Cash Still King With Consumers Banks,

CUs need to explore trends in recycling to save money

BY KEITH GRIFFIN, SENIOR EDITOR, BANKING NORTHEAST MAGAZINE

Q. What are some of the consumer transaction trends you're seeing in cash recycling? Are more customers avoiding bank tellers for example?

WOLF: I wouldn't say they're necessarily avoiding tellers. In some instances, I think after COVID and the lockdown, people got used to doing transactions at an automated or self-service device. So, lobbies weren't open. They were forced to go through drivethroughs or access ATMs. So they got a little more comfortable doing things not face-toface. I think also due to some of the staffing shortages that we observed during COVID, there just weren't enough people to fill the teller position. So, you have fewer people in the branch and wait times get longer, so people start avoiding that situation and then change their behavior to utilize a channel that might be a little more convenient.

Q. Are you seeing that among more of a certain demographic? Is it younger people, older people? Who's getting more impatient waiting in line?

WOLF: It might be concentrated within older segments because they are typically heavier branch users. So once that teller capacity is removed from those branches, they're used to a certain level of service, those times go up, they might seek out other means to make that transaction.

I think younger folks have been pretty good at adopting some of the other self-service channels, so doing things at the ATMs, mobile check deposit, they're a little more open to doing these transactions and were probably already doing them pre-pandemic.

Q. Why does the utility of cash remain strong?

WOLF: It definitely remains strong, but within certain segments and certain payment types. For instance, we see strong cash usage within in-person small dollar transactions. What that means is I go to a coffee shop and I'm going to buy a $5 latte. I'm going to pay for it with cash. So we still see cash in that sense remains strong. It also remains strong for different segments, so older segments typically prefer to operate in cash. So those folks that are maybe 65 and older. And then we also see lower-income groups more reliant on cash.

Q. Why is cash more important to the lower household income groups?

WOLF: Some of those folks might be considered underbanked. So, they're maybe not utilizing a typical bank. They also might be operating in more cash-intensive businesses where they're getting paid in cash, and there's also maybe a little bit of mistrust within the banking system within that lower-income segment. Another thing we observed is cash can be utilized for budgeting purposes. So, you know, setting up an envelope for groceries, for the gas bill. So it allows them to be able to control what they're spending a little bit easier than, you know, just swiping everything on a debit card.

Q. Why are banks in credit unions seeing more cash deposit volume? It seems almost against the trend.

DUNLAP: We’re seeing a pretty steady trend of deposited notes being more and more at the ATM level. Many people are more comfortable with depositing notes at a self-service system like an ATM. You think about 20 years ago, people were all going to the teller line to do their deposits, but we introduced ATMs. They could take envelopes at some point. That was probably 15, 20 years ago. People started to put deposits in envelopes, and then the technology of cash deposits really evolved over the last 10 to 15 years to be able to take notes directly in at the ATM and scan them and validate them. And people were becoming more comfortable with that. That's one of the reasons why more and more people want to deposit those notes at the ATM. They also get credit for those notes a little quicker than they would at night drop. That's all playing into that trend as well.

Q. What are some of the consumer transaction trends?

DUNLAP: So, you just mentioned the deposit volumes are coming up. That's a trend we're keeping a close eye on, especially when you're thinking about the next phase of technology when it comes to cash recycling, taking those down week per week, but we're seeing some shift in what's going on with those transactions. notes and recycling them back out. Another trend we're seeing is check transactions. They're kind of fading away, although they're still popular in the United States, one of the bigger markets for usage of checks. We're also seeing a trend where cash dispense transactions are declining a bit as well. So the transactions are coming

Q. Just to follow up a little bit on withdrawals versus deposits. There's been changes in both of those, correct?

DUNLAP: Right. One thing we monitor is the cash into out ratio. So that's the number of notes coming into the ATM versus what's being dispensed. And 2010, I think it was about 20% of cash coming into those types of ATMs was available for dispense. So, 20% of those notes were deposit notes. Now it's closer to 30 to 40%. We're seeing a heavy trend of more notes coming and, and less notes coming out. That trend and ratio is coming up as well.

Q. What are some of the global trends you're seeing that might be coming to the United States?

DUNLAP: Globally there's really a lot more focus on cash recycling. Some of the major markets in Asia and Europe and even South America have been doing cash recycling for some time. They're already leveraging the benefits of using those deposited notes to dispense those notes back out and also reduce that cycle time between, uh, visits to go on, either add cash or remove cash. So, those are trends we're seeing globally. Obviously, there's different markets that have different requirements, so we're using those lessons learned of those markets and applying them here to the U.S. market that's getting ready for it.

Q. Why should banks and credit unions get behind cash recycling? What are the advantages to them?

DUNLAP: There are two major advantages. One is the reduction of cash and transit cycles or replenishment cycles, you know, could be done by the cash transit companies or with branch tellers. The number of times they have to touch the machines will come down with cash recycling. That's a major one. It's just less visits, and less cost if you're using cash transit companies. The other major one is you don't have to touch the unit as often. So, as we often see in this industry, failures happen when people are involved. They open things up, they close them wrong, or they put the notes in wrong. When you use cash recycling, you're out there touching the unit less. It really improves the reliability of that equipment (and) extends the life cycle of that equipment because it's just less workload on that entire ecosystem of ATMs. Also, if you're reducing the cycle times, you’re going to save money with the operational cost to keep that unit running.