By Helena Muller, VP Banking EMEA North, Diebold Nixdorf
There is no doubt that the payments landscape is changing. Innovation has touched every part of the financial services industry and with that offered more choice than we ever thought possible. Changing consumer behaviours, new technologies and regulation have all driven international digitisation at varying speeds, but one factor that remains a clear constant is the need for choice. Consumers are demanding flexibility in every part of their financial lives, and this also includes payments.
Despite the growth in digital and alternative payments, cash has shown to be a mainstream necessity in almost every country. In fact we’ve even seen demand for cash and cash usage rise in many places this year, as global instability and economic uncertainty drive new behaviours. This shift highlights the importance of this payment method as an ‘all inclusive’ option that needs to be safeguarded for the future.
However, this leads to the ultimate question of how to maintain cash in a way that works for everyone. We all recognise the need for cash, but the challenge comes in managing it in an economically sustainable way. With less cash overall in circulation, the associated costs of managing it for the industry become higher.
With this is mind let’s explore how collaboration could be the key to unlocking a viable future for cash.
Creating the foundations for success
Let’s start with the bigger picture. Transformation is nothing new within the financial services industry and services, solutions and the way we bank has been evolving steadily over recent years. This has been accelerated and shifted further as a result of the global pandemic, and more recently the international unrest and economic uncertainty. Therefore now could be the perfect time to regroup and realign on cash and its future.
Cash is more than just a topic for banks, retailers, merchants and those that deal with cash. It’s important for each and every person. Sustainable cash management has gone from a consideration for those who accept or manage notes, to a critically important topic for wider society.
In the UK we’ve now seen the government step in with legislation announcements to protect cash for those who want and need it. We also seen similar action in the Nordics where the cashless balance tipped too far and local governments intervened with various measures to ensure adequate levels of cash in circulation. This highlights the importance of creating the right foundations and infrastructure in each country to support cash as a payment method.
The complex dynamics of retail banking mean that this support will need to be tailored and appropriate to each country, but in principal the backing of the government is vital to success. Measures including providing financial relief for those who process cash, legislation to ensure everyone has access to cash services and incentivising industries to handle cash will drive the right behaviours. In a position to influence every industry, governments must ensure that the whole cash ecosystem is supported – meaning that it’s not only about cash management, but also ensuring all sectors are encouraged to accept cash as a payment method.
Getting on board
Looking next at the financial services industry, effectively maintaining cash could be improved by cash recycling. For example, by enabling cash paid into an ATM to be then re-dispensed, cash handling costs and processes become significantly more efficient. In the UK the cash recycling adoption rate is still relatively low at around 15%, lagging behind other European countries. This is partly a result of the network structure in the UK, with the near even split of ATMs provided by independent deployers offering more simple cash out services versus ATMs provided by banks and building societies.
One of the main benefits of implementing cash recycling services, whether that be in the branch or at an ATM, are the cost efficiencies that can be realised. The more cash that can be recycled at a single point of contact automatically, the more streamlined and automated the process can be. Not only does this mean that banks can operate a more efficient network of self-service systems which can both accept and dispense cash, it also delivers a better customer experience. Consumers can complete multiple transactions in one place, delivering the speed and convenience demanded today.
Research shows that automated deposit terminals are set to grow by 8% by 2026, with three quarters of these being cash recyclers. This trend goes hand in hand with branch transformation strategies as the industry continues to strive for the golden mix of branch types and locations. Shifting towards becoming more ‘customer experience’ hubs, automating cash management and optimising cash recycling is also freeing up staff to focus on sales and customer related activities. With 65% of consumers stating that in-person contact at the branch contributes to a feeling of appreciation, the benefits of embracing such automation go beyond simple process simplification and cost savings, and support overall satisfaction and customer retention.
Adoption and education
Finally and most importantly let’s look at the end consumer. Cash availability, recycling and how cash is managed will influence how both consumers and businesses interact with their financial services provider.
The shift in branch formats is not only facilitating a customer first approach, but it is also empowering consumers to complete transactions in a whole new way. For example, using a teller-less branch or self-sufficient cash recycling ATM in a pop-up branch to ‘shop for cash’ at a busy shopping centre on a Sunday afternoon could unlock new levels of flexibility and convenience for consumers. With a branch or ATM being within an acceptable distance the top third and fourth drivers for selecting a new financial service provider in the UK, having the capability to plug service gaps and meet customers where they are, creates a compelling offering as part of the channel mix.
Small and medium businesses (SMBs) are also a hugely important customer group. Accounting for around 70% of cash deposits in many branches, maintaining a presence close to SMBs is a critical consideration for most financial service providers. Re-thinking what that physical presence may look like and implementing cash recycling can make a significant difference – creating new go-to channels for physical fulfilment that are more convenient, as well as more sustainable overall.
However as with all change, success is only achieved through a willingness to adapt. This is where education plays a key role, both for staff and for consumers. By clearly mapping new staff and customer journeys, communication can provide the fundamental foundations to maximising adoption rates. For example, in a branch where transactions have been migrated from the teller and cash recycling has been implemented, staff can help support and educate customers at the self-service channel. As customers get used to depositing and withdrawing cash in one place, the efficiencies also naturally increase.
The challenge ahead
Whilst the benefits of better cash management and increasing cash recycling are clear, implementing new processes and maintaining access to cash for all is not without its challenges. In a highly competitive financial services market, getting the balance between availability, meeting customer expectations and cost-optimal cash handling can be difficult. Investment into new technology is always a big consideration at a time when costs are top of mind and efficiency drives ramp up. In addition, new branch formats, hardware, software and training costs all need to be considered when creating new cash management strategies.
Notwithstanding these considerations, change is required and the early adopters are already reaping the rewards. As financial service providers look to tackle rising cash costs, it’s likely we’ll see the shift to cash recycling accelerate as the UK catches up to our European counterparts. Transaction migration and automation will continue to remain key focuses for many financial service providers and allowing cash to be deposited, recycled and withdrawn is enabling that next level of efficiency, alongside creating more flexible and convenient customer journeys.
It is clear that cash touches the lives of each and every person and is going nowhere fast. Maintaining access to cash is the responsibility of both our industries and our governments to ensure flexible and inclusive payment options for society. Whether that’s ‘shopping for cash’ at a shopping centre on a Sunday afternoon, or enabling SMBs to deposit takings quickly and conveniently, the whole ecosystem is inextricably linked. Therefore, laying the foundations for a sustainable cash model is today’s priority, to ensure we are protecting the industries, consumers and societies of tomorrow.
Global Banking & Finance Review
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