Transition to a Wireless and Cashless Payment Access System for a Self-Service Laundry Business

Transition to a Wireless and Cashless Payment Access System for a
Self-Service Laundry BusinessCourse ProjectJeffery LadyManagerial Applications of Information Technology – IS535
DeVry University, Keller Graduate School of ManagementOctober 12, 2014

Table of Contents TOC \o "1-3" \h \z \u Abstract PAGEREF _Toc400908064 \h 3Brief Company background PAGEREF _Toc400908065 \h 3Discussion of business problem(s) PAGEREF _Toc400908066 \h 4High level solution PAGEREF _Toc400908067 \h 5Benefits of solving the problem PAGEREF _Toc400908068 \h 5Business/technical approach PAGEREF _Toc400908069 \h 7Business process changes PAGEREF _Toc400908070 \h 7Technology or business practices used to augment this solution PAGEREF _Toc400908071 \h 9 HYPERLINK \l "_Toc400908072" Conclusions and overall recommendations PAGEREF _Toc400908072 \h 10 HYPERLINK \l "_Toc400908073" High-level implementation plan PAGEREF _Toc400908073 \h 12
Summary of project PAGEREF _Toc400908074 \h 12References PAGEREF _Toc400908075 \h 14

AbstractCurrently, there are about 35,000 coin laundries in the United States, generating nearly $5 billion in gross revenue annually (Coin Laundry Association, Overview, 2014). A recent press release from Business Wire stated that Sestomatic Systems, a maker of cashless payment options for the self service laundry industry, estimates the annual gross revenue of the unattended commercial laundry market to be $8 billion dollars (Business Wire, 2014). Even with the significant size of the industry only 28% of self service laundry owners who participated in a recent survey stated that they offered a wireless and cashless payment option for its customers (Calma, 2014).
Clearly, this industry is poised and in need for a transition to increased availability of wireless and cashless payment options. This project will present an opportunity to apply a technology solution, a wireless and cashless payment access system, to address a business problem of a company which will add value to the organization. The business problem to be solved is how to transition to a wireless and cashless payment system for a regional self-service Laundromat.
Brief Company backgroundPacific Crest Laundry and Wash Company (PCLWC) is an independently and privately owned company which operates two commercial laundry facilities in the Portland, Oregon area. Both facilities offer traditional, coin-operated, self-service washer and dryers as well as drop-off/pick-up laundry options with no dry cleaning. They are also planning a new facility in a vacant warehouse surrounding a growing multi-family development.
Discussion of business problem(s)Traditionally, the self-service laundry business relies solely on coin operated washers and dryers to serve their customers. This is an accurate description of the two existing PCLWC facilities. They require their customers to either transport large amounts of cash in and out of their facility or utilize a self-service change machine to convert bills into the appropriate number of coins required to wash and dry a specified amount of laundry. The transportation of cash into the facility, coins and cash in and around the facility, and the minimal to non-existent number of employees during off-peak hours presents a safety and security risk for the customers. Criminals understand that individuals approaching a self-service laundry business, with both arms possibly occupied, are likely to have cash in their possession which presents a robbery opportunity. Criminals also understand that the number of employees in a self-service laundry business is either non-existent or extremely limited during off-peak hours. Using a self-service change machine, which converts bills into coins, is also a safety and security risk. Customers are required to remove cash from their person and insert this cash into the machine while in a facility with little or no physical security in place and few, if any, other customers during off-peak hours.
An example of exploiting this security threat took place earlier this year when New York police were looking for three robbers who may have hit as many as eight Laundromats in Brooklyn and Queens over several weeks in February. In each robbery, criminals stormed into buildings wearing masks and gloves. Once inside, the robbers took cash from the registers and any customers who were there at the time (Dienst, 2014). Machines that convert bills into coins also represent a vulnerability. An example is from the State of North Carolina where police obtained security camera footage of a man suspected of breaking into change machines at a local Laundromat (Wolf, Dawson, 2013).
High level solutionA solution for eliminating the reliance on cash/coin operations and to reduce some of the security vulnerabilities that PCLWC faces is to install a wireless and cashless payment access system on their existing washers and dryers at each of their two existing commercial laundry facilities. This solution can also be part of the design and equipment considerations at their new facility. Solutions for each of these facilities varies; machines in their existing facilities can benefit from a conversion to a wireless and cashless payment access system while keeping the coin option on a limited number of machines for a limited amount of time. The new PCLWC facility would be outfitted with advanced technology machines capable only of a wireless and cashless payment option.
