Academic journal article ABA Banking Journal

Profiting from Loose Change

Academic journal article ABA Banking Journal

Profiting from Loose Change

Article excerpt

It was the last straw for Coast Federal Savings Bank when a customer brought in $4,300 worth of coins to exchange them for notes. Now the Glendora, Calif., thrift is one of the first financial institutions using a change redemption system from CoinBank Automated Systems Inc., a Los Angeles-based start-up.

CoinBank maintains that a bank's cost of handling change amounts to about 10% of what it takes in, which, considering that many banks don't charge customers for the service, represents a very bad proposition.

Consequently, it's not surprising that banks are finding CoinBank's proposition attractive. That is "let us provide change machines free of charge in your branches and pay you a cut from what we charge customers to use the machines." Banks are getting between 0.5% and 1.5% of whatever amount the customer exchanges, a portion of the 6% to 7.5%, commission CoinBank charges.

Why the consumer--especially one who has not previously been charged for redeeming their change--would be willing to pay is convenience, CoinBank maintains. Its machines take unsorted change whereas banks usually require customers to sort their coins into rolls of various denominations, writing their account number on each.

The inspiration for CoinBank came from similar, CoinStar, machines, that were proving popular with consumers in California supermarkets. Since CoinBank spotted a market niche, CoinStar, the original supermarket machine provider, out of Bellevue, Wash., has begun targeting bank business also.

Although banks already used a type of coin machine in their back offices, these machines require a human operator, Bruce Korman, chief executive of CoinBank's parent, Cash Technologies Inc. …

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