Taking Cash Management to the next level – is now the right time?
It seems impossible to open up/log on or switch on any media today without receiving reports about the demise of cash. It is well understood by our industry that the often reported benefits of moving from cash to ePayments are a smokescreen for the principle reasons of transaction transparency to authorities and reduced costs for the central and commercial banks, but the overwhelming message to the public is that cash has had its day.
To a pessimist it would seem that all business dependent upon cash is in a twilight phase.
Cash In Transit and its less physical cousin, Cash Management are, by nature, conservative souls. The processes and tools used to conduct the daily operations of collecting cash and counting cash have, not really changed much in the past couple of decades for many local or even regional businesses. Even the recognisable MNCs can be frustratingly slow at acting on known solutions to long-standing constraints and this might be explained by some common reasons –
- When it comes to security management the approach is often “if it isn’t broke, don’t fix it”. Where personal safety is at risk, conservatism is understandable. However there is a tendency for a similar attitude to creep into areas of operational management which can stifle innovation.
- Investment in new technology can feel like a leap of faith. Often board level management finds it difficult to reconcile the value of the necessary investment with the SME Millennial-generation representative who is pitching the idea in front of them. As the adage goes, you only buy from people you like or trust. Both require a degree of personal empathy, and this can be hard to establish if there is no common ground between parties.
- Today Cash in Transit tends to be commoditised in this region. The reasons for this are many; the relative power of the main customers (the commercial banks), market dominance by a few giants and commercial inexperience of company owners might be considered three significant ones. Consequently margins are low and customers do not expect innovation from providers.
Fortunately our industry is blessed with many people with the foresight to see opportunities where others see limitations. From my own personal experience I can report that there seems more interest in developing new business solutions for handling and processing cash than ever, from parties both within and outside of the industry, and I expect to see a number of market entrants into the Cash Management markets in the coming months.
How is it that some can see opportunity in this space, when the prevailing winds appear very much to be blowing against efforts to grow profitably in this sector? The answer is apparently in technology.
You would need to have been living on a remote island in the middle of the Pacific Ocean to have missed the developments in communications over the past decade or two. The universal connectivity that we all have with our smartphones, the arrival of “smart-cities” and the establishment of powerful data-mining software may have their origins far from our industry, but the possibilities these developments bring to the Cash Management industry are valuable.
Here are a few developments that are on the drawing board of a number of cash management organisations and that are made feasible by this communications revolution: -
- Smartsafes. The use of Smartsafes is perhaps not as innovative as some in this list. A number of commercial banks have used Cash Deposit Machines in their bank foyers for a number of years to try and take physical deposits away from the tellers. However the interesting advancement being pushed now is to connect the Smartsafe’s data files with the Cash Management company’s systems, creating a Utility-style depositing models which provides a low cost deposit option for SME retailers and the benefit of scale for the cash management company. Key to this service is an interactive programme linking customer to cash management provider for instant updates and scheduling.
- As an alternative to traditional “walk to bank”, this opens up a bigger section of local retail to cash management services, enabling a growth in the market which outstrips present growth rates.
- Cash Orders/Floats. As the commercial banks continue to distance themselves from the tasks of physical cash handling retailers are challenged with how to supply their outlets with low denominations and change. A recent study for a central bank in this region highlighted the issue that coin circulation is not functioning. One of the stated reasons was that the population “hoard” the coins they receive and retailers don’t receive coin as payment, and that the central bank is forced to pump new coinage into the economy to prevent a drought of change. Ironically the same country sees commercial banks actively withdrawing from the task of supplying coin to retailers on demand making matters worse. Supplying low denomination notes and coin as a cash management company is now possible with the emergence of app-based dropboxes for the likes of Amazon and the confidence the public now have in electronic security, it must only be a matter of time before retailers can collect their daily float from a controlled environment and a smart-locker.
- Dynamic Planning. Some years ago the supermarkets started home deliveries and established a new generation of algorithms to predict, plan and optimise these deliveries. Now Grab, GoJek and other sharing-economy giants have further evolved these programmes to establish highly flexible logistics models that optimise demand through charging flexibility and minimise waiting times. It would be fair to say that nearly all of the CIT industry is still to catch up with these developments, in this region certainly. In Netherlands one CIT company has launched a collection model borrowing much from the planning developments mentioned above, although they do still use their own staff to collect (!)
The successful adoption of these or other technologies into the Cash Management proposition has a double benefit. Not only can they improve top line, middle line or bottom line results for your business, but invariably they add value to the customer experience. With that comes an enhanced relationship and a move away from the commoditisation of your service.
Now may be the best time for your CIT business to push forward with new, connectivity based solutions.
Anthony McAndrew is the Principal Director at Astute Outcomes Asia Sdn Bhd, a consultancy house focused on providing innovation and efficiency to the Cash Management industry.