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.