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July/August 2016 // PUBLIC GAMING INTERNATIONAL //
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s lottery has historically been a cash-only industry,
we are early on in the learning curve for accepting
other forms of payment. With “cashless,” a great op-
portunity awaits us—to embrace the next genera-
tion of lottery players and drive incremental sales and profits to
good causes.
Cashless includes traditional credit, debit, and gift cards, as
well as newer methods, such as PayPal or ApplePay and oth-
er mobile payment models. These are all well supported by
the many technical solutions available in the market, but the
greatest challenge for lotteries is to understand and accept the
economics related to cashless—i.e., the benefits and costs of
the investment in expanding the payment options available to
lottery players.
Cashless is about customer service—for players
and retailers.
Consumers prefer choice and respond much better when you
bring your products to them, via their favored medium and
channel, and support their ideal way
of paying. While cash will never go
away completely, it is no longer pre-
ferred, particularly with the younger
generation, who shop with a card or
their mobile device and often don’t
even carry cash.
Your retailers and players, current
and prospective, will be more recep-
tive to a cashless lottery, its brand, and
its products.
Ultimately, this is about optimizing prof-
its for the lottery and its retailer partners.
While there are costs related to cashless, they are an
investment in the future growth of lottery sales.
It is important to view cashless as an “investment” as we re-
view its related costs—the banking fees—and who should bear
these costs—the lottery or the retailer.
Let’s begin with an explanation of the components of bank-
ing fees related to accepting credit and debit cards. There are
quite a few layers to this, each with fixed and/or variable cost
components, including:
•
Interchange
that is paid to the issuer of the card.
•
Acquirer Fees
for the merchant banking partner who
processes the transaction.
•
Network Assessments
owed to the payment network
(e.g., Visa or MasterCard).
•
Chargebacks
related to customer disputes or fraud.
Most retailers don’t review this at the individual transaction
and fee component level. Rather, they typically review the total
Choice for the Modern Consumer:
Lottery & Cashless Payments
By Andrew Crowe, Vice President, Interactive Payments, IGT
Exhibit 1: An example of the banking fees involved in accepting credit and debit cards.