Cashless payment options technology for the PCLWC should include the use of traditional debit/credit cards as well as incorporating the Near Field Communication (NFC) set of standards. NFC will allow a mobile device (smart phones, pads, etc) to establish communications with another device by placing the devices a couple of inches apart. The mobile device would communicate with a washing machine, dryer, or point-of-sale (POS) device at the counter supporting their drop-off/pick-up laundry service. This would allow for a cashless payment using NFC technology. Apples decision to adopt the NFC standard, with an onboard hardware based secure element, as the basis for Apple Pay, assists PCLWC to adopt a cashless payment system that is NFC compatible (Gent, 2014).
Benefits of solving the problemThe benefits of solving the coin operated (cash) only laundry dilemma for PCLWC include a reduction in societies cost of using cash, the possibility to see an increase in overall revenue, a reduction in a variety of security vulnerabilities, and an increase in the ability to offer special product and service promotions which would not only contribute to increased revenue but also increase customer satisfaction, customer trust, and brand loyalty.
Contrary to popular belief there is a significant societal cost to using cash for retail transactions such as Laundromat services. According to a 2013 study by Tufts University, the cost to society of using cash is over $200 billion per year in terms of fees, theft, and $31 billion in lost productivity. These costs include automated teller machine and check cashing fees , the cost of cash theft (primarily from households theft), and the productivity lost in the time it takes (approximately 28 minutes per month) to access cash (Chakravorti, Mazzotta, 2013).
An expected increase in revenue, convenience, and satisfaction as well as a decrease in security vulnerabilities are a few other reasons to pursue a cashless payment option. According to a 2013 study by Heartland Payment Systems of the Coin Meter Company, a Portland, OR area coin-operated laundry company, they noted a revenue increase of 18% for a low performing laundry facility who transitioned to a cashless payment system. According to Mike Marsden, owner of the Coin Meter Company, the benefits of using wireless, cashless technology include not only the revenue increase but a significant decrease in vandalism since there are no quarters or bills to steal. From enhancing the convenience and satisfaction for customers, to boosting the bottom line, to reducing security vulnerabilities, going cashless has helped the Coin Meter Company eliminate reliance on coin payments. Says Marsden, “It’s what my customers are happiest with. They hate dealing with quarters” (Heartland, 2013).
Business/technical approachThe business/technical approach for the existing two facilities will be to identify the number of units (washers and dryers) that would benefit from a conversion to a wireless and cashless payment access system, identify which units would remain capable of both cash (coin) and cashless payments, and evaluate the usage of each machine as a percentage of overall facility usage. The result would be a projected conversion cost per unit as well as an overall machine downtime cost based on the impact of a specified number of units being out-of-service during the conversion phase. Units unable to be converted due to type, model, or age would be identified with a full replacement cost or be identified as remain in inventory as cash only cost payment.
The second step would be to identify the location of a wireless access point. Most important in the step is to address the issue of security and privacy; both for outside wired access to the internal wireless access point as well as the wireless exchange of data between the wireless access point and the individual machines that it will communicate with. All systems should be Payment Card Industry (PCI) compliant and use Secure Sockets Layer (SSL) encryption between the wireless server and client or individual laundry machine.
The business/technical approach for the PCLWC new facility would be less complicated since design, construction, and installation of the machines would accommodate cashless payment options
Business process changesCurrent business process at PCLWC revolves solely around coins and converting bills to coins. Once a decision is made to on how many machines will remain that accept coins, business processes can now be developed which focus more on wireless and cashless solutions. The advantage of keeping some machines capable of coin operation is that of customer preference. There may be some customers that either have a security concern with cashless payment or do not have the financial ability to secure a payment option other than bills and coins. I recommend that the two existing facilities identify a limited number of machines capable of coin and cashless operation and advise the customer base that this is only for a limited period of time (6 to 12 months) as both facilities will transition to an entirely cashless operation in the near future.
Based on the demographic study already completed, the new facility can be designed and constructed with only a wireless and cashless payment option.
One rational for a business process change to an entirely cashless system at the existing locations is convenience for the changing demographics. With people simply carrying less cash, business must adopt to the changing habits. According to a recent Bankrate.com Financial Security Index Survey 40% of a survey population (2 out of 5) carry less than $20.00 cash in their pockets. About 9 percent of those surveyed say they don't carry any cash at all. The electronic payments industry "is doing a good job shifting people away from cash," says George Peabody, a payments strategist at Glenbrook Partners, a payments research firm in Menlo Park, California. Jason Oxman, CEO of the Electronics Transactions Association, says there are a lot of reasons why consumers have embraced noncash payments. One important reason is security, he says. If a $20 bill gets stolen from your wallet, you're out $20. In contrast, if someone fraudulently charges $20 to your credit account, you often don't have any liability (Ross, 2014).
