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The future of cash handling

As cash supply and demand continues to rise, so has the cost of managing all that cash, with the greatest portion of the burden resting on our financial institutions where the majority of cash handling takes place.

March 29, 2011 by Alan Walsh — Head of US Banking, Wincor Nixdorf

It’s been decades since we all witnessed the introduction of credit and debit card payment systems; yet, contrary to all past predictions, cash somehow remains king. While most of us have multiple plastic payment options, the preferred method for transactions in the U.S. and around the globe is still good old cash, adding up to roughly $360 billion in transactions every year. That’s almost $1 billion per day!

Because of this, the amount of cash in circulation around the world continues to grow, creating a $1 billion demand for new banknotes each year. Here in the U.S., the number of bills currently in circulation has risen by an incredible 42 percent just since the year 2000.

As cash supply and demand continues to rise, so has the cost of managing all that cash, with the greatest portion of the burden resting on our financial institutions where the majority of cash handling takes place. The primary factors driving these expansive costs include antiquated, time consuming, repetitive and highly unsecure cash handling procedures, all of which continually expose a branch’s cash to theft, shrinkage and accounting errors.

The greatest of these cost drivers — 61 percent — is personnel time spent on cash handling processes that haven’t changed much since the cash arrived via stage coach.

When you think about it, the number of times cash is counted per day at a typical branch is absolutely staggering. Not only is cash handled by multiple hands at the beginning and the end of the day, but double counting is required every time cash is bought or sold to the teller, when ATMs are replenished or when cash is transferred to an armored carrier. These antiquated processes that have been the norm for hundreds of years are costly, inefficient and leave retail branches at considerable risk.

When you put it all together, these costs create an enormous burden in the U.S., where cash handling is estimated to cost $73 billion per year. Globally, that figure soars to $300 billion!

How can banks reduce cash management costs and optimize their cash processes, from the teller counter or ATM to the safe? Automation.

Automation can reduce both the amount of cash in circulation and the overhead of controlling and monitoring the entire cash cycle. Automation is the key to optimizing the cash cycle and has the potential to reduce cash handling costs by 20 percent or even more.

Wincor Nixdorf views the entire cash cycle as a special form of a delivery and value chain with one main objective: to provide the right amount of cash at the right time and using the fewest resources possible. The goal is to relieve staff of manual cash tasks, such as counting, sorting and bundling, and refocus their time and energy for more productive activities such as sales and customer consulting.

An emerging concept in the retail banking arena is the “closed cash cycle”. In this concept, ATMs, cash recycling systems and TCRs all utilize intelligent cassettes that are compatible between the devices. This completely automates the cash cycle, enabling cash to be exchanged between different cash points in the branch without the need for manual handling or processing.

A closed cash cycle such as this streamlines cash handling in bank branches, reduces the risk of robberies, excludes employee manipulation from the outset, and helps avoid inventory discrepancies, whether in the branch or during transport.

This concept also ensures the greatest possible data transparency and maximum audit compliance, and even enables the exchange of cash between bank branches. Precise information on the value of cash in the cassette, the dates of its use and the paths it has taken are available anytime it is needed. This maximizes process transparency while minimizing manual cash handling — therefore reducing costs.

Cash is indeed here to stay. However, optimizing cash management is the key to success for retail banks. By combining innovative hardware and software processes with the intelligent management of cash streams between the bank and its commercial customers, banks can revolutionize cash cycle management in their institutions.

And, while complete automation of the cash cycle won’t happen overnight, it is clear that integrated cash cycle management can deliver rapid returns on investment and help retail banks achieve maximum transparency throughout the process chain, maximum security in cash handling, and improved overall productivity.