Sometimes touted as a competitive advantage in the branch wars, the coin-counting kiosk is headed to the scrap heap at one of the nation's largest banks, Capital One Financial.
What remains to be seen is whether Capital One is shooting itself in the foot in the battle to recruit and retain retail customers, as banks continue to search for ways to improve the branch experience.
Capital One plans perhaps as early as next week to remove all coin kiosks from its branches in Washington, D.C., and the suburbs of Maryland and Virginia, where it has the No. 2 deposit market share as measured by the Federal Deposit Insurance Corp. The coin kiosks were located in a majority of Capital One's branches in the Washington area, although not all of them.
A spokeswoman said Capital One is ditching the machines there because "they're unreliable."
The $237 billion-asset Capital One declined to say how many kiosks it owns and operates nationwide. Its other retail operations are primarily in New York, New Jersey, Louisiana and Texas.
"We're evaluating our strategy for the remainder of our branches," spokeswoman Amanda Landers says.
What's certain is that the move has stimulated spirited debate in an age where it's cooler to talk about apps and electronic payments than it is to mull the future of pocket change or branch strategies.
Branch consultants disagreed sharply with each other about whether Capital One is making the right move.
Since fewer people use branches these days, and the machines are probably costly to purchase and maintain, coin kiosks "probably fit [Capital One's] strategy less than it had in the past," says David Kerstein, president of Peak Performance Consulting Group in Austin, Texas.
"There are better ways to bring people in [to your branches] than coin machines," Kerstein says. "You can find these machines in many supermarkets."
But coin kiosks can help banks develop positive brand awareness with their customers, says Bill McCracken, the chief executive at Synergistics, a banking research firm in Atlanta.
"I'm sure in the bottom-of-the-spreadsheet calculation, [coin kiosks] are not a huge profit generator, but that should not be the sole consideration," McCracken says.
"You hear banks say they want to get warm and fuzzy" with their customers, "then you pull out something that makes their lives easier," McCracken says, adding that it's a mistake to remove the machines.
Several banks from big players like TD Bank to smaller ones like Rio Bank in McAllen, Texas vowed to stick by their machines.
The $240 million-asset Rio uses coin kiosks in its branches as a way to compete with much-larger competitors like Wells Fargo, says Craig Lewis, executive vice president.
"As a smaller community bank, tech-wise we try to keep up, but it's like trying to keep up with Big Brother," Lewis says. "We'll always be behind them, but having something [like coin-counting machines] lets us be a little different. This is something we can do to chip away at them."
TD Bank has more than 1,100 kiosks in branches nationwide. The kiosks were installed by Vernon Hill's Commerce Bank, which TD acquired in 2007. The Toronto-based bank's customers "find added value in the convenience" the coin-counters offer, says Kevin Gillen, head of TD's retail strategy group. Some customers use the machines to teach kids about managing money, he says.
Even if banks like TD and Rio charge a fee to use the kiosks, simply offering the machines is something to help bricks-and-mortar banks stand apart, McCracken says
"What if a customer has a bag of coins? How does having USAA or Simple help you?" McCracken says. USAA operates primarily online and BBVA Compass' Simple is entirely online.
Kiosk makers will have to watch closely to see whether Capital One's decision is an outlier, or if other banks decide to follow its lead.
Outerwall, one of the largest manufacturers of coin-counting machines, continues to experience steady growth in its Coinstar kiosk. The number of Coinstar kiosks installed nationwide in banks, as well as supermarkets, drugstores and other retail outlets has grown 12% since the first quarter of 2011, to 21,000 kiosks at the end of the first quarter of this year
The other big kiosk maker, Cummins-Allison in Mt. Prospect, Ill., also says its coin-counting machine business has grown. As a private company, Cummins-Allison does not disclose how many kiosks it has installed nationwide.
Outerwall and Cummins-Allison both declined to comment when asked if their kiosks are installed in Capital One branches. Capital One also declined to answer that question.
Representatives from both Outerwall and Cummins-Allison said their coin machines have accuracy rates of at least 99.9% and that the machines have few mechanical problems.
Other banks that have coin-counting kiosks located in branches include the $18.4 billion-asset Susquehanna Bancshares, in Lititz, Pa., which has 53 machines made by Cummins-Allison and Scan Coin; the $1.3 billion-asset Glenview State Bank, in Glenview, Ill., which is owned by Cummins-Allison's parent company, Cummins-American; and $1.1 billion-asset Fox Chase Bancorp, in Hatboro, Pa., which uses machines made by N.F. String & Son.
Rio Bank paid about $11,000 for each of its six machines, all made by Cummins-Allison, Lewis says. Rio doesn't charge its customers to use the kiosks, but non-customers are charged a 7.95% fee. Combined, all six machines generate revenue of between $700 and $750 per month.
Lewis only wants to generate enough revenue to cover maintenance costs on the machines and he doesn't necessarily see the kiosks a way to add customers, he says.
"I'd love to be able to tell you that we've opened up 100 new accounts because of this," Lewis says. "A bank is really supposed to provide something above and beyond for the community, and we feel like this is something we give back."