- The Washington Times - Tuesday, August 6, 2002

Coinstar was founded 10 years ago as an alternative to the time-consuming process of rolling all that loose change lying in milk jugs, under the sofa cushions or on the car floor.
Now it is trying to develop into a full payment system.
Coinstar machines allow consumers to lug their change to a store and pour it in, and the machine churns out cash for an 8.9 percent service fee.
Now the company has 10,000 locations, mainly in grocery stores, with $5 billion worth of change cashed.
Rich Stillman, chief operating officer of the Bellevue, Wash., company, said the past 10 years have been like a "Nantucket sleigh ride."
"This is a business that we essentially invented ourselves," he said.
Now, Coinstar is branching out, trying a variety of services, including the possibility of allowing customers to pay their utility bills at the machine.
It is also testing a prepaid credit card in 52 stores. Customers put any form of payment into the machine coins, dollars or plastic and get a prepaid MasterCard, Mr. Stillman said.
The company plans to expand on the idea by investigating ventures with other types of prepaid credit cards and prepaid cards for wireless minutes.
"Coinstar is really a touch point for a wide range of financial services, among them the prepaid method, that we feel will better serve customers," he said.
Prepaid wireless is a "huge" business in Europe, he said.
For now, the company has recently introduced a new backlit model that resembles a soda machine. The Washington area was chosen to be the first of six cities to receive the new machines.
"The backlit machine is just a better-designed product," Mr. Stillman said. "It's more attention-getting."
The U.S. Mint has begun to take notice of Coinstar, as the company recirculates coins that traditionally sit around in a piggy bank or jar.
"Coinstar is not the major influence [on whether] we produce more money or not, but we take note of how many coins are being recirculated," spokesman Michael White said. "The number one factor is the economy, but we may print a few less coins if we see a good return of that coin from Coinstar."
Coinstar was founded by Jens Molbak, a graduate student at Stanford University. Staring at a jar of change sitting on his desk, he thought there must be a better way to cash in the coins.
Two years and many interviews with supermarket shoppers later, Mr. Molbak founded Coinstar. By 1992, Coinstar had installed its first machines in four San Francisco-area supermarkets. An estimated $10.5 billion in change sits idle at any time.
The Coinstar machines are usually strategically located in high-traffic areas in grocery stores, such as entrances and exits. The company charges an 8.9 percent service fee, 1 percent of which goes to the store.
To cash in their coins, consumers bring their jar of coins, or piggy bank, to the grocery store, and pour the contents into the "hopper." The machine sorts through the change, and the dirt, counts the coins at about 600 per a minute and issues a receipt that can be taken to the cash register to be redeemed for dollars. The company says the machines have a 99.99 percent accuracy rate.
The machines are equipped with computers connected to a network that reports to Coinstar's headquarters in Bellevue. The network allows the company to recognize when a machine needs maintenance.
The Safeway at 401 M St. NW installed the machine as a draw and for customer convenience, said Mark Thomas, assistant manager.
"There's a vast majority of individuals who just come into the store to use the machine," he said.
He said about 80 percent of Coinstar customers use the machine without shopping, and a small percentage use the money they cash in to help pay for groceries.
"They had the money to begin with," Mr. Thomas said. "It's just a psychological thing since they have a more acceptable form of currency."
Coinstar is reaping the benefits of the desire for convenience. The company's projected earnings for the second quarter are $36.5 million for its North American core business, thanks partly to a national ad campaign.
Coinstar machines also serve as a place to donate money to charity through the company's Coins That Count program. Coinstar has created partnerships with the Red Cross, UNICEF and the Leukemia & Lymphoma Society.
"A lot of these donations are just a dollar or two," Mr. Stillman said. "It's a wonderful thing to allow only a small amount of money in that fashion."
The Red Cross began working with Coinstar at the end of 2000, and by the end of 2001 had collected $800,000 through coin donations, said Casey Minix, senior associate for corporate partnerships at the Red Cross.
Marguerite Higgins contributed to this report.


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