MEI: Much More than the ‘Yellow Bill Validator’

There’s no doubt about it—MEI has a lot going for itself, including a stunning ship share, partnerships with other industry leaders, proven products and a supportive leadership with a unique take on business.MEI’s omnipresence in the gaming industry—and beyond—is confirmed in the numbers. Machines handle more than 2 billion transactions per week in more than 100 countries. In the U.S., the company boasts more than a 90 percent share of new casino openings in 2009 and 2010, and more than an 85 percent share of upgrades and expansions. Additionally, many of the major slot manufacturers have named MEI their preferred bill validator supplier, including WMS, Bally, Aristocrat and Novomatic. And perhaps most notable for our readers with a sweet tooth, MEI literally had a sweet start under chocolate company Mars.

But the reason we’re telling you their story today is to get to know the company and its leadership, including why they’re No. 1 in bill validation, and the mission and vision behind it all.

History
MEI first made its mark by developing the first electronic coin mechanism in the 1960s, then the first electronic non-contact bill validator, and as of late, its credit card capability and vending management solutions software.

Mike Hayes, MEI’s CEO, shares the company’s history from his perspective: “It came about in the late ‘60s, when John Mars, one of the brothers who ran the business for much of the last part of the previous century, was running a vending company in the U.K. He was frustrated at the poor reliability of mechanical coin acceptors. So he developed, with a couple of engineers from the chocolate factory, an electronic way of accepting coins, which he patented and formed as Mars Money Systems. He then pushed MEI through the following decade as a real mentor of the business, its kind of corporate sponsor, to be at the leading edge of technology and to be a global business. Those two elements are a big part of our legacy.”

Tom Nugent, president of gaming and retail, adds that MEI became involved in gaming when it was approached by a slot machine company in the late ‘80s to build a bill validator for the casino gaming industry. “At that time, Mars was unsure about the new market,” he explained, “so we replied to the OEM that they could use an existing product, but we would not develop something specific for them. In 1995, that same OEM came back to MEI and asked them to develop a technology for gaming. Mars then decided to go forward. That was instrumental in bringing MEI into the casino business.”

But there is a third part of MEI’s legacy, Hayes says. “The way of doing business that came with a mass family company, the ethics, the associated policies are all very much with a Mars pedigree.”

Growth is naturally a part of the MEI story—growth into other industries and other parts of the globe. In the early ‘90s, MEI bought a Swiss company who took them into the transport industry and also brought in new advanced technologies. “It was about expanding the geography and bringing in new technology,” Hayes explained. MEI later bought CONLUX, a leading supplier of payment assistance to the vending industry in Japan, which was crucial to entering the market as a non-Japanese company. Then 2006 marked the sale of the business to private equity. It is now owned by Bain Capital and Advantage Partners.

Though the business was sold by Mars, that pedigree Hayes referenced remains. It’s evidenced by the company’s mission and five guiding principles (see sidebar at end).

MEI’s business is truly focused on the customer, measuring its own success against the success of its customers. “We want to deliver the best value for money, and how do you measure value from money?” Hayes asked. “Well, we like to measure our value to our customers by how much more profitable they will be with our solution as opposed to anybody else’s. That’s the key guiding direction for us; it’s our mission.”

Hayes added that they like to build a stakeholder mentality among the company’s employees, who are called associates.

Work Environment
The daily work environment at MEI is really quite unique, one which Hayes refers to as an “informal egalitarian environment.” It’s an open office plan, meaning nobody in the company has an office (not even Hayes), no one gets special parking, and everyone eats in the same place and uses the same restrooms. “It’s a very single-status type of culture,” he commented. “We’re looking to build a strong engagement among associates. We communicate a lot. Every month we tell people exactly what’s going on in the business. That gives it a unique, almost collegiate atmosphere.”

Proof that it’s effective? “Recently we did a survey of our associates,” Hayes explained, “and the area of business that they rated the company highest on was its ethics. That I think comes back to our Mars roots.”

Hayes says this is also how the company fosters creativity in its associates, through a highly approachable senior leadership team. “We’re really engaged in day-to-day activities in the business,” he said. “You combine that with the fact that we focus on working closely with our customers so our technical people go to trade shows, and our operations people visit customers. We combine customer closeness with this kind of informal environment, and I think that gives ideas exposure.”

MEI practices kaizen events, which is a lean process that focuses on continuous improvement of processes in manufacturing and business. In particular, it allows MEI’s associates to look at a problem or an opportunity, brainstorm different ways to improve it and be accountable to implementing the improvement idea, Nugent explained.

Nugent adds that MEI also does quite a bit of engagement directly with its customers. For example, they invite the OEMs to come and participate in kaizen events and even attends its customers kaizen events. “We’re using our customers, this partnership, to foster creativity, share best practices and ideas,” he said.

Product Philosophy
“We stand behind our product and we will be there for our customers,” Nugent said. At MEI, it’s much more than just having the best products—though that’s an important piece of the puzzle, too. It also comes down to people, both MEI associates and the company’s customers. “Our ethics speak to how we engage with customers,” he said. “It starts with that yellow product and continues with the whole company standing behind it.”

And it’s the people that make MEI more than just the company with the yellow bill validator. Nugent said it’s because they offer a complete package. “Our service team, our partner’s service team. It’s about the approach we have with the customers, the follow-up. When there’s a tech issue, it’s good for us.”

Two of MEI’s flagship products for gaming are the CASHFLOW® SC and EASITRAX® Soft Count. The former is a high-performance bill validator for TITO environments; the latter an integrated software/hardware solution for a casino soft count room. EASITRAX boasts more than half a million installs in various industries. CASHFLOW is available in gaming and retail and has sold over 1.2 million units.

