Cash seems to be one of those things that you either hate it and want to see eradicated, an opinion expressed by the CEO of Bank of America, or you love it for its utility and refusal to go away despite having been declared dead many, many times. A recent Fed report on consumers’ payment choice suggests that although declining in use, cash is far from being replaced by digital payment options.
An opinion piece in PaymentsSource argues that it is useless to fight for the eradication of cash, but rather consider ways to use technology to make it more efficient such as cash recycling, a technology that hasn’t caught on in the U.S. as it has in other countries:
For banks and financial institutions, the wave of the future is using technology to optimize, not eliminate, their cash-handling processes.
Stories about cashless merchants like Sweetgreen (salad restaurants), Bluestone Lane (coffee shops) and Amazon Go (convenience stores) imply that the transition to a cashless society is well underway, but according to studies from the Federal Reserve Bank of San Francisco, “cash continues to be the most frequently used payment instrument, representing 30% of all transactions and 55% of transactions under $10.”
Self-service deposit capabilities offer the greatest opportunity for financial institutions to evolve their cash management offerings. Traditionally, merchants deposit their cash at a bank branch or using a night drop box. Bank employees must count and validate the cash, then update the business’s account accordingly. Automating the business deposit process at the ATM saves the merchant time and gets the money into their account faster. On the banking side, upgrading equipment to include ATM technology that can accept—and recycle—merchant deposits opens the door to significant gains in efficiency.
Cash recycling enables banks to support merchants’ cash needs while optimizing their own operations. On average, deposits account for more than half of banks’ cash-handling activities. By automating deposits, banks can significantly reduce their workloads and expenses. In a system with a closed cash cycle, deposits from the bank’s business customers replenish the ATMs, supplying the cash that will be dispensed for withdrawals. Simply put: Merchants fill the ATM, consumers empty the ATM and the cycle repeats. Countries that have successfully adopted cash recycling include Japan, Germany, Turkey and Belgium, but adoption rates remain significantly lower in the U.K., U.S. and Brazil.
Overview by Sarah Grotta, Director, Debit and Alternative Products Advisory Service at Mercator Advisory Group