Coin changes and vending

Jonathan Hart, chief executive of the Automatic Vending Association, discusses the upcoming UK currency changes and how this will affect the thousands of vending machines in schools.

It is less than six months to go until the new pound coins are released into circulation in March 2017 and production of the brand new 12-sided pound coin has already begun.

The pound coin is being replaced for the first time in more than 30 years due to its current vulnerability to counterfeiters and the high volume of fake pound coins in circulation – up to three pound coins in every 100 have been found to be fake. On a similar note, the Bank of England has announced it will introduce new £5 and £10 polymer (plastic) bank notes to improve the security and quality of UK bank notes. The £5 note will be introduced from 13 September 2016 and the £10 note will follow in 2017.

From the very start of the consultation process on the new pound coin, the AVA has been working closely with the Royal Mint to ensure that the vending industry’s concerns about the cost and practical implications were heard and taken into consideration.

It was through the AVA’s involvement that the coin now has soft edges rather than the harder edges that were originally proposed, enabling it to roll better as a result and therefore work better in vending machines.

Both sides of the coin
At the AVA, we are all too familiar with the costs that currency changes incur to ensure that the estimated 560,000 vending machines in the UK can accept them.

In 2011, the new 5p and 10p coins were introduced at a cost to the industry of £28.9m. It is estimated that the upgrades required for the new £1 coin and the news banknotes could be more.

At the same time, we fully understand and support the position of both the Royal Mint and the Treasury in wanting to protect the integrity of the UK’s currency and reduce the level of fake coins in operation throughout the UK.

How can schools prepare?
Many of the UK’s estimated 3,500 secondary schools have at least one vending machine on their premises and, whether these machines are old or new, they will need to be prepared and possibly modified to ensure that they can accept the new currency.

Modifications to software within note-accepting vending machines is already taking place across the UK to ensure machines are able to accept the new polymers £5 notes. A similar software update will be again required to ensure machines accept the new £10 note next year. There will be a six-month period from March 2017 to September 2017 when both the old and the new pound coins will be in circulation. Thereafter the old pound coin will no longer be legal tender. So, the AVA recommends that educational facility managers ensure that their vending machine operators start working with their coin mechanism suppliers now to ensure they are well prepared.

For the majority of modern vending machines, upgrades to coin mechanisms and note readers can be done on site and operators can simply send out engineers to make the necessary changes to the machines. However, there are approximately 40 per cent of vending machines where the coin mechanism will have to be sent away for the upgrade to take place.

When you put your £1 coin in a vending machines it goes down a ramp. If the machine recognises the coin, it goes into a cash box located in the machine. However, if the machine has a note reader fitted it is allocated into a plastic tube where a number of the £1 coins are kept. If it is not accepted it just comes out again.

During the initial dual coin acceptance period, the old and the new £1 will go into the cash box. At the end of the dual coin acceptance period, an engineer will need to revisit each machine to turn off acceptance of the old pound coin.

For validator machines that are used in many secondary schools to charge pre-pay cards with funds to use on schools vending machines, the process of upgrading the coin mechanism will be very similar.

Contactless conversion
Although the currency change will have a significant effect on vending machines, a growing number of vending transactions are now happening without any coins or cash at all.

British vending machines selling snacks, drinks and phone chargers are rapidly adopting card and contactless technology with the number soaring by 20 per cent a year, according to Creditcall, a payments company.

The barrier to the use of cards in vending has historically been the high charges imposed on operators by the banks and card companies. The advent of contactless payment cards and the recent lowering of the transaction charges has removed some of these barriers.

While big changes are on the horizon for the UK currency, the vending industry is well prepared. The majority of upgrades required should be straightforward and there is still plenty of time for schools to ensure that they are ready by next March.

Further information