in late 2001.

One size does not fit all

"I see the tray type dispenser as more of a niche for us," Levenick said. "I think most people like the extra security you get with a locking cassette. Other than the SDD 1700, which requires a jig, the others on the market are very quick and easy to load."

One problem with tray-style dispensers, Levenick said, is their limited capacity. "The tray works against you if you want to offer any transactions beyond cash dispensing, such as check cashing. You're going to have some limitations with that smaller capacity."

Triton's TDM has a capacity of just 500 notes. Noting that most merchants prefer to keep cash levels in their ATMs low and replenish them frequently, Jackson said, "If you're only doing 300 or 400 transactions a month and you figure you dispense three or four bills for each transaction, chances are you're probably not going to load more than sixty bills at a time."

GTI's Langston said his company uses an SDD 1700 for its Merlin ATM and a MiniMech on the Merlin II. For its newest and least expensive ATM, the Merlin III, GTI uses a dispenser called the LCDM manufactured by Puloon, another new market entrant.

While GTI tested the LCDM for months and "it worked just fine," Langston said, the company would not have sought another supplier if it didn't think a less expensive alternative was necessary to remain competitive.

The Puloon CDM 1000

Jason Kuhn, general manager of WRG Services, a Willoughby, Ohio ISO that also manufactures two of its own ATMs, said his company has been evaluating dispensers from LG N-Sys, Puloon and other companies new to the U.S. market because of downward price pressure.

WRG offers De La Rue's MiniMech as a standard feature on both its Fast Cash and the Vision 100 ATMs, with the possibility of upgrading to an SDD 1700. De La Rue has an advantage, Kuhn said, because of its proven track record.

"We're always looking for a lower cost alternative, but we're not going to change our equipment unless we know that it's quality," he said. "There's a huge difference between upfront purchase price and cost of ownership. You may be able to get an ATM for $300 less, but you can burn that up pretty quickly on a couple of service calls."

"I preach cost of ownership all day," Kuhn said, "The problem is, not everybody's listening."

That's exactly what his company sells, said De La Rue's Copestake. The MiniMech requires no adjustments or scheduled maintenance, he said, which keeps the long-term costs down. For occasions when De La Rue dispensers require repair, the company maintains a service depot in Watertown, Wis.

To create buzz around the concept and educate the market, De La Rue coined the term Quickfill Cash Can. "We wanted it to be sort of like 'Intel Inside,' so hopefully the end user would know what kind of quality they were getting."

De La Rue also modified the MiniMech so that it could be loaded with euro and other currencies, as the merchant cash fill model is beginning to catch on in some other countries, such as the UK.

Copestake admits that De La Rue is not comfortable with the market's eroding profit margins. "We don't see ourselves supplying product for the ultra low end of the market," he said.

Instead, he hinted, it's possible that De La Rue may combine some of the features of the MiniMech and the SDD 1700 to serve higher-volume, merchant cash replenishment sites. That market may grow, he said, as more long-term ATM contracts expire.

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