CMSpi's Polymer Planning Summit, which brought together many of the UK's biggest retailers, highlighted that the new living wage, rising interest rates and the transition to polymer banknotes will all force up the cost of cash.
Retailers are facing huge disruption and cost implications over the next three-to-five years as a series of developments in the cash industry impacts business operations. Though consumer cash transactions are in decline, the cost of cash will begin to increase for retailers, driven by rising interest rates, the living wage and changes to sterling, such as polymer banknotes and the new £1 coin.
"Retailers are being hit with a double-whammy: falling consumer usage of cash and rising costs of accepting, holding and transporting it," says Brendan Doyle, CEO of CMSpi. "As the cash volumes retailers receive begin to decline, so too will the efficiency of the processes they currently have in place. The Bank of England has indicated that interest rates of 2.5% to 3% will likely become the 'new normal', so with cash taking on average 4.5 days to get from a retailer's till to their bank, the cost of holding cash – in tills, safes and in transit – increases significantly."
"Retailers may think the alternative would be to have more collections and get cash into the bank quicker, however increasing the frequency of cash collection services only increases costs further," explains Doyle. "Add to this increased employee costs due to the living wage and we calculate this will result in the cost of cash going up from around 0.20% to 0.30% (of transaction value) for most major retailers."
Certainly, these extra costs will only add to the headache retailers are about to face to ensure they become "polymer banknote ready".
"The developments expected over the next few years could be described as somewhat of a 'perfect storm'," says Mark Trevor, Commercial Director of Vaultex, the largest cash processor in the UK. "Retailers will have to traverse the staggered introduction of the £5, £10 and £20 polymer notes, the new £1 coin and the Scottish notes. Factoring in the potential interest rate rise and the living wage as well and you have a lot of pressure coming up on costs."
With the cash landscape becoming increasingly challenging, retailers will need to think carefully about their cash strategies and consider how their payments operations are – and will be – managed to mitigate rising costs.
"The future will see a greater emphasis on efficiency and technology-based solutions," adds Doyle."Meaning that for most major retailers the accepting, processing and depositing of cash takings will look very different than it does today."
CMSpi's Polymer Planning Summit, held in London's Churchill War Rooms, brought together representatives from the Bank of England, The Royal Mint and some of the country's top retailers, including Tesco, John Lewis, Shell, Ladbrokes, Travelodge and Virgin Trains.
CMSpi is a dedicated, independent team of expert consultants and analysts with over 20 years' experience advising merchants on how to optimise and reduce their payment acceptance costs. It works across all areas of consumer payments with the objective of securing the best end-to-end solution for its clients.
CMSpi is able to break down complex supply chains, provide transparency, negotiate the best rates and implement a payments structure that is right clients – typically achieving six or seven figure annual savings.
CMSpi's international payments expertise has enabled it to work with world-leading organisations, such as McDonald's Restaurants, ExxonMobil, Pizza Hut, Aldi, Enterprise Rent-a-Car, H&M and Marriott Hotels.
For more information visit www.cmspaymentsintelligence.com
Anna Sharrock, Moorgate Communications, Manchester: +44 161 817 5048
Thomas Morris, Moorgate Communications, London: +44 20 7377 4998