Strategies to reach hyper-efficiency at your cash operations

The efficiency in the cash cycle is closely tied to the goal of lowering the cost of cash, which increases the acceptance of cash on the retail side. This leverages the operational success of any business in the currency industry. Efficient cash cycle management enhances cash flow predictability and stability, allowing the industry to be resilient and mitigate risks for the future. 

The more efficiently a company streamlines its processes, the more likely it will be to achieve its long-term goals and stay financially healthy. However, achieving efficiency gains isn’t always straightforward, especially when there are processes that involve multiple external stakeholders. - For example, in the cash cycle.

What really moves the cost of cash in the cash cycle?

Consider the journey of a new banknote. First, it is printed by specialized printworks for the central bank and then distributed to commercial banks by cash-in-transit (CIT) companies. From there, it is circulated to merchants and consumers via local branches and ATMs.

After the banknote has been used for transactions and brought back to a bank branch, it is securely transported to cash processing centers, where they are examined for authenticity and fitness and sorted. Fit notes are often recirculated to banks and ATMs, continuing the cycle, while unfit notes are taken out of circulation and sent back to the central bank for disposal or recycling.

Every step in this journey incurs costs, and in some cases, those costs rise. The increase in global GDP is driving higher demand for cash, particularly in fast-growing markets, where expanding financial networks to reach underserved areas requires significant investment. In developed economies, the fixed costs associated with cash operations represent a large proportion of the total expenses and are challenging to reduce.

For commercial cash centers, managing these costs effectively is crucial to maintaining a sustainable business model.

“In order to lower the cost of cash, it’s essential to introduce more efficiency across the entire cash cycle,” says Renato Diato, Global Vice President and Head of Commercial Solutions. “At G+D, we call this hyper-efficiency, which is a more holistic approach focused on bundling efficiency gains across the entire cash cycle, rather than isolated measures.”

A solution that looks beyond standardized efficiency

The hyper-efficiency approach requires reconsidering every process in cash operations and combining measures that bring efficiency gains along every stage of the cash cycle. This can only be achieved by taking a holistic view of the entire cash cycle and working collaboratively with other stakeholders.

Let’s look at some of the strategies cash centers can adopt for making cash handling hyper-efficient: 

• Scalable cash processing infrastructure: Demand for cash fluctuates throughout the year, so cash centers must be adaptable to avoid unwanted and costly inefficiencies. In addition to integrating future-proof cash processing technology from reliable partners, cash centers should ensure that systems are scalable to cope with fluctuating demand.
   
• Automation: With billions of banknotes in circulation, automation is essential to managing cash operations. The level of automation depends on the requirements and volumes processed: central banks typically integrate fully automated systems to process large volumes of cash efficiently, while manual handling and small to mid-sized banknote sorting devices to process loose banknotes and coins are still common in smaller cash centers from commercial banks or - when outsourced - CITs.
   
• Integrated software solutions: Software is the backbone of our modern digital lives. In the different fields of the cash cycle, software offers a host of benefits from, streamlining processes to enabling AI-powered data-driven decisions that can support with forecasting and planning. For example, software can help make ATM replenishment more efficient by predicting cash depletion and triggering timely refills based on cash availability rather than according to a fixed schedule. This minimizes downtime and optimizes cash flow management, thus reducing costly idle cash.
   
• Optimized processes: Removing unnecessary steps and simplifying operations is another way to streamline workflows. Even though challenging to implement during daily operations and against entrenched behaviors, exploring the best way to handle cash, optimize device usage, choose the right set of machines, and streamline an entire cash room towards smooth-running processes is a great benefit. This can be achieved by implementing standard procedures and optimizing logistics. Ideally, this is supported by an experienced consulting team of experts who can bring in best practices from around the globe based on real operational data. For example, moving to cassette swap for replenishing ATMs, which enables an easy and fast ATM refill in cash processing centers directly with loose banknotes, instead of the time-consuming task of bundling and unbundling banknotes, while also cutting down on labor and operational costs.
   
• Smart service & maintenance: Just as data and software integration can be used to support planning and forecasting, it can also be used to optimize maintenance schedules based solely on machine use rather than fixed intervals. This approach minimizes downtime by ensuring maintenance is scheduled during low-activity periods while reducing the likelihood of costly ad-hoc repairs. Besides this preventive maintenance, smarter service also comes with the connectivity of all devices, even of large fleets of smaller cash devices located in branches all around a country. Via connectivity, they can be remotely updated to the latest firmware versions and currency adaptations, which increases security and reduces service costs.
   
• Adaptable business models: Investing in advanced technology and processing systems requires upfront investment, but combining this with an OPEX model can reduce the burden while providing the flexibility to adapt to changing operational needs.  An alternative model is to adjust payment terms to suit the customer’s requirements. For example, if the process for refilling ATM switches to a needs-based schedule that aligns more closely with cash availability, it stands to reason that a different payment structure is also required. Banks can reduce unnecessary expenditures by only paying for CIT services when ATMs need refilling. Meanwhile, CITs can decrease their operational costs by optimizing routes based on real-time cash availability forecasts. It’s a win-win for both parties.

These are just a few of the measures that, when integrated collectively, can drive hyper-efficiency and reduce cash handling costs throughout the cash cycle.

More importantly, integrating these optimizations in silos is not enough. To truly reap the benefits of a hyper-efficient cash cycle, greater collaboration between cash cycle stakeholders is required.

Collaborating as a success factor for a hyper-efficient cash cycle

“The basis for any collaboration is trust,” says Robert Rose, Senior Strategic Portfolio Manager, Commercial Solutions. “Trust to share data and best practices. Once you have that, you can start thinking about how we can optimize our joint processes for mutual gain.”

One step to achieve this is the optimization of digital interfaces that enable the fast and secure transfer of data between cash cycle players. Establishing common data standards and interfaces will enable greater interoperability, which in turn would improve operations and lead to further efficiencies by unlocking the potential for even more advanced data analytics and AI-powered use cases.

In this ever-evolving competitive landscape, collaborating with the right technology partner can make all the difference. As a pioneer in currency technology and partner to central banks, financial institutions, and CITs around the world, G+D provides the best knowledge to make the cash management processes sustainable, resilient, and, most importantly, hyper-efficient. Only by working together and rethinking the cash cycle holistically can we lower the cost of cash strengthening its acceptance.

Published: 19/12/2024