Another rational is the importance of accurate and timely recordkeeping; which directly contributes to the value of company in the event they wish to sell. Timely and accurate record keeping directly contributes to making good business decisions. With a coin based operation keeping track of machine usage and tracking cash available can be difficult and labor intensive. The machines need to be emptied and counted regularly as do the machines that change cash into coins. In just one of the PCLWC facilities there are a total of 68 machines (washers and dryers) which require daily cash usage statements, which also helps determine machine usage; and it is usage that is one of the keys to assessing the facilities machine configuration. You need to break down the usage numbers to more detail than just the total number (68); Usage needs to be tracked by the type (front loaders and top loaders) and capacity (18- lb, 25- lb or 30-lb) and not as one group unit. This helps determine the right configuration and number of machines for the customer base. This can be extremely time-consuming in a coin-operated environment.
Another rational is the issue of machine maintenance and down-time. Depending on the time of day that a specific machine malfunctions, management may not know about an inoperable unit until the next business day. This delay means the machine is unavailable for use and not generating revenue. Wireless and cashless payment systems can notify management of an inoperable machine, allowing for an immediate maintenance response, thereby reducing the time that the machine is not able to generate revenue.
Technology or business practices used to augment this solutionCreating a positive laundry experience is not simply adaptation of a wireless and cashless payment access system. Other technology and business practices, both inside the facility and in marketing, can augment the recommended solution.
First impressions are lasting impressions. The parking lot is one of the first impressions set in the mind of a new customer. Ensure the pavement is in good order, that there is sufficient lighting during the evening hours, and eliminate any obstructions between your parking locations and the facility entrance. In general, the exterior of the existing the PCLWC facilities are is fair shape. However, a good pressure wash of the concrete entryways and facility siding would be recommended. Door jams and window jams need to be replaced so that all the windows and doors operate without any excessive noise.
According to the Coin Laundry Association 77% of your potential laundry customers’ research businesses online before they walk through your door and only 18% of laundry owners have a website or advertise it (Coin Laundry Association, Marketing, 2014). Owners should not be shy. They should be proud of the facilities they operate and spend the capitol required to tell their story. A web site and a social media presence do not have to be an elaborate or an expensive proposition but it must be recognized as critical to business success. According to Barry Callen, author of Manager's Guide to Marketing, Advertising, and Publicity, e-marketing is now the fastest growing marketing communications area and likely to be the dominant marketing medium in the near future (Callen, 2010). Given the demographics of the customers frequenting PCLWC planned and existing facilities, they should consider creating a marketing internship opportunity for a student from Portland State University to develop this e-marketing effort. Given that most internship opportunities are of limited duration this individual could establish an initial on-line presence and help train full-time staff in both maintenance and update.
Conclusions and overall recommendationsA wireless and cashless payment access system will benefit the Pacific Crest Laundry and Wash Company; both in their existing two facilities as well as their proposed new facility. Given the importance of as little machine down-time as possible, issues of security and privacy, retaining the ability to accept coins (for a limited duration), credit and debit cards, and NFC technology I recommend that the PCLWC adopt the Setomatic Systems SpyderWash system for their machine conversions in their two existing facilities. This same technology should be adopted on machines in their new facility as well.
The SpyderWash system accepts all forms of payment; standard debit/credit cards (even those with pin and chip – RFID), NFC transactions, and other mobile payment platforms (Google Wallet, SoftCard etc.) while still allowing the PCLWC to retain coin payment option for a limited time. The SpyderWash system is completely wireless and has an extremely robust web based management system. This allows full access to all payment processing (including coins) and maintenance status of your machines from any mobile platform via the web from any location. This allows for detailed analytics and reports to help make better business decisions. SpyderWash allows for a free loyalty card application to complement existing marketing and customer satisfaction initiatives. SypderWash incorporates the only reader in the laundry industry that is certified by Visa, MasterCard, American Express, and Discover. Not only does the software meet their rigid security standards, but they have added an additional measure of protection with our triple encrypted Bluetooth technology. All aspects of the system meet the PCI DSS requirements, from the washer/dryer interface to the processing of credit cards over the web. Our reader is also CE (European Commission), UL (Underwriters Laboratories), and RoHS (Restriction of Hazardous Substances) approved. This device is FCC (Federal Communications Commission) compliant as well (Setomatic Systems, 2014).
High-level implementation planSetomatic Systems is headquartered in Farmingdale, NY. A business development consultant will schedule a visit to existing PCLWC facilities and review their conversion plan. There is a low-cost initial set-up fee payable to Setomatic Systems. Although there are no extra fees for options such as a loyalty program, remote monitoring or multi-location support, there is a merchant percentage fee for all cashless transactions at each machine. The percentage is based on the number of machines and the installation plan that PCLWC selects.
