Anyone who has not been operating their ATM fleet from under a rock for the past several years will know that cash in circulation around the world is growing.
Current estimates place the amount of cash in circulation worldwide at a total value of $5.2 trillion in U.S. dollars, a pile of money that would stretch to the moon and about halfway back again.
It might not be too long before it stacks up to a complete round trip. The Federal Reserve Board of San Francisco estimates that cash in the U.S. will continue to increase at an annual rate of 1.7 percent through 2021, and World Bank figures for the past four years show cash growth in virtually every country around the globe.
Banking research firm RBR projects that to meet the demand for ready access to cash, the world will add 1 million more ATMs by 2020 to reach a total of 4 million worldwide.
Unfortunately, while consumer demand for cash continues to rise, so does the cost of managing, handling and transporting it.
Estimates vary, but as a rule of thumb, cash-related expenses are said to represent 40 percent or more of the cost of operating an ATM. Whatever the percentage, the fact is that cash is the single biggest cost on the ATM balance sheet. And it’s not getting any smaller.
CMS, a cash management software provider, has estimated that by 2020 U.K. retailers’ costs for cash handling will grow by as much as 50 percent.
Financial institutions are also likely to see their cash costs rise, driven particularly by transportation and security-related expenses. And potentially by holding cost when global interest rates finally climb out of the basement.
However, CMS pointed out in a recent blog post, there is much that can be done to reduce the cost of cash, by tackling cost sinks such as:
- counting cash multiple times;
- inefficient collection and delivery schedules;
- poor armored transport service levels;
- ATM balances, residuals and deliveries too high;
- manual reconciliation processes; and
- high shrinkage levels.
Cash management software is one way to squeeze out these and other cash-related costs. But more and more ATM operators are really crushing costs by combining software with cash recycling ATMs.
Depending on the situation, a deployer can save anywhere from 40 to 66 percent on cash-handling costs by upgrading to cash-recycling ATMs — including some 50 percent of CIT costs.
Diebold Inc. has reported that one client recently wrung 50 percent of the cost out of cash-handling by adding the company’s cash-recycling ATMs.
Chinese ATM vendor GRGBanking estimates that cash-recycling machines can decrease the daily cost of ATM operation by 18 to 25 percent, and could save an FI as much as $948,000 per 100 ATMs annually.
GRG should know — cash-recycling ATMs are well-established in China and other Asian countries, where they’ve been deployed since the late ’90s. Diebold introduced its 3030 cash-recycling model into the Chinese market in 2002.
In 2003, regulatory approvals cleared the way for the deployment of cash-recycling ATMs by financial institutions in Europe, where retailers were already making use of the technology.Wincor Nixdorf Cineo technology, which uses interchangeable cash cassettes for closed, end-to-end cash handling, is well known to banks across the continent.
NCR Corp. says that it has installed more than 1,200 cash-recycling ATMs at ING branches across Europe, including 550 of the bank’s “Proxi” branches, which reflect a trend toward lightly staffed facilities where interaction between employee and customer is focused on conversations about products, rather than counting cash.
Africa, the Middle East and South America have also embraced cash-recycling ATMs, particularly in hard-to-reach villages where CIT service is not as readily available as it is in cities.
In the U.S., regulatory requirements haven’t been an obstacle, but financial institutions still have been far slower than their counterparts in other countries to warm up to the concept of note-recycling ATMs.
As an explanation for this, some cite the difficulty of balancing ATM cash in and cash out, which does require more thoughtful monitoring and management — and certainly makes more sense in some locations than others.
Others cite the low cost of cash as opposed to the relatively high cost of replacing existing machines with ATM cash recyclers. FIs reasoned that it was less expensive to simply overstock ATMs with cash in order to ensure constant availability.
Still others say that inefficient cash management just wasn’t a big deal until bank revenues tumbled in the wake of the Great Recession and the Dodd–Frank Wall Street Reform and Consumer Protection Act. With profits under pressure, banks began to target areas for greater cost efficiency; cash management popped up right in their crosshairs.
But finally, cash-recycling ATMs are beginning to make sense for the U.S. market. Within the past couple of years, FIs in the United States have been investigating and piloting cash-recycling ATMs. Diebold initiated a pilot test for a U.S. bank in 2014. In 2015 Nautilus Hyosung announced that it had completed the first full-fledged cash recycling ATM system as part of a branch transformation project.
The company worked with Elan Financial Services to certify its machines on the network on behalf of an unnamed bank. And last August, Suzanne Galvin, senior vice president of product management at Elan, assured ATM Marketplace that this first implementation will be followed by many more in the U.S.
“We have a really healthy funnel at the moment in the support of this technology,” she said. “A lot of financial institutions are looking at the whole topic of branch transformation and they’re looking at this from the perspective, as you well know, of trying to improve on the customer experience, but also helping to reduce their costs of operation in the retail environment.”