The U.S. Mint recently announced that it is accepting public comments on its mandate by Congress to produce recommendations on alternative metallic content of coins. The Mint, tasked with this research to ensure that taxpayer dollars are being spent wisely in the production of coins, lost $105 million producing the penny and the nickel, prompting some to call for immediate changes.
Whatever the outcome, the Mint should make sure that their recommendation provides small businesses reasonable time to adapt to changes, and that their input is considered. Some small businesses, like those in the vending machine industry, rely on predictable, standardized coins. Rapid and significant changes to coinage creates an added expense and can make the difference between a thriving and a failing business. Therefore, the Mint must carefully evaluate the costs and benefits of its decisions and not move too quickly before all options and consequences are considered.
The National Automatic Merchandising Association (NAMA), representing the $42 billion U.S. vending and refreshment services industry, testified that these changes could amount to an industry cost of $3.5 billion . While there have been significant advancements in payment technology, only 7 percent of machines were equipped with cashless readers in 2012, and most vending transactions are cash transactions. Therefore, the vending industry will need to be given sufficient notice of any coin changes before implementation to ensure that transaction-related complications will be managed appropriately.
Changes in metallic content could call for anything from a simple recalibration in vending machines to the installation of new coin-accepting equipment, with a cost that would range from $100-$500 per machine. With an estimated seven million vending machines across the country and research showing that over 95 percent of vending operators are small businesses, the costs of such changes will be significant, placing an additional burden on the industry.
Metallic content changes can also impact coin acceptance rates, causing an added headache to the vending industry and to consumers. Errors and complications may also result due to efforts to prevent counterfeiting; ultimately leading to customer dissatisfaction.
These concerns are not hypothetical. In fact, they have recently taken place in Canada. According to a recent Wall Street Journalarticle, changes in metallic content have caused significant problems for vending-machine operators and city governments alike, who have been forced to recalibrate coin slots and local parking meters. In a similar effort to reduce the cost of coin production, the new Canadian coins use technology making them cheaper to mint than their predecessors. Costs to recalibrate the Canadian vending industry may exceedC$40 million. Thus far there has been considerable frustration with results, with new coins being routinely rejected.
It is understandable that some people will criticize attempts to delay rapid changes in coin content if the status quo loses money. However, it is important to recognize that the U.S. Mint produces a profit from its overall coin manufacturing business, and therefore shouldn't make imprudent changes at the expense of small businesses that rely on predictable, standardized, coinage. In fact, changes made without careful consideration, in an attempt to cut costs, can actually be a net loss.
The vending and refreshment services industry, led by NAMA, wants to work collaboratively with The Mint which has been working to obtain industry and stakeholder input. On March 13, they hosted a stakeholder outreach meeting to obtain input from industries impacted by potential changes in coin production. This is another step in the right direction, and we hope the Mint continues to listen to the concerns of small businesses to avoid any unintended consequences.
Dell is senior vice president of Government Affairs at NAMA.