Cash Processing Technologies
Laurene Arrison
Technology and innovation strongly influence the payments system. This innovation creates two potentially opposing effects on cash: 1) increased competition from emerging mobile and other digital payment alternatives, and 2) the ability to automate certain aspects of cash handling. The benefits of cash automation include reduced costs, increased speed of transactions, increased accessibility to cash (e.g., ATMs) and improved security and control of cash balances.
Until recently, cash handling has been largely a manual and labor-intensive process. However, this has begun to change with a host of new devices that automate certain back office cash handling functions, such as till preparation and end of day counting and balancing, as well as front-line tasks like cash dispensing.
The roles of bank branches and credit unions are shifting from a transaction processing oriented model to a more sales and service oriented model. In addition, to improve customer access and convenience, banks have encouraged their customers to move towards the ATM, online, and mobile channels. In some cases, banks have been so successful that the challenge now is on working to get people back into their branches as a way of growing and reconnecting with their customer base. They have implemented new design strategies to offer a variety of amenities, such as coffee bars, internet stations, lounges, child play areas, and even coin counting kiosks, to attract customers into the retail branches.
Based on findings from the 2012 Diary of Consumer Payment Choice study, 12 percent of cash withdrawals still occur within the branches and through teller lines. Many credit unions and bank branches still rely on manually counting cash for those teller transactions, and tellers spend the majority of their time counting cash versus utilizing their time to interact with customers. They also spend time moving cash in and out of vaults to open and close shifts, and managers are required to oversee staff throughout this process.
Most merchants still receive cash payments and have customers who prefer to use cash as their primary payment instrument. In an environment where payments technology and innovation is growing, cash transactions remain very manual compared to other payment instruments for merchants. Merchants must devote staff time to counting and balancing cash drawers, and they spend large amounts of their time reconciling their books at the end of shifts and preparing deposits. If the merchant does not utilize an armored carrier service, they are required to physically bring the cash into bank branches for deposit.
For these merchants, the threat of robbery is constantly looming, as is the risk of serious injury to the staff member(s) who take the daily deposit to the bank. The risk of theft and staff injury remains even for merchants with armored carrier service, as thieves know that cash is stored in drawers or safes where associates and managers have access.
By providing the capability to accept, authenticate, sort, count, and in some cases dispense cash, these devices automate back office cash handling and provide significant labor savings to the merchant or bank using them. In addition to increasing count accuracy and reducing staff time spent counting (and recounting) notes, the devices improve identification of potential counterfeit notes and function as secure storage units for cash, which reduces theft and increases safety for employees.
Cash dispensers are defined as computerized devices that supply cash for cash out transactions. Cash dispensers are designed to only dispense cash and provide for faster, more accurate, and efficient cash transactions. They are best suited for operations that process higher volumes of withdrawals than deposits and are therefore typically implemented by credit unions and certain bank branches.
Smart-safes improve productivity by automating the cash deposits for merchants. With the adoption of smart-safes, merchants have cut costs by reducing staff time involved in counting and balancing cash tills and preparing bank deposits. In addition, if combined with provisional credit, smart-safes reduce deposit float for merchants, and managers no longer need to leave during operating hours to physically make deposits at bank branches. A number of quick serve restaurants have even mentioned that they have experienced significant improvements in the overall quality of services and food because managers no longer left the restaurant to make deposits. Smart-safes also improve cash management for merchants. With accelerated access to their funds, merchants can lower one of their largest costs for handling cash, which is the armored carrier pick-up fee. For merchants, those savings alone are more than enough to cover the costs of adopting smart-safes.
Another benefit of smart-safes is that they reduce opportunities for theft by internal and external parties. The cash is no longer exposed in cash drawers, and the number of times it is handled between when it is accepted at the point-of-sale until it arrives at the bank is dramatically lowered. A number of merchants have stated that shrinkage, whether through administrative errors or employee theft, has been eliminated since the deployment of smart-safes. Because they capture data on the employees who make deposits into them, smart-safes streamline reconcilement at the end of shifts and, when there are differences in a deposit, they make research faster and easier. Also, to deter crime from external parties, merchants tend to make the safes visible to customers and display signs throughout their stores notifying them of the safes. Thus, potential thieves are aware that the cash is fed directly into the smart-safes, and that employees, including managers, do not have access to the cash deposited. Merchants report that it has helped reduce crimes and insurance costs, especially for convenience stores who have listed this as one of the primary reasons they have implemented smart-safes.
Cash recyclers are similar to cash dispensers, but they have the added ability to accept, authenticate, sort by denomination, and to some extent evaluate the fitness of the currency notes received from customers. At present, they are primarily used in bank branches to automate transactions for both cash withdrawals and cash deposits. Cash recyclers are an ideal solution for operations that have a large amount of cash receipts in addition to cash payouts. The benefits for cash recyclers include the ones previously discussed for cash dispensers with the addition of a few enhancements.
Since cash recyclers provide branch operations with the ability to automate all cash transactions, productivity gains for tellers and managers are significantly increased compared to cash dispensers. Managers are relieved of their vault management tasks when tellers transfer cash in and out of cash vaults throughout the day and can focus on servicing customers and increasing sales. Cash recyclers can completely replace cash drawers and remove the risk of having cash exposed. Tellers no longer need to spend time after their shifts manually balancing cash inventories since all the transactions are automated and balanced in real-time through the device.
While adoption of recyclers for merchants is not as widespread as it is with banks and credit unions, the merchants who do use recyclers typically use them to streamline back office tasks. Recyclers help merchants with till prepping, end of day balancing, and prepping bank deposits. Automating these tasks allows merchants to significantly reduce labor and redeploy back office employees to other areas in the store. The labor savings experienced from the automation of the back office cash handling tasks alone have helped merchants make the business case for implementation. However, a segment of merchants are beginning to look for a more full service solution that includes both provisional credit for deposits and the ability to recycle cash. Merchants that can take advantage of the technology will be able to combine the benefits previously mentioned for both recyclers and smart-safes. Yet the costs may be a deterrent for adopting such a solution, unless a merchant has high enough cash volumes that would justify the investment.
Cash dispensers, smart-safes, and recyclers have provided banks, armored carriers, and merchants with new opportunities to automate and improve the process for handling cash. Dispensers and recyclers have helped banks and credit unions reshape their branches towards a sale and service business model, rather than a transactions processing model. Smart-safes and recyclers have helped merchants mitigate risks for handling cash transactions and helped to increase the productivity of their operations.
Despite the documented benefits, widespread adoption has yet to be realized. Many organizations have listed: 1) the return on investment, 2) overall cost of implementation, and 3) effectiveness of the products, as the main concerns when they consider whether or not to implement cash dispensers, recyclers, and smart-safes.
The views in this paper are solely the responsibility of the author and should not be interpreted as reflecting the
views of the Federal Reserve Bank of San Francisco or the Board of Governors of the Federal Reserve System.
Welcome to the ultimate guide to processing cash. In this comprehensive article, we will delve into the essential aspects of cash processing, including its importance, key terms, the cash processing cycle, cash processing equipment, and security measures. By the end of this guide, you will have a clear understanding of how cash processing works and the steps involved in ensuring efficient cash management.
Cash processing is a critical function for businesses, banks, and financial institutions. It involves handling, counting, sorting, and storing cash in a secure manner. Efficient cash processing is vital for maintaining accurate financial records, preventing errors, and mitigating the risk of fraud. By implementing robust cash processing procedures, businesses can streamline operations and optimize overall cash flow.
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