As Society Goes Cashless, Casinos Soon Could Follow
Cash might still be king, but it’s making fewer personal appearances these days.
There used to be a time when customers took a few steps into a casino and their senses were flooded with the sight and sounds — and even smell — of money changing hands. Not so much these days, and it’s guaranteed to be even less so as casinos are drawn into a cashless society.
The strongest motivator of the moment in moving to cashless is public health. The COVID-19 pandemic gave new meaning to the expression “filthy rich” at least when it came to handling greenbacks. As scientists grappled with the mysteries of the novel coronavirus, merely handling currency was viewed with suspicion for health reasons.
“Going cashless has been inevitable with or without a pandemic. … But now we’re talking about contactless as well as cashless,” said Omer Sattar, executive vice president and co-founder of Sightline Payments, a digital commerce platform that serves the casino industry.
The American Gaming Association has produced extensive research advocating for the transition away from cash to essentially digital transactions. After all, if coffee shops can do it, why not gambling halls? Increasingly, casinos are doing whatever they can to move to virtual transactions. Nevada regulators have been moving toward facilitating a more cashless casino environment.
“There are very few places that you go to today in your life — grocery stores, forms of entertainment, bars, restaurants, where people are transacting in cash,” said Jay Snowden, CEO of Penn National Gaming during a recent earnings call. “And when I say people, that's not a 21-year-old, that's not a 44-year-old, that's not a 58-year-old, that’s not a 72-year-old. It’s everybody. Everybody has debit cards and credit cards and I think it's just an expectation.”
The AGA released findings of a report in June called “Payments Modernization Policy Principles,” the product of an 18-month examination of a more cashless environment on casino floors. The result was an advocacy position in favor of the transition that highlighted benefits such as giving customers more choices among transaction methods, aiding in responsible gaming and enhanced law enforcement monitoring. Of course, not to be overlooked is the cost benefit to gambling operators.
Cell Phone Payments are Coming
The linchpin will be a mobile device, in other words, the customer’s cell phone.
“The user journey will be entirely mobile,” Sattar said. “Eventually, facial recognition technology will merge into the payment process.”
Exactly how any disease is likely to spread, including the highly contagious COVID-19, through the handling of money is murky. But perception is reality and people, in their day-to-day lives, are avoiding certain physical contacts. Money has turned out to be one of them.
That concern will actually turn out to be a cost benefit to casino operators as the transfer of “values,” read that as money, is achieved virtually rather than literally.
“I think this entire public health situation has been awful across the board,” said Tom Reeg, CEO of Caesars Entertainment, during a recent earnings call. But a silver lining, he noted, has been to further expose the handling of cash as antiquated.
“Most of the rest of the world is now moving to cashless (and) are already there. And I think that because of what’s happened with the virus, I would expect the pace of the ability to get there to quicken. And that's a big cost savings for us. … It hits a lot of different areas that you might not be thinking of as you think of that transition. That would be a big win for the entire space.”
Players Need to Buy In
Possible friction to such a change in the casino experience could come from customers. Instead of pulling bills from their wallet, they’ll have to adapt to a payment process that takes money from their bank account or other source of funds, moves it to their cell phone with an e-wallet (and perhaps also some integration with a casino loyalty program), and then is exchanged for credits on a slot machine or chips at a blackjack table. Optimally, it feels seamless.
Mike Rumbolz, CEO of Everi Holdings, which supplies technology solutions (including financial technology) to the casino industry, has experienced vast changes on the gambling floor as both an industry regulator and business executive.
He helped introduce the ticket-in, ticket-out (TITO) technology now common for slots and video poker.
The middle-aged demographic cohort of 20 years ago who played slots were used to buckets of coins and the auditory satisfaction of coins or tokens hitting the metal tray.
But the rewards to the casino were substantial.
“We watched ticket-in, ticket-out take about five to five-and-half years to cover about 90-95 percent of the U.S. market,” Rumbolz said. “That was driven primarily by the tremendous cost savings that accompanied the ability to get rid of hard-count rooms and getting rid of coin operations on your casino floor and going to tickets currency. That really drove it — the efficiencies for the operator.”
Plus, there was convenience to the customer. The trade-off of losing the satisfying heft of toting coins was the convenience of a transportable slip of paper that could be used in other slot machines or exchanged for paper money at a kiosk.
Meanwhile, the sensory reward of coins falling into the slot machine tray was mimicked by sound effects.
Amusingly, the practice has become so engrained in casino culture that even today that sound of invisible coins clanging around has remained even though many customers playing today’s slots have never even seen a gambling device where coins are inserted into a slot.
Back to the Future
Fast forward a couple of decades and some of the issues regarding paper currency remain similar.
“We spend millions and millions and millions and millions of dollars across the company, moving cash, tracking cash, sending cash, collecting cash, storing cash every day,” Penn National’s Snowden said. “And you can imagine the sort of efficiencies that (cashless money transfer) creates, while at the same time making it a better guest experience. We can't move fast enough on this as an industry.”
For customers the advantage is the convenience of utilizing the ubiquitous and indispensable appliance of modern life — the cell phone.
“Ultimately, (the cell phone is) where you can bring in all the compliance measures that become so important to a modern casino to meet your (anti-money laundering) requirements for FinCEN (an enforcement arm of the U.S. Treasury Department) and all of your financial reporting requirements; to be able to track a player and ‘know the customer’; to tie into your credit systems and perhaps, most importantly for the operator, tie in your loyalty segment,” Rumbolz said.
The enormous amount of information that casinos will glean about customers by being able to track their spending activities, both gambling and other purchases, will dwarf the information that gambling companies have been able to gather through loyalty programs.
In addition to buying table game chips and electronic machine credits, casino patrons will be able to use their cell phones — presumably connected with the loyalty program — to pay for show tickets, meals and retail purchases. And if a casino has an associated mall, as many do, the casino can create programs where players are rewarded with retail goods in mall stores. All of this information accumulates in casino data bases to be parsed, possibly for marketing.
Principle #1: Equip customers with more tools to wager responsibly. Learn how digital payments on the casino floor can bolster responsible gaming measures: https://t.co/bmzrZn7r5R pic.twitter.com/QIi2wmXhxn— American Gaming Association (@AmericanGaming) July 2, 2020
Help for the Problem Gambler?
Some of that same information can also be used to detect disordered gambling behavior.
“Customers can limit their activities or self-exclude,” Rumbolz said of some of the possible safeguards. A more nettlesome question is to what extent should a casino intervene in a player’s gambling activity.
Some overseas jurisdictions actually allow for third-parties, such as family members, to push for a gambler’s exclusion, Rumbolz said.
That’s not likely to happen in the U.S., but indications of problem gambling gathered through digital transactions could allow an operator to go to a regulator and say, “We want to set certain parameters in our program and if we see something that meets these levels of activity we’re going to at least talk to the player and find out what’s going on,” Rumbolz said.
While cashless commerce gives customers greater options and flexibility, there is the reality that enormous amounts of information are being gathered. It all places greater responsibility on the gaming industry, said Sattar, the Sightline Payments executive.
“There’s a need to balance personal freedom and the intrusiveness of Big Brother,” Sattar said. “If we don’t pay attention to that we are going to be in trouble long-term and none of it will be good for the industry.”
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