Article

$1 banknote presents a challenge to cash recycling efforts

Wincor Nixdorf wants to meet with banks and the vending industry to solve the problem.

February 5, 2011

PADERBORN, Germany — Wincor Nixdorf Inc. is scheduled to display its full CINEO line of Automated Teller Safes and ATMs later this month at the ATM Industry Association conference in Miami.

But Jens Bohlen, CEO of Wincor Nixdorf Inc., which is based in Austin, Texas, said the company faces a challenge concerning the machines in the United States because of the $1 banknote.

CINEO is a cash-recycling system designed to save banks and other financial institutions the cost of cash handling and servicing at branches. The machines reduce the need for armored car services to deposit and pick up cash. In addition, they eliminate the need for bank tellers to count and recount cash, Bohlen said.

CINEO, an acronym for Cash Intelligence NEO or New, does this through a system of interchangeable banknote-holding cassettes. The Automated Teller Safe, which is located behind the teller window, houses a maximum of seven cassettes. Each cassette holds a maximum of 2,200 banknotes of any denomination, including $10s and $20s.

If one of the ATM's cassettes runs out of cash, bank employees remove any one of the cassettes filled with banknotes from the Automatic Teller Safe or teller cash recycler. The employees then remove the empty cassette from the ATM, replacing it with a cassette filled with banknotes. The empty cassette is then installed inside the Automated Teller Safe, ready to accept more deposits.

The problem is that the U.S. economy has a tremendous number of $1 banknotes. The $1 bills quickly will fill up the cassettes, Bohlen said. To make matters worse, cardholders who withdraw funds from a cash recycling ATM could receive large numbers of $1 bills, which they would not want, he said. For example, if a cardholder withdrew $100, he possibly could receive a large number of $1 bills.

The $1 banknote is unique to the United States. In European countries, where the euro is the currency, the smallest banknote is 5 euros (U.S.$6.78). Currency smaller than 5 euros are coins, such as 2 euros (U.S. $2.71) and 1 euro (U.S. $1.35). Coins are not recycled.

Although there have been attempts to replace the $1 banknote with a $1 coin, they have been unsuccessful. The latest occurred with the Susan B. Anthony dollar, a coin that was a little larger than a quarter. The government minted the Susan B. Anthony dollar from 1979 to 1982 and again in 1999. The coin proved to be very unpopular. As a result, the government has not taken any action to remove the $1 bill, due to either intensive lobbying by "Save the Greenback" or consumer resistance.

Bohlen said he wants to meet with banks and financial institutions to determine how to resolve the matter. He also wants to meet with representatives of the vending machine industry to determine how they handle large numbers of $1 banknotes.

"I think it's fair to want to have conversations with the industry and discuss a possible solution," said Nicole Sturgill, research director of Delivery Channels for TowerGroup, a research and advisory firm based in Needham, Mass. "At the end of the day, the $1 note isn't going to go away so there has to be a technology solution in order to gain any recycling traction in the U.S. For the most part, people don't want to receive $1 notes from the ATM, but they need to be able to deposit them."

The numbers of $1 banknotes in circulation are growing, according to the U.S. Treasury Department. As of Sept. 30, 2010, there were $9.4 billion worth of $1 Federal Reserve Notes in circulation. This is an increase of 2.2 percent from September 2009 and a 3.3 percent increase from September 2008, according to the Treasury Department's U.S. Currency and Coin Outstanding and in Circulation.

There were $10.9 billion worth of $5 Federal Reserve Notes and $126.2 billion worth of $20 Federal Reserve banknotes as of Sept. 30, 2010.

Wincor Nixdorf Inc. is owned by Wincor Nixdorf AG, which is based in Paderborn, Germany. Wincor Nixdorf AG is the world's second-largest ATM manufacturer, based on annual shipments.