Want to hear two of the most ridiculous claims ever made about the casino gaming industry?
- “Slot players will never give up their coins and tokens.”
- “Casinos don’t believe their customers are ready for cashless.”
That first gem was heard in the late 1990s when bill validators, credit meters and, more importantly, Ticket In/Ticket Out (TITO) technology first appeared. Those were (literally) game-changing revolutions. Borrowing a line from actor Charlton Heston talking about guns, some pundits said, “You’d have to pry those rolls of nickels from the cold, dead hands of hard-core slot players.”
In the real world, it took less than a heartbeat to fall in love with credit play and tickets. No more dirty hands, hopper fills, and treks to the cage with heavy cups or racks. The games were just as good, but without the hassles.
For operators, the benefits were even more remarkable. You no longer had to hire weight-lifting athletes to staff the drop crew; hard count rooms and their noisy machinery were abandoned; “Change” attendants could ditch their back braces; and you no longer had to order VIP white gloves, high-denom tokens or coin cups.
The second quote is a bit more recent. It was mentioned several times during an excellent webinar from Eilers & Krejcik just two weeks ago called, “Embracing the Cashless Journey for Casinos”.
The session began with some citations about the general adoption of cashless transactions in the non-gaming marketplace. They began their presentation with this impressive slide:
But you don’t really need their stats to validate these trends for yourself. How many cashier windows are at your bank today compared to 10 years ago? When was the last time you used cash at Home Depot or Wal-Mart? Do you really believe Jeff Bezos became a mega millionaire by folks sending Amazon cash or checks via snail mail?
So, it is ridiculous to think that any casino operator would worry their players might not adopt cashless. Not only are the players ready; they wonder what’s taking us so long when every 7/11 and gas station across the country made the upgrade 20 years ago.
The fictional character Gordon Gecko (played by Michael Douglas) said “Greed is good” in the 1987 film “Wall Street”. As a long-time casino operator, I feel that in our industry “Greed gets in the way…way too often.” There are often just too many hands in the pie.
Technically, slot machines had the ability to go cashless with the adoption of the SAS 5.01 communication protocols of the late 1990s. And certainly, even better with the implementation of SAS 6.0 in July of 2002. Both enabled AFT or Advanced Funds Transfer. That’s another name for cashless.
Just because it was possible doesn’t mean anyone was willing to do it. And getting credits on a machine is only part of the problem. You must also have relationships with banks and credit card companies to get access to the players’ accounts (no surprise that they may want some portion of the economic pie). And in between are other middlemen also looking for a return on their services (aka interchange fees, assessment fees and payment processor fees).
And just because SAS protocols permit AFT, the major slot system providers need to use it to create the interfaces. Today, each system provider seems to be pitching a different cashless solution, either partnering with an outside vendor or developing an in-house solution. Of course, they want some action for their assistance.
Your grocery and hardware stores faced some of these issues too, but not as many. They decided to just go with the credit card/ATM folks and the middlemen. They realized it was just good business to make cashless easy, rather than trying to squeeze out some additional non-core revenue from a proprietary solution. Can you imagine if you had to have a different card and procedures to use cashless at Lowes, McDonalds, Amazon, Target, Macy’s and dozens and dozens of other retailers?
They realized that using one of the standard credit or debit cards tacked on 3%, but most customers and the merchants agreed that the tradeoff was worth it to make things convenient for their customers. Not so in our casino world.
First, there are more hands reaching into our pie and some seemingly senseless regulations. For example, for years credit card companies would not accept casino gambling charges (on moral grounds??). That’s hard to understand since you can buy stocks, bonds, ghost guns, alcohol, tobacco, oxycodone and bitcoin with a credit card. Additionally, they charged “card-present cash advance” transactions at a much higher rate than what you would pay on a typical retail store purchase. With the explosive growth of online gaming, the credit card companies have eased some of their rules in the last five years, but many banks have not. Given the growth of casinos and sports betting across the nation (not to mention their major tax revenues), I can’t believe it would be that difficult to apply some political pressure to get the banks to change their position.
It may also be some casino operators themselves standing in the way. ATM and credit card fees are a significant source of non-gaming revenue, most of which drops into casino accounts controlled by the CFO. That’s right, the same executive that would probably have to green light the decision to go cashless would have to give up a lot of their revenue to do so.
In case you doubt that scenario, how come most casinos charge higher ATM/credit fees than other businesses, even though survey after survey shows that casino players hate these high fees almost as much as they despise “resort fees”?
