IN THIS ISSUE Embrace Change Embrace Change 1 Ted Devereux | Spearpoint Group

View from the Sidelines ­ Cash 3 few editions ago I wrote an Handling Faces Serious Change Aarticle titled “Embrace Change” and at the end I said “We are no The Rise of the ITM 6 different from any other industry, change or become irrelevant.”

It is clear that cash is still a popular form of payment, especially in developing countries, but we must There are clear logistical challenges not be complacent. Digital payment that may preclude stealing large methods are gathering pace and, in amounts of physical cash ­ not so for digital cash, though. some developed countries, have been accepted as a simple and pain­ challenges, but to move it digitally in free way to make small purchases. large quantities, does not! However, cash remains the most cost­effective payment method for With cash under pressure, banks the retailers when compared to debit and retailers need to find ways to and credit card payments. This has make the movement, processing and caused countries where digital recycling of cash more efficient and payments have gained traction, and cost­effective to ensure it remains a where there is a push to be cashless, viable payment method when to be concerned about the cost of compared to digital transactions. digital payments becoming prohibitive and without any checks It is therefore up to the Cash and balances. Many of us are also Management Industry to step­up and concerned about the security of offer services above and beyond the digital payments when compared to traditional transportation, processing cash and that some sectors of and recycling of coins and society will be disadvantaged. To banknotes. Even the bigger banks physically steal cash in bulk has its Continued on next page

1 Continued from previous page This allows for the redeployment of excess machines to new locations with multiple touch points, branches, and thereby significantly extend reach SSTs (ATM’s / CDM’s / Recyclers / to their existing customers. By Deposit Safes) both on and off increasing touch points, the branch, find it difficult to operate acquisition of new customers efficiently themselves due to density becomes that much easier. issues making the secure logistics of moving and processing cash Research shows that the number of expensive. This is compounded for off­site SSTs now exceed those the smaller banks and for the bigger deployed on­site. This trend, together banks when expanding their reach to with a push to recyclers, is changing less populated or rural areas. A key the dynamics in the field and may see objective for Central Banks is financial a slowdown in the purchase of new inclusion for all. This puts pressure on machines. This leads to banks banks to expand their touch points. Banks face challenges as they expand their needing to rethink their operating reach into rural communities ­ challenges strategy if they wish to extend reach Many banks wish to promote their which can be mitigated by the Cash at a known and reduced cost. Management Industry. own brand and are reluctant to share platforms with other banks. This Management businesses directly Retailers are embracing smart results in a line of machines in monitoring the SSTs and by providing safes where they get end­of­day shopping malls or other areas, the single­line maintenance, the UK and credit and can reduce collections from majority of which are under­utilized. Australia have managed to substantial daily to twice or even once weekly. reduce the callouts per machine to Smart safes provide the added benefit Many banks operate their own SST less than one per month. In Asia the of limiting the touch points, counting monitoring either direct from the average callouts per machine are in cash accurately (avoiding miscounts switch or by employing a tool. For excess of 5 per month. This is partly and / or shortages), removing excess small SST estates, this is just not cost due to a lack of or poor preventive cash from the till which enhances effective. Some SST manufacturers maintenance and limited information security, and by reducing the number and independent providers have provided by the monitoring tool of times it needs to be counted and provided monitoring services, but do making repairs more difficult. banked. In addition, counterfeits can not directly supply the field services that are necessary such as the cash To assist in reducing SST callouts, Continued on next page supply, processing, reconciliation and the monitoring software needs to first­line maintenance and in some provide detailed information to instances, the second­line support the field engineers but must maintenance. also provide a high level of inbuilt security to detect and prevent The Cash Management Industry is skimming, malware, etc. Cyber in a much better place to provide fully attacks are becoming more prevalent managed services monitoring the and costly. bank’s SSTs, as it already provides the cash replenishment services and Whilst it makes good economic the first­line maintenance and are well sense for small SST estate operators able to provide second­line to outsource fully managed services, maintenance. In the UK and Australia, it also makes sense for them to Cash Management Companies consider brown label machines where Brand competition often discourages banks from sharing machines with directly monitor SST estates and they share machines with a number of each other despite there being good provide what is termed “single­line other estate owners and can thus reason for doing so. maintenance”. By the Cash remove the duplication of machines.

