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Cash-recycling at the ATM or kiosk

MEI's Andrew Osborne touts the benefits of cash-recycling, especially where cost-cutting and float are concerned. But he also warns of downfalls associated with low-quality recyclers that can't meet high-volume demand.

October 12, 2006

Abou the author: Andrew Osborne is responsible for the global business development for the retail division of West Chester, Pa.-based MEI Inc. He is specifically tasked with growing MEI's presence within checkout solutions, retail security and self-service markets. Before MEI, Osborne worked for Siemens Corp. ContactAndrew Osborne.

Consumer cash transactions today represent approximately 80 percent of the total volume of transactions in the United States. Since cash transactions under $20 are particularly strong, it makes sense that retailers are focusing their attention on cash management.

With increasing levels of retail automation, from self-checkout to self-service, retailers are looking closely at the developing trends in cash-management systems.

Andrew Osborne oversees retail operations for MEI.

In particular, retailers must understand the total cost of cash, from fees charged by cash-in-transit operators and banks for the issuing cash, to the internal costs of cash handling at the store - movement of cash to and from the point of sale and the cash room and shrinkage, which is directly related to the time employees are exposed to cash.

Cash recycling can positively influence all of those factors.

A cash-recycling device accepts and stores dollar bills for dispensing at a later time. The same bill fed into the device by one customer can then be dispensed to a subsequent customer for change or cash-back on a debit-card purchase.

In theory, if the number of deposits for each currency denomination were equal to the number dispensed, there would be no need to replenish the cash. The system would continue processing transactions as long as it did not fail or require service.

So a cash recycler makes the POS more self-sufficient, reducing the number of employee interventions. There also is less float, translating into lower cash holding and banking fees.

However, though all recyclers provide the same basic function, not all recyclers are equal.

Choosing a recycler: the pros and cons

Retailers must consider the following key factors when selecting a cash recycler:

• Can it reliably handle global currencies?
• Can it reliably discriminate between good and bad currency?
• Is it designed to provide a cash-back facility to the consumer?
• What are its security features and its speed of operation?

Naturally, there are pros and cons to utilizing a cash-recycling solution.

The main advantages are reduced costs of cash-handling through improved total cash management, while the main disadvantages are the complexity of the devices and potential downtime of poorer-quality units.

What are the advantages to a single device?

The fact that a recycler combines a cash acceptor and dispenser into a single device means the self-service system has one less device to support. Fewer devices means less communication ports required to control them and a simpler overall solution.

A smaller footprint has its advantages. The footprint of a recycling device is typically smaller than the combined size of a cash acceptor and dispenser.

Labor costs are reduced. With a recycling device, managers, cashiers and maintenance personnel spend less time purging and replenishing currency.

Machine up-time increases. If the device is configured correctly, and the number of deposits for each denomination supported is equal or nearly equal to the number of dispenses, the self-service system could operate for an indefinite period of time without human interaction.

Cash-handling costs drop. Most self-service applications equipped with recycling devices will handle less cash and will require less seed inventory or float.

Cash handling is simplified. With recycling devices, there are fewer cash-storage cassettes to handle, and the same cassettes are typically used for deposit and dispense.

Reconciliation time is reduced. Whether using a recycling device or separate cash acceptors and dispensers, retailers still need to balance and reconcile their cash at the end of the day. The inherent advantage of recycling technology is that there will be much less cash physically to reconcile.

One sour grape in the cash-recycling story, however, is that these complex devices are more prone to money jams.

Recyclers typically have higher jam rates than individual cash acceptors and dispensers. A poorly designed transport system or outdated recycling technology can critically impact the unit's performance, leading to downtime and incremental maintenance costs.

Cash recyclers can be more difficult to operate and maintain. Ongoing maintenance costs include all the activities required to keep the device running properly. First-line maintenance is that which can be completed by non-technical employees, and second-line maintenance requires a trained technician.

As a general rule, first-line maintenance costs are much lower than second-line. Moreover, the more complex the device, the less likely the maintenance can be performed by first-line personnel. Since recyclers are complex devices, second-line personnel are normally required, and even they need special training. In addition, ongoing maintenance costs may be higher over the life of the product, although that is somewhat offset by the fact that you're paying to maintain one device, not two.

In general, applications that have the highest volume of deposits and dispenses are the best candidates for recycling applications.

With the inevitable movement toward automated transactions, more and more retailers will demand recycling devices, because of the positive impact recyclers can have on cash management costs.

As the growing interest in recyclers continues, vendors will continually improve recyclers to meet the demand.