With a few prominent exceptions, banks have stopped accepting buckets full of change from consumers, a shift that has given rise to a mini-industry outside banking in coin-counting machines.
Typically, vendors focus their installation efforts on grocery stores. Now one of them wants to bring coin exchange full-circle - both by placing machines in bank branches and by putting the money directly into accounts rather than making customers line up at the cashier to exchange a voucher for cash, as is done today.
Coinstar Inc.'s machines allow people to convert a jar of loose change into paper bills when picking up a week's worth of groceries.
New networking technology, for which Coinstar recently secured a patent, is aimed at making the machines more convenient. Meanwhile, it has also signed a deal that reveals a broad new strategic goal: to install self-serve coin kiosks in bank branch lobbies across the country.
The moves reflect Coinstar's plans to expand beyond the supermarkets that have been its primary channel for the last 12 years. They also offer banks an opportunity to stop having to turn away customers, many of whom still do not know that tellers are unlikely to take loose change in bulk.
A fresh-scrubbed youth hauling his piggy bank to the bank seems like an image from Norman Rockwell's America, where a smiling teller stands ready with a mallet. But J. Alton Wingate, the president and chief executive of Community Bankshares Inc. of Cornelia, Ga., said such scenes are rare today. "Right now it's not reality, because it's expensive," he said.
Community, through its Financial Supermarkets Inc. subsidiary, which helps banks put branches in stores, signed an agreement this month with Coinstar that gives the banking firm exclusive rights to market the coin-counting systems to banks in this country.
"We think there's a market out there," Mr. Wingate said. For example, he counted 22 customers with jars of unsorted change at the main branch of Community Bank and Trust on a recent Saturday. The tellers accommodated those customers, but most banks today are reluctant to do so, he said; they either charge a fee or provide paper tubes for consumers to roll the coins themselves.
Financial Supermarkets and its bank clients should decide by mid-July on target markets for coin-counting services, Mr. Wingate said. Coinstar does not currently have any machines in banks, but by yearend FSI plans to have kiosks in 200 to 250 bank branches around the country. "We will be marketing it to financial institutions for their conventional locations," instead of their in-store ones.
Rich Stillman, the president of Coinstar, said the branch lobby could be an important location as the Bellevue, Wash., company expands into markets beyond the grocery store.
"With FSI's connections in the bank channel, we will find partners for whom coin-counting is a value-added service," Mr. Stillman said.
Alan Robinson, an analyst at the Seattle investment banking firm Delafield Hambrecht Inc., said Coinstar needs to expand its distribution, because it is running out of room to grow in its historic supermarket niche.
"Coinstar can broaden the franchise a little bit" beyond grocery stores, he said. "The key thing Coinstar has going for it is the network of machines, which are all networked together. No other operator has that kind of network."
Some banks mention coin-counting services in their marketing campaigns. Perhaps the highest-profile example is Commerce Bancorp Inc. of Cherry Hill, N.J., which has counting machines in the lobbies of each of its nearly 300 branches.
But Mr. Stillman said the prominence Commerce gives to its machines only underscores how uncommon the service is. "The vast majority of banks don't want to bother with the change. That's been the pattern for the last 10 years or so."
He pointed out the opportunity for banks to generate income from the service. Coinstar charges customers a standard commission of 8.9% of the amount counted.
Peter Soraparu, the executive director of external relations at the Bank Administration Institute, said that in their ongoing efforts to improve teller productivity and reduce costs, "banks had started to question whether they wanted to be a coin-counting utility for people."
Commerce has offered self-service coin-counting for four years. "They have proven immensely popular," said David Flaherty, a vice president. The machines sorted 20 billion coins last year and currently sort $20 million of change each month.
He would not discuss the cost of the service, which is offered free to customers and noncustomers alike. "It's an investment in our business," he said. "We feel it helps us build our business. It reflects what Commerce is all about, in terms of improving the customer experience."
A handful of other banks are following the Commerce example, including Glenview State Bank, a seven-branch community bank in the Chicago suburbs that has begun promoting its free coin-counters in an effort to attract young savers.
David Kreiman, a senior vice president and the marketing director at Glenview State, said it put the first machine in place last summer, added one at a second branch in February, and is now planning one for a third branch.
The self-service machines have been well-received, he said. "They seem to really enjoy doing it themselves. It's very much in line with our bank's philosophy as a service-oriented community bank."
But Glenview State's experience may not be typical. The bank is a unit of Cummins-American Corp., a Glenview company whose other major subsidiary, Cummins-Allison, makes, among other things, coin and currency sorters.
"It's sort of a perfect fit," Mr. Kreiman said. Glenview State does not offer coin-counting at the teller window; business customers are charged a 5% commission if the back-office staff counts their coins.
Coinstar's next step will be to enable its kiosks to transmit deposit information directly to a bank. This would allow people to dump change into the machines, whether in a bank lobby or a grocery store, then swipe an automated teller machine card to authorize a deposit, instead of the current practice of issuing a paper voucher that the customer must take to a cashier to exchange for cash.
This month Coinstar received a patent covering the networking technology.
Coinstar already offers consumers a stored-value MasterCard and prepaid wireless and long-distance telephone cards that can be credited with the change poured into the kiosks. "It is a logical set of steps" to add the deposit capability, Mr. Stillman said. The kiosks are already linked to a data network that lets Coinstar determine when a kiosk needs to be serviced.
Mr. Stillman said it could take two to three years to retrofit the network of nearly 11,000 machines to execute the fund transfers. However, "this vision is one we are aggressively pursuing."
