Firm moves to produce credit card slot system

David Strow

Tuesday, Aug. 14, 2001 | 11:14 a.m.

A small Las Vegas gambling company is promoting a new concept for casinos: the marriage of the slot machine and the credit or debit card.

Innovative Gaming Corp. of America is saying it's prepared to introduce a system to regulators next year that will allow slot players to play a slot machine simply by inserting a credit or debit card.

IGCA will be the only company to offer such a system, company officials claim, as the company has acquired a suite of patents that cover the use of credit and debit cards in slot machines for gambling purposes. If the company can get approval from gaming regulators in Nevada and elsewhere, it hopes to begin licensing the cashless gaming system to other slot makers.

But getting that approval isn't expected to be easy, for one big reason -- problem gambling.

"It's a good idea in theory, but in execution it could create some bigger long-term issues ... getting it through the regulatory process could be difficult," said Marc Falcone, gaming analyst with Bear Stearns. "Controlling compulsive gambling is going to be a big component of that."

IGCA's Chairman, Roland Thomas, claims the company is planning to address this issue. As he pictures it, a customer would go to a central, ATM-like device to enable a credit or debit card to be used in a slot machine. The player would be given a PIN number, and would be required to set a limit on how much he or she wished to gamble. Once the player hits that limit, the card would lock up, and couldn't be used again for gambling purposes at any casino for a period of five to 10 days.

That would help control problem gambling, Thomas claimed, and could potentially reduce it.

"That's very much a plus for this sort of system," Thomas said.

It was concerns over problem gambling that prompted the National Gambling Impact Study Commission to recommend that ATMs be banned from casino floors. But IGCA claims its system has received the endorsement of former California Lt. Gov. Leo McCarthy, one of the most outspoken gambling opponents on the study commission.

"He's very supportive of this, and his response was ... it's one of the first responsible approaches to gaming," Thomas said.

But problem gambling experts aren't yet convinced. And they're concerned that mixing credit cards directly with slots could prove disastrous for someone who compulsively gambles.

"(The self-imposed limit) in itself isn't enough to deal with the issue of problem gambling," said Carol O'Hare, executive director of the Nevada Council on Problem Gambling. "Simply trying to externally control someone's financial behavior is not sufficient."

It probably wouldn't create new problem gamblers, O'Hare said. "But for the problem gambler, we are certainly creating an opportunity for them to be even more isolated in the experience," O'Hare said.

"When you don't even have to get up to walk to the source of money any more, there's even less opportunity for the person to stop and think," she said. "That credit card going in (the machine) is the switch going on for them, and they're not likely to stop until that switch goes off."

IGCA isn't a large company by any standard, and few in the gaming community are familiar with it. It currently has three slot machine models out on the market, and three gaming machines that are video-based versions of table games like craps, blackjack and roulette. Its stock was nearly delisted from the Nasdaq earlier this year after its share price dropped below $1 per share, but the Nasdaq ended this effort in June after its share price recovered. It now trades at just above $2 per share, with a market capitalization of $28.7 million.

The company posted just $4.73 million in revenues in the second quarter of 2001, though this was an increase of 98 percent over the year-ago quarter. Its operating income was $307,000.

But the company has posted negative cash flow for each of the last three years, and IGCA reported a cash position of just $106,000 as of March 31. If sale forecasts aren't met, the company's financial report stated, the sale of stock at a discount or the discontinuation of operations would be considered.

But Thomas insists this is a technology that could be huge, one that could potentially challenge the "ticket-in, ticket-out" technology that now dominates cashless gaming.

"I think the nature of this industry is about diversity of choice," Thomas said. "From discussions we've had in the industry, we believe that's so."