“Our technology is built very differently than our competitors’,” Nugent commented. “It’s the same size and shape, but fundamentally there’s a different approach that we have to recognizing and validating currency. Over the course of the last seven to 10 years that we’ve introduced CASHFLOW SC, there’s never been a counterfeit accepted in a U.S. casino with a properly configured MEI bill validator. I think that speaks for itself.”

Hayes also explained that MEI has a vending bill validator, which was launched in the mid-‘90s and is still the market leader today, selling millions. Then in the transport business, MEI offers a high-end bill validator that runs for $6,000 per unit and has also seen its fair share of success.

In the near future, Nugent shared that we can expect to see a revamped SC Advance around first quarter 2012. “What we’ve done is we’ve taken the same footprint, look and setup, but we’ve completely redone all the electronics with technology that was not available in 2006 when CASHFLOW SC was created,” he said. “SC Advance is 30 percent faster than CASFHLOW SC, and more memory allows us to go with more currency sets and features.” There’s also a new array of security features, all making a “noticeable difference.”

Though no one ever brags of problems, there is one in particular that perfectly illustrates the MEI difference. About a year ago, a supplier had supplied MEI with a defective component that made it through testing, but failed during high usage. It made it to the field in two large casino openings on the East Coast. The properties called MEI before their openings about the problem they were experiencing. “It was on a Saturday and it was the company picnic,” Nugent remembered. “Mike Hayes raised up and said ‘Is there anyone that can help?’

Over the course of the next 48 hours, nearly 50 associates went to the two locations and took out the bad component and rebuilt and replaced it. Both of [the casinos] opened very quickly without any disruption in their business. Those installations are memorable because it shows what MEI is about. It’s rare that we have a problem. If 50 associates leave a company picnic and spend their weekend taking care of a customer problem, it speaks to the company culture.”

“This was a superb example of an associate, many of them not invovled in the gaming channel, who stepped up and worked,” Hayes also recalled. “Some of them would work in one casino during the day and one at night. It was inspiring.”

Another example of the MEI difference is through its specification process. The company conducts value-added trials (VATs) where the customer can witness MEI products in use on their own floor. “Typically, we will take a bank of slot machines between two competitors,” Hayes explained. “In the end, the most powerful variable is how much money is in the cashbox.”

Nugent also shared that MEI has conducted about 200 VATs in casinos and that fewer than than 1 percent don’t go with MEI. “It’s a high success rate once we make a comparison against our competitor’s performance,” he stated.

The other element, Nugent explained, is that as a casino considers opening, MEI is involved from the beginning. They find out what kind of cash management systems they want, look at the floor plan and tailor their technology for it. “If we look at the numbers in 2007-2010, we won over 90 percent of all new casino openings,” he said.

Other reasons Nugent cites as what set them apart is the fact that MEI is the largest in what it does—in fact it’s nearly double the size of our nearest competitor—and has service capabilities around the world. “By being the largest, very few people have the ability to have such a globalized network of service,” he said.

MEI’s EASITRAX® Soft Count
MEI’s EASITRAX® Soft Count
Initiatives
Nugent says there are two important initiatives at MEI right now. The first, cash management, is a process that supports MEI’s technology beyond the point of consumer usage. “If you imagine a bill validator, a person puts in their note, and then we could just say we’re done and walk away,” Nugent said.

He then refers to EASITRAX that actually manages the transactions and cash beyond that initial acceptance. “In gaming, it’s manifested in software and hardware,” he explains. “We support the activities in the countroom. In retail, it’s transactions where we manage the infrastructure that’s required between a retail consumer and the interface of the bank. In the vending industry, it’s an application where we provide management software and communication. This initiative of cash management is very exciting.”

The second initiative is cash recycling, where when coins are put into any machine, that same coin will come out and pay back the change. “We’re seeing the trend in the bill validation side for recycling,” Nugent said. “We’ve launched two recyclers so far. One is focused on our vending industry and one is focusing on retail. It of course has aspirations for the gaming side such as a kiosk in a store or vending machine or game device.”

Industry Observations
With a company so dedicated to technology, it’s not too surprising to hear Hayes note that a lot of MEI’s management team is “quite nerdy.” But it’s a good thing, as MEI spends around 10 percent of its revenue in R&D and has a commitment to thorough testing on a global level. It also means they’re on the forefront of new developments and trends.

In terms of bill validation, a trend Nugent references is the high usage of plastics, which he says MEI started. “The usage of plastics on bill validation has changed dramatically in the last several years,” he said. “Recycling is also coming into the bill validation market space. We see a never-ending battle against counterfeits. We’ve got to be ahead of the organized counterfeiters, and even the casual person who may be interested in creating a fraud. That in itself drives technology change in the bill validation market.”

He also says technology needs to work together to accomplish total cash management. “Operators demand products like EASITRAX Soft Count and player tracking systems. They also expect them to work together.” The process is about more than moving money—it’s about closed loop cash management. “The flow of cash can now be tracked from the bank to the ATM, to the player to the slot machine to the soft count room and then back to the bank. This information is very powerful to properties as they are now enabled to streamline their operations.”

Looking Ahead
MEI’s goals for the future? To be masters of their own destiny. “We started this journey with private equity, allowing us to separate and be our own company,” Nugent said. “I see that path continuing. To be in control of our future. In terms of how we interface with gaming, we want to get in deeper with the operators. We want to understand their aspirations for our types of technology and to work diligently with the machine manufacturers to ensure we are developing products that fit their expectations as well.”

The last thing Nugent wanted to leave CEM readers with goes back to the mission statement, that their value is measured by the profitability of their customers. “That’s what we are about.”

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