Summary of projectThis project presented an opportunity to apply a technology solution, a wireless and cashless payment access system, to address a business problem of the Pacific Crest Laundry and Wash Company that will add value to the organization. It presents the business problem, it states the benefits of solving the problem, it discusses the business process that will change as a result of the proposed solution, it offers a solution and implementation plan, and it describes some of the beneficial business practices that can augment the technology solution.
The adoption of a technology solution in an industry with very tight profit margins, such as the self-service laundry industry, can present a difficult proposition to management. It may lead management to ask “is the technology solution really complicated to install?” or “am I really going to see an increase in my business because of it?” or “is that monthly fee as a percentage of each swipe really worth it?” One of the best validations of this technology solution may be to ask those who have made the transition. Bruce Beggs, of America Coin-Op - a leading trade publication, recently interviewed store owners from around the country whose operations use cashless systems offered by some of the industry’s best known vendors. Some of the comments he received included “We used to measure turns per day by machine by putting the quarters in a bucket and weighing the bucket. We would estimate, based on the vend price, how many turns a day that machine, or that particular size machine … were doing a day. The system was so labor-intensive; we did that only maybe three times a year. Now I can do it in five minutes.” Or this comment, from Munim Yono, who owns Millennium Laundry in Lincoln Park, Michigan. “I can go to the system and look up each machine, what it did, what time, and how much money was generated, It makes life so much easier” (Beggs, 2014)
Some companies pay a lot of money for an outside firm to provide solutions to a company’s biggest challenges. The adoption of a wireless and cashless payment access system for the Pacific Crest Laundry and Wash Company is a business decision that should be made without the need for a high priced business consultant.
ReferencesBeggs, B., (2014, May 8). Cashless Laundries: Is the Future in the Cards? American Coin-Op.Retrieved from https://americancoinop.com/articles/cashless-laundries-future-cards-conclusion
Business Wire. (2014, September 22). Retrieved from http://www.businesswire.com/news/home/20140922006494/en/USA-Technologies-Setomatic-Systems-Bring-NFC-Based-Mobile#.VDqsZ_mIDWcCallen, B., (2010) Manager's Guide to Marketing, Advertising, and Publicity. Briefcase Books. New York : McGraw Hill.
Calma, C., (2014, April 8). Survey: Cost of Cashless Conversion Doesn’t Captivate Majority of Operators. American Coin-Op. Retrieved from https://americancoinop.com/articles/survey-cost-cashless-conversion-doesnt-captivate-majority-operators
Chakravorti, B., Mazzotta, B., (2013, September). The Cost of Cash in the United States. The Institute for Business in a Global Context, the Fletcher School, Tufts University. Retrieved from http://fletcher.tufts.edu/CostofCash/~/media/Fletcher/Microsites/Cost%20of%20Cash/CostofCashStudyFinal.pdf
Coin Laundry Association, Overview (Accessed 2014, October 10) Retrieved from http://www.coinlaundry.org/contact-us/about-the-self-service-laundry-industry/
Coin Laundry Association, Marketing (Accessed 2014, October 10) Retrieved from http://www.coinlaundry.org/membership/marketing/
Dienst, J., (2014, February 26). Suspects Sought in NYC Laundromat Robbery Spree. Retrieved from http://www.nbcnewyork.com/news/local/Suspects-Sought-Laundromat-Robbery-Spree-NYPD-Queens-Brooklyn-247208121.html
Gent, E., (2014, October 1) Apple Enters the Payment Market with NFC Offering. Engineering & Technology (17509637), 9(9), 12.
Heartland Payment Systems. (2013, August 13). Case Study: Coin Meter Company. Heartland MicorPayments News. Retrieved from http://www.heartlandmicropayments.com/Resources/Files/Laundry%20Data%20Sheets/CoinMeter%20Case-Study%207-11-2012.pdf
Ross, A., (2014, May 4). Financial Security Index: Cash's cachet. Smart Spending. Bankrate.Com. Retrieved from http://www.bankrate.com/system/util/print.aspx?p=/finance/consumer-index/financial-security-index-cashs-cachet.aspx&s=br3&c=smart%20spending&t=story&e=1&v=1
Setomatic Systems, Our Technology. (Accessed 2014, October 9) Retrieved from http://www.setomaticsystems.com/our-technology/
Wolf, W., Dawson, J, (2013, December 16). Man sought in Laundromat change theft. Retrieved from http://www.kinston.com/news/web-exclusives/updated-video-man-sought-in-laundromat-change-theft-1.250378