2 ACMA CURRENCY NOTES a more efficient and cost­effective way to Continued from previous page handle cash. As standalone entities, this be identified earlier and the retailers have is difficult to achieve, which presents an oversight of how much cash they are opportunity for the Cash Management holding at any given time. Banks and Industry to fill the gap. But this requires Cash Management Companies need to vision and investment by the CMCs to be a part of this initiative, otherwise they put in place the tools and equipment that IT IS CLEAR THAT will lose accounts. Smart safes are will provide world­class outsourcing “BANKS AND gaining traction by replacing Cash services to satisfy the changing needs of Deposit Machines in bank branches as cash. RETAILERS NEED A they are more reliable and not as MORE EFFICIENT AND expensive. We, the Asian Cash Management Industry, need to change or run the risk COST-EFFECTIVE WAY It is clear that banks and retailers need of becoming irrelevant! TO HANDLE CA”SH. View From the Sidelines ‐ cash handling faces serious change Tan Jit Kent

he increase in digital payments need cent of the volume. Tnot be a harbinger of certain doom • Survey respondents between 18 to 25 for cash. And indeed why should it? years of age and those 45 years and Digital books and audio books have burst older use cash approximately 34 per on to the literary scene in the past cent of the time to pay for transactions. decade and yet virtually no­one seriously With 6.6 billion banknotes printed in expects printed books to die out 2014, the US continues to produce altogether. The validity of that analogy around 8 billion banknotes per year, notwithstanding, the simple truth is that seeing strong growth in one and twenty cash will remain an important mode of dollar notes for domestic use and payment despite rapid developments in hundreds for international use. There has the digital space. And there are been a rise from $1.2 trillion in circulation numerous reports from all over the globe in 2013 to $1.66 trillion in circulation in to prove this. 2018. In the USA’s 2018 Diary of Consumer Meanwhile the Reserve Bank of Payment Choice Report published by the Australia’s report, published in December Federal Reserve System, it was shown 2018, on ‘Where’s the Money? An Investigation into the Whereabouts and Neither gone nor forgotten ­ reports that: on the death of cash have been • Cash continues to be the most Uses of Australian Banknotes’ found that: greatly exaggerated. frequently used payment instrument, • Out of the total outstanding banknotes, representing 30 per cent of all 15–35 per cent are used to facilitate transactions and 55 percent of legitimate transactions transactions under $10. • Roughly half to three­quarters are • While online shopping continues to hoarded as a store of wealth or for grow, 77 per cent of payments were other purposes, of which we can made in­person. For these in­person allocate 10–20 percentage points to payments, cash accounted for 39 per Continued on next page VOLUME 2 | ISSUE 3 3 efficiency for banks and affiliated Continued from previous page merchants. domestic hoarding and up to 15 Debit card cashback (or cash out) has percentage points to international been available for some time now. It hoarding allows retail customers to add an amount • 4–8 per cent are used in the shadow to their total purchase value which is then economy paid by their debit card. The customer • 5–10 per cent are lost receives that amount of cash together Although Australian consumer with purchased goods. Customers find it payments in cash (by transactions) a convenient way to withdraw cash declined from over 60% in 2010 to only without going out of their way to locate an 37% in 2016, the value of outstanding ATM. At the same time, stores have less banknotes grew an average of 6 per cent work to do with cash and spend less per annum over the last ten years. resources on cash management. Adding on to this, Travelex’s Retail Teller Machines (RTM) work on December 2018 Report on its study on an analogous concept. When they were the UK, Australia, Brazil, and South launched in 2012, RTMs were the first Africa revealed the following: cashless ATM that dispensed a secure For years, ATMs have been the go­to • Most people neither expect nor desire ticket which could then be exchanged for solution for cash withdrawal needs. a cashless society. Instead, they want Could we ever imagine life without cash. RTMs are located inside stores and them? a mix of payment methods to be provide a full range of banking services available, including cash. like a normal ATM. There has been an • As many as 24 per cent of people will increasing use of Point of Banking never give up cash, no matter how Terminals as cashless ATMs that process convenient cashless payment bankcard payments with the provision of technology becomes. a cashback service. The terminal is small • Cash is no longer king—but neither is and can sit on the countertop right next to it dead, and where cash is less the cash register. A customer just has to common, there is far less desire to go swipe their card, enter their PIN, and 100 per cent cashless. choose an amount to withdraw. A receipt WHILE WE WILL IN On the global front, many developing is issued which they then present to the ALL LIKELIHOOD countries are still seeing a double­digit cashier to get the cash plus the goods “ growth in demands for banknotes. Other they have purchased. CONTINUE USING than Sweden and Norway, most The advent of FinTech has made it JUST AS MUCH developed countries continue to even easier to implement retail teller experience moderate increase in machines. Using a mobile Point of Sale CASH AS WE ALWAYS demand. (Pin Entry Device) and a mobile phone HAVE, THE WAY IN So maybe physical money is not dying with a mobile app, accredited merchants out after all – but that is not to say that enable their customers to withdraw cash WHICH WE OBTAIN there will be no disruptions in the cash using their ATM card. This is already CASH IS LIKELY TO scene overall. While we will in all happening in the Philippines where, in likelihood continue using just as much many locations, the local ATM is often a CHANGE. cash as we always have, the way in bus or ferry journey away. It will probably which we obtain cash is likely to change. be a matter of time before this service is For years ATMs have been the main rolled out in other countries. source of cash, and indeed it is not easy There are emerging solutions that take ” to imagine any other means of this a step further – allowing people to withdrawing money. Yet several novel withdraw cash using just their mobile alternatives have emerged which improve convenience for users as well as Continued on next page