One other slide presented during the webinar from Everi alone showed just how much those fees can accumulate:
Most assume a lot of those casino ATM transactions would go away with slot machine cashless. However, the fees would remain, just in a different form. Rest assured that the casino CFOs are going to want some of that new action too.
Repeating from above, it is not any slot player slowing the adoption of cashless! They will latch on to it quicker than TITO as long as it is as simple to use as it is everywhere else. The ideal solution is for all the diverse providers (payment processors, system providers, casino operators and regulators) to join together on a single standard and move forward. Insert a credit card, and (voila) credits are transferred to your machine. Of course, that could reduce some of the royalties to a few providers, but the industry as a whole would benefit.
While unlikely in the near term, this has happened before. Earlier mention of SAS communication protocols that allowed slot machines to talk to the accounting and player tracking systems is a good example. At one time every slot maker had a different protocol which talked only to their own machines. It was like a Tower of Babel on the casino floor. But for the sake of harmony and the players, the industry agreed to all use the IGT SAS standard. Likewise, they also agreed on universal standards for TITO (although that one required royalty payments to the originators for several years).
There is also the casino-specific issue of Problem Gaming, something that is critically important to our industry. Using a credit card for cashless slot play means incurring debt. That is not good. A player can easily spend more than they have, not to mention the added burden of insanely high interest rates. Hopefully, some guardrails can be put into place to limit potential abuses since this gaming and spending data will be plentiful.
There is an alternative casino cashless solution that does not involve debt or interest fees known as PIN Debit. However, this faces some technical challenges. When you use your debit card instead of a credit card, there is no debt incurred. The money comes directly out of your checking account. If you do not have enough in the bank, your transaction will be declined. In other words, you can’t spend more than you have. Draining your checking account is not ideal, but it is better than piling up debt and interest.
PIN stands for Personal Identification Number. You’ve probably used it somewhere at a gas pump or store, or more likely when you entered your PIN number to get cash from an ATM.
The ideal situation for a slot player would be to insert their ATM/PIN Debit card into the slot machine, enter their PIN code and download credits directly to the machine. Your bank, rather than a Pit Boss or Slot Manager, would stop you from getting into too much trouble.
That would be much like downloading free play today. But there is a problem. The major credit card providers (Visa, Mastercard, Amex and Discover) created a set of technical standards called Payment Card Industry Data Security Standard, aka PCI DSS. Today, the same player tracking keypad that you now use to enter your casino PIN for free play does not meet the PCI requirements. In other words, your bank PIN number cannot be properly secured and encrypted for ATM transactions with today’s hardware.
The parts required to meet those standards cost only a few dollars more than the existing displays. However, it would mean replacing every player tracking display in every machine. That would be costly. This ideal situation is not going to happen anytime soon.
While not as ideal for problem gaming, using a credit card at the machine would also be a great improvement. But both those solutions would likely face serious pushbacks from gaming regulators. When cashless first emerged years ago, especially some schemes with ATM-like terminals at the end of slot machine banks, they objected that it would be too easy for players to get cash??? Apparently, they worried that it would be too easy for these players to gamble in their casino???
They would only allow these types of ATM/Credit kiosks near the casino cages or other remote locations with the assumption that these players would come to their senses during the short walk to a cash machine. Those regulations seemed nonsensical then, and they are even dumber today. But the regulators write the rules, and they are seldom early adopters.
I encourage you to listen to the full 60-minute webinar I mentioned earlier. Despite that one silly quote I’ve pointed out, there is some great information in this session about the next “game changing” step for our industry. Here’s a link.
Finally, most are convinced that online gaming will soon be legal across the country. Some worry that this will obsolete brick-and-mortar casinos. However, I firmly believe with more openness to changing cultural norms, both modes will flourish and enhance each other. That’s exactly what happened with poker decades ago.
However, it is almost certain that we will fall behind if we don’t adopt cashless soon. That is the very foundation of the popular[1] online gaming model. Failure to welcome and adopt new technologies as soon as possible could leave land-based casinos in the same category as Blockbuster, Borders and Kodak. We need to do whatever is necessary to quickly approve standards that put cashless “player ease-of-use” ahead of short-term, proprietary profit goals and re-consider many of our outdated regulations.
# # #
[1] New Jersey was one of the first states to legalize online gaming in 2013. Their 2024 YTD thru September gross revenues show that slots recorded $86.6M, the internet hit $81.2M and table games had gross revenues of $26.5M. Clearly, things are changing.
