Article

4 ways to unlock the value of cash

CIT carriers are enjoying lower capital costs; cash processors are reaping the rewards of technology. How can ATM deployers claim some of the benefits?

April 28, 2015

byMike Plante, VP and Head of Business Development,Cash Management Solutions

The armored transport industry is reaping the rewards of lower capital costs, increased labor productivity, improved technology, reduced attacks and reduced fuel charges. Yet merchants and ATM deployers have seen little reduction in prices over recent years and some armored transport providers still impose fuel and insurance related surcharges.

Meanwhile cash processors have reaped the rewards of consolidation, high barriers to entry and vastly improved technology, with many reducing staffing levels by two thirds in the process. However, cash deposit and withdrawal pricing has remained stagnant. What can merchants and ATM deployers do to divert some of these benefits to themselves?

1. Outsource

Economies of scale, rapidly changing technology, security, and knowledge all point towards outsourcing of cash activities. Armored transport services, by their nature, require intensity of service to be productive. Very few retailers or deployers have the geographical intensity required to make an in-house AT service financially viable.

Historically, reasons to insource armored transportation have rested on service quality and high supplier pricing, but these reasons are just a reflection of inefficient servicing and procurement. Supply chain performance and service quality in the industry has improved significantly over the last decade due to improved vehicles, newer technology and flexible working.

Reconciliation presented a major barrier to outsourcing cash processing, but again technology has resolved these issues. Outsourcing cash processing at a (typical) large retail chain can reduce costs of cash by 25 percent.

2. Innovate

Cash counting safes and recycling machines have reduced in cost over recent years as the technology improves. As interest rates rise, the attraction of provisional credit and improved cash flow will grow and better reconciliation, improved productivity and the removal of risk make these machines a "no brainer" in the quick service restaurant sector.

Capital costs have yet to reduce to the extent that large retailers can choose this option over outsourcing, but this is only a matter of time and, as labor costs continue to increase relative to capital, these options will become more attractive.

3. Radicalize your supply chain

So far, scheduling of cash replenishments and collections has been conducted within the prism of traditional weekly patterns. However, cash flow does not take such a structured path. In recent years, CMS has worked with a number of clients to make the cash supply chain more responsive to the day-to-day needs of their businesses.

Flexibility is key; by working with suppliers, deployers and retailers can achieve savings of as much as 20 to 30 percent in cash management budgets without the need to reduce collection and replenishment charges or threaten service quality and cash availability.

4. Encourage competitive markets

It’s time for retailers and deployers to raise the issue of ever-increasing concentration in cash markets with central banks and governments through industry associations. Retailers in the U.K. recently succeeded in getting card interchange fees included in the remit of the new payments regulator. There is a strong case for cash to be included, too. Central banks have a different agenda and it would be dangerous to entrust your business interests and those of your customers to them.