Cash-back at the point of sale is a popular feature with consumers because it lets them withdraw funds using their personal identification number-based debit card accounts without paying surcharges or foreign fees. Now, some merchants are expanding the cash-back function into a new area: automated checkout systems.
Indeed, self-checkout systems have become almost a must-have among large supermarket companies, such as Albertsons, as well as big-box retailers, such as Home Depot.
Many of these self-checkout systems are designed with ATM hardware, which enables them to support a cash-back option in what amounts to a withdrawal. Moreover, because the cash dispensers are in a point-of-sale environment, the merchants cannot collect ATM interchange fees from card issuers.
Dusty Lutz, director of product management at Dayton, Ohio-based NCR Corp.'s self-checkout division, says most of NCR's FastLane self-checkout systems are sold with cash dispensers, safes and cassette cash trays. These features evolved from merchants wanting to offer cash back with PIN-based purchases, even in an automated environment.
Self-checkout merchants are using the free cash-back option to attract customers, says Lutz. "Just about everybody gets the cash dispenser," Lutz says of FastLane sales. "They are trying to entice the user to come in."
NCR has installed about 10,000 FastLane machines, which cost about $100,000 each, says Lutz. NCR recently rolled out a smaller, less-expensive FastLane system for smaller stores.
FastLane machines enable customers to scan their own purchases, and they offer an electronic means by which to use most common payment forms. In addition to taking signature-based debit and credit cards and PIN-based debit cards, the machines also come with cash acceptors and electronic check swipes to accept checks.
Consumers choose plastic for about 40% of self-checkout transactions, and about half of the transactions are cash, says Lutz. Only about 10% are checks, which are authorized by a floor worker who checks the user's identification, he says.
Another leading supplier of self-checkout systems, Montreal-based Optimal Robotics PSC Inc., could not be reached for comment on the cash-back features of the company's U-Scan system.
Most of the stores that have self-checkout lanes also have ATMs, says Lutz. Lutz doubts, though, that FastLane cash-back transactions are cannibalizing ATM transactions because the cash-back option usually limits withdrawals to about $100 and requires a purchase.
Limits on ATM withdrawals often are at least $300 per transaction, and ATM users do not have to buy anything.
But Bill Hammel, managing director for Scottsdale, Ariz.-based eFunds Corp., an off-premise ATM operator and transaction processor, says the growth of free cash withdrawals at self-checkout lanes probably will adversely affect ATM-transaction volumes in some stores. "POS cash back at self-checkout is an evolutionary threat to ATMs," he says.
Merchants, however, probably would not be concerned much about some ATM transactions being cannibalized by free cash withdrawals at self-checkout machines, says Michelle Del Toro Jaketic, research manager at the Washington, D.C.-based Food Marketing Institute. The self-checkout systems are becoming popular among a variety of merchant types that view them as a way to cut costs while improving customer service, notes Toro Jaketic.
"It decreases labor costs, and you can focus labor resources elsewhere," she says.
Self-checkout systems enable one floor worker to manage multiple checkout aisles, and the systems have shown that they can reduce lines and customer wait times, says Toro Jaketic. Self-checkout, however, is usually limited to customers making a small number of purchases, she says.
But availability of free cash withdrawals is likely to grow along with the self-checkout trend. A recently completed FMI survey of 40 major supermarket companies owning more than 6,000 stores found that 53% are either planning or already have deployed self-checkout systems. That compares with 94% who stated in 1999 that they had no plans to install self-checkout systems.
Moreover, most of NCR's FastLane customers are buying multiple systems, not just one per store, notes Lutz.
Also, internal surveys by major supermarket chains that offer self-checkout found that more than half of customers in those stores use the self-checkout lane at least once per month and that about a quarter use the lanes at least once per week, says Toro Jaketic.
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