4 ACMA CURRENCY NOTES render today’s conventional ATMs Continued from previous page redundant, or at the very least reduce phone. One only has to download an their usefulness. Would banks then app and create an account, choose a cut down on the number of ATMs they shop and select an amount to use, or perhaps move towards withdraw, let the cashier scan the sharing of machines? How would this barcode, and voilà: cash in your hand in turn affect cash management and your bank accounted is debited services that transport money to and the corresponding amount. from ATMs? We have established that This could foretell a future where cash is here to stay, but many anybody with a mobile phone can disruptions lie ahead in terms of the Many innovative cash withdrawal solutions simply search for a nearby shop to way it is obtained and handled. And incorporate retail merchants into the picture. withdraw cash – or they might make as is often the case, much uncertainty Customers are able to withdraw money at an online purchase and have it and speculation is to follow. One thing shops instead of seeking out ATMs. delivered together with cash. These is for sure though – it promises a novel cash withdrawal methods could fascinating view from the sidelines.

Further reading:

1. Raynil Kumar, Tayeba Maktabi, Shaun O'Brien, "2018 Findings from the Diary of Consumer Payment Choice", 1 November 2018. 2. Richard Finlay, Andrew Staib, Max Wakefield, "Where's the Money? An Investigation into the Whereabouts and Uses of Australian Banknotes", December 2018. 3. Travelex's report ­ available upon request via [email protected].

VOLUME 2 | ISSUE 3 5 The Rise of the ITM Brad Moody | Lowers & Associates

ecent and significant acquisitions in Since these machines are deployed in Rthe banking industry have left many a fashion that increases risk, banks are banks with an overabundance of brick turning to the services of the CIT carrier. and mortar banking centers located in What many CIT carriers fail to realize is close proximity to (if not right across the that the risk goes beyond exposure street from) one another. As the natural caused by the placement of the ITMs. It lease expirations of these banking extends to the complexity of servicing the facilities occur and banks merge their ITM itself, as various manufacturers have customers into a single center, they face very specific service requirements. As bank customers converge into a common complaint: It takes too long in fewer centers, crowds begin to the teller line to perform simple Consider a typical deposit image ATM have an impact on turnaround with a total service time of 12­15 minutes time for transactions. transactions such as cashing a check on a Friday afternoon. to complete the cash swap, cash deposit pull, imaged check retrieval, receipt The ITM (interactive teller machine) paper change, captured card processing, allows banks to offer services to their etc. with the management of three customers in an automated fashion receipts and typically one or two where upwards of 80% of transactions denominations. In comparison, ITM can be performed with no teller service time extends to 18­22 minutes assistance. The ITM also permits the with additional bagging procedures, unbanked to cash the bank’s customer management of coin, additional checks with ease and without human denominations inclusive of $100 notes, THE ITM PRESENTS A interaction. This frees up the teller line and up to eleven receipts to manage. for customers who prefer personal This level of exposure and service time “WIN-WIN SCENARIO interaction, who need to perform more FOR CUSTOMERS complex transactions, or who wish to Continued on next page AND BANKS. ON THE inquire about products and services the OTHER HAND, THE bank has to offer. The ITM presents a win­win scenario DETAILS CAUSE for customers and banks. On the other CONCERN AND hand, the details cause concern and COMPLEXITY FOR CIT complexity for CIT carriers. CARRIERS. For example, it is becoming clear that banks fully intend to deploy the ITM to the drive­through lanes and piggy back the machines in each lane in order to allow multiple customers to utilize the ” machines quickly. ITMs are also being installed in the lobbies of the banking center and bank lobby leaders are educating customers on the advantages of using the ITM/ATM for future ITMs free up the teller line for customers who transactions. prefer or require assistance over the counter.

6 ACMA CURRENCY NOTES operating practices can reap them Continued from previous page more business from banks as ITM increases even further when you deployment continues to increase. consider the security impacts of servicing ITMs in drive through lanes where ITMs are stacked or back to This story is the foreword from A CIT Carrier's back with one another. Guide ­ Building Your ITM Program. For a full discussion, have a look at the complete The risks involved with ITM article ­ which is available here. servicing and replenishment are complex and far­reaching. Yet, the opportunity for carriers to successfully A CIT Carrier's Guide ­ Building Your mitigate the risks and employ sound ITM Program, by Lower's & Associates.

Upcoming Events

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VOLUME 2 | ISSUE 3 7 ADVERTISE WITH US About ACMA

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