As technology offers consumers more and more ways to pay digitally for goods and services, the question persists: When will cash become obsolete?
These days, “cashless society” is a bona fide buzzword, eliciting speculation from business leaders, journalists and futurists alike. But predictions of cash's looming extinction may be premature and many merchants are still dealing in cash for a variety of reasons, particularly among small and midsize businesses.
For banks and financial institutions, the wave of the future is using technology to optimize, not eliminate, their cash-handling processes.
Stories about cashless merchants like Sweetgreen (salad restaurants), Bluestone Lane (coffee shops) and Amazon Go (convenience stores) imply that the transition to a cashless society is well underway, but according to studies from the Federal Reserve Bank of San Francisco, “cash continues to be the most frequently used payment instrument, representing 30% of all transactions and 55% of transactions under $10.”
There are a number of reasons that cash isn’t going away, including that refusals by businesses to accept cash have prompted accusations of discrimination against underbanked consumers. In fact, both Sweetgreen and Amazon Go have since reversed their stance on cashless-only, and the state of New Jersey and the city of Philadelphia have both banned cashless stores on these grounds.
Large-scale retail operations are generally equipped to handle both cash and digital payments. But when it comes to smaller businesses, such as a single-person merchant relying on a plug-in like Square to accept payments at the local farmer’s market, establishing a system to accommodate multiple payment types requires support from a financial institution equipped to meet their needs.
In order to satisfy consumer demand for more ways to pay digitally, merchants need systems that can handle a variety of transaction types simply, conveniently and securely. For retail banks and financial institutions, this means upgrading legacy hardware and software to enable future-ready capabilities like cash recycling. In particular, the connectivity of modern ATMs can enhance the self-service channel to become more than just a “cash and dash” mechanism.
Self-service deposit capabilities offer the greatest opportunity for financial institutions to evolve their cash management offerings. Traditionally, merchants deposit their cash at a bank branch or using a night drop box. Bank employees must count and validate the cash, then update the business’s account accordingly. Automating the business deposit process at the ATM saves the merchant time and gets the money into their account faster. On the banking side, upgrading equipment to include ATM technology that can accept—and recycle—merchant deposits opens the door to significant gains in efficiency.
Cash recycling enables banks to support merchants’ cash needs while optimizing their own operations. On average, deposits account for more than half of banks’ cash-handling activities. By automating deposits, banks can significantly reduce their workloads and expenses. In a system with a closed cash cycle, deposits from the bank’s business customers replenish the ATMs, supplying the cash that will be dispensed for withdrawals. Simply put: Merchants fill the ATM, consumers empty the ATM and the cycle repeats. Countries that have successfully adopted cash recycling include Japan, Germany, Turkey and Belgium, but adoption rates remain significantly lower in the U.K., U.S. and Brazil.
Beyond enabling merchants to serve customers who still prefer to pay with cash, a cash recycling system also provides increased security, faster and more convenient deposit transactions and the direct crