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Sorry, mobile: Cash is still king in retail


Various technology analysts, retail industry pundits, and economists of all stripes, have long predicted the demise of paper and coin currency along with the dawn of a cashless society.

And it is true that over the last few years, we’ve seen a big acceleration in the drive towards large-scale consumer adoption of new digital payments technologies, especially in the mobile category.

In fact, in 2014, Juniper Research predicted that the total number of smartphone payments would hit 9.9 billion by 2018, with one in five phones acting as digital wallets.

Taking this all into consideration, it’s no wonder that physical currency is viewed by many to be shortly destined for obsolescence. The reality, however, is that despite all the buzz around mobile payments and digital wallets, cash is still the king in the retail industry, and will most likely continue to remain so for decades.

Cash Usage Statistics

The most basic metric to assess cash’s staying power is its volume in circulation. In the United States, from 2007 to 2012, the amount of bills and coins in circulation grew 42%. Since 2012, that figure has continued to grow.

It is undeniable that cash transactions in the retail industry have declined when measuring cash versus other forms of payment as a percentage of total sales. However, research shows that, overall, consumers do prefer to use cash more than non-cash payment options, especially for certain situations, such as quick purchases and low-dollar amount transactions. Even those consumers who typically prefer to use debit and credit cards are 49% more likely to use cash for purchases less than $20 and currency is used by most consumers for purchases under $10, regardless of preference.

Another factor contributing to the continuing prevalence of cash usage in the U.S. is the population of unbanked and underbanked. (An underbanked person is someone who may have a bank account but also uses alternative financial services (AFS) outside of the banking system. An unbanked person has no bank account.) Although slightly higher levels of employment and an improved economy have contributed to a small decline in the statistics since 2012, a startling 20% of U.S. households (24.8 million) were underbanked in 2013. Furthermore, 7.7% (9.6 million) households had no bank accounts at all.

Advancements in the mobile/digital payment alternatives space notwithstanding, the expense and resource cost associated with processing cash transactions and securing currency still presents significant challenges for retailers, and will do so for the foreseeable future. There does, however, exist solutions that can alleviate some of the pain points.

Smart Safes

With a smart safe solution, retail employees enter notes into the safe, which automatically counts and validates the currency. At the end of the business day, the device communicates the cash totals to the retailers’ bank, which then provides provisional credit for the deposits while the cash remains in the safe, awaiting pickup from the armored carrier service.

Smart safes, which have been around for about a decade, reduce risk and errors, increase staff productivity, reduce risk and theft, and accelerate credit for cash deposits.

Cash Recycler Solutions

One of the more exciting developments in cash handling is the increased adoption rate among retailers of cash recycler solutions. The trend has garnered a lot of attention from industry participants over the past year. Cash recycler solutions include a “smart safe” device that allows retailers to deposit coins as well as notes and make withdrawals for change (notes and coins). It also recycles the smaller bills and coins, thereby reducing the need for change orders.

Another very meaningful benefit of the solution is that it allows retailers to drastically reduce or even eliminate the manual steps usually required for cash processing. By automatically counting bills and coins and transmitting their value to the company’s bank account before the cash has been physically moved – the solution eliminates the traditional labor-intensive processing. This effectively turns the cash on location into “bank owned cash” and enables the retailer to optimize working capital management. With large retail chains that can quickly scale upwards; the larger the retail operation, the more valuable the solution becomes. Consider the value of all the cash “trapped” at any one time at each one of a chain’s many hundreds (or thousands) of store locations.

Beyond these advantages, cash recyclers can also reduce risk, theft, and minimize costs associated with labor-intensive cash-handling tasks. They additionally collect and store a treasure trove of data around cash requirements, which retailers can harvest and use for operational efficiencies among other features.

Truly a game-changer in currency management, cash recyclers’ utility and benefits span several top retail functions, including treasury, IT, loss prevention, human resources, and operations. It’s a tool that should be researched by any retailer looking to find increased transparency and control over their cash handling and working capital.

Joan Brancaccio is managing director and product management executive, global receivables in global transaction services at Bank of America Merrill Lynch. In this role, she has responsibility for managing cash and check receipts product teams in the North America Treasury Management business. Her current focus is overseeing the transformation of core paper and cash based products into image and electronic solutions that are designed to revolutionize the way companies receive payments.

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