|Cash recycling gets another look (November 2010)|
Improved technology and the need for efficiency has more banks interested
Teller cash recyclers (TCRs) are an evolution of teller cash dispensers, available for years. Recyclers connect with teller software and accept cash, verify authenticity, sort by denomination, and then securely store that cash at the point of transaction. That cash is recycled for withdrawals.
These devices are designed to cut costs, improve cash handling, and increase branch efficiency. So why have banks waited until now to start adopting the technology?
For one, studies indicate now is the time to implement better cash handling. TowerGroup reports that 60% of U.S. transactions are still cash. Vendors say the recession and need to control spending may have increased use of cash.
“[Cash] will be a part of the transaction activity in the branch, and there’s going to continue to be the need to manage that cost of handling it,” says Linda Perconti, director of Delivery Channel Solutions, Diebold Inc. “The next evolution might consist of building more recycling into self-service as the overall transaction process becomes more and more automated.”
“Cash is here to stay,” she adds, “for a while.”
A change in perception of the devices as bulky, unreliable, and expensive has helped to put them in the spotlight, as well. The new ability to integrate the TCRs with teller system software, as well as the increasing number of manufacturers and product offerings available, makes the devices more appealing.
In fact, a recent Celent survey found that over 50% of banks are either considering, planning, piloting, or routinely using a TCR solution (see graph, p. 25). Increased interest comes as banks face new pressures from regulatory and economic changes. “In the branch channel, they’ve had to respond with cost cutting and also with investments that make sure that the selling and the servicing is done as efficiently and as effectively as possible,” says Bob Meara, senior analyst, Celent. “So any transaction automation that frees tellers to do that is an attractive investment. And also, anything that can cut down the size and cost of branch operations overall is good.”
Banks with a large cash flow are especially interested in the recyclers, and once they invest, placement must be carefully considered to get the best results. “For the banks themselves, it’s now a matter of figuring out what to put where,” says Nicole Sturgill, research director in Delivery Channels for TowerGroup. “There is no one size fits all. Cash flow needs to be the determinant on what they choose to put into the branch.”
Suppliers such as Diebold, NCR, Talaris, and Wincor-Nixdorf can help banks determine which device is the best fit.
NCR, for example, conducts branch effectiveness modeling to understand the ins and outs of the branch—who is coming through the door, when they are coming, as well as when the branch becomes cash positive versus cash negative.
“This is about how you change someone’s work flow; it’s also about how you change the consumer interaction and understanding what the consumer is willing to do and when they’re willing to do it,” says Bob Tramontano, vice-president of marketing for NCR Financial Services. “There isn’t just one recipe.”
Indeed, Talaris offers banks a business analysis by finding out what it is they want to accomplish, which is typically centered on customer sales and service. They then delve into the bank’s processes to discover and fix what is preventing achievement of their goal. Often, problems occur at the teller level, specifically with balancing, according to John W. Smith, senior vice-president of Talaris. He says recyclers can often help to fix balancing problems. “We track and trace every note, every transaction, and essentially eliminate out-of-balance conditions.”
Benefits differ by bank
For Republic Bank and Trust, a $331 million-assets institution in Norman, Okla., a recycler helped it to maintain the cash flow and manage more transactions at a small location in a strip center. Placed in the middle of the teller and new accounts area, the recycler eliminated balancing issues and the need for cash drawers. It also simplified the process of auditing and dispensing money at the branch.
Republic also placed a recycler at a full-service downtown branch, eliminating two teller positions. “It’s been great being able to still efficiently process transactions for our customers with fewer actual people,” says Staci Pruett, a vice-president and banking center manager.
TCRs can also effectively manage cash flow in larger branches. “We have not used TCRs as a head-count reduction strategy; we’ve used it to augment what we’re doing,” says Michael D. Johnson, vice-president of Deposit Fulfillment for First Reliance Bank, a $592 million assets bank in Florence, S.C.
Tellers handle roughly two-thirds of all branch transactions, and of those transactions, half involve cash, according to Celent. So the benefits to the teller are greatest when a TCR is installed. “We see a lot less of those administrative buy and sell transactions that don’t really add any value to our customer,” says Johnson. “The tellers that are actually connected to the TCRs—we’ve seen their cash handling volumes increase by as much as 20%. They are doing more transactions month over month than peers who are not connected to the TCRs.”
More face time with customers
In addition to a reduction in back-office tasks, there is a decrease in cash on hand, transaction times, and time spent opening/closing cash drawers. The most important benefit of TCRs, however, is in customer service. “You have the ability to keep the eye contact and the conversation going with the customer while their transaction is being processed,” says Diebold’s Linda Perconti. “In an environment where the institutions are trying to differentiate by that customer experience, this is key.”
Aside from the many teller benefits, recyclers also offer banks improved security. Recyclers can verify and identify counterfeit bills, and they also serve to deter crime. According to Smith, there were 5,963 robberies at bank locations in 2009. The average loss was $7,723—roughly the amount in a cash drawer. Recyclers can often eliminate these cash drawers altogether, or, at least significantly reduce the amount of exposed cash, which can discourage would-be robbers from targeting a particular location.
Recyclers also serve as a physical vault for the cash. Many times, especially at smaller branches or shopping center locations, the TCRs can replace large and costly traditional vaults. “TCRs are going to be a fixture in some of the newer branch designs,” says Celent’s Bob Meara.
The benefits of TCRs are numerous, but Wesley Wilhelm, senior analyst at Aite Group, LLC, recommends that banks also pay attention to analytics to get the most out of their device. “Look at the opportunity to use some advanced analytics to do appropriate cash-need forecasting,” he says. “The simple process of recycling the cash is valuable, but it takes on far more value if it’s done in an environment of forecasting what you really need and allowing for less cash to be tied up in the bank’s cash-out balances.” â–
The electronic version of this article available at: http://www.nxtbook.com/nxtbooks/sb/ababj1110/index.php?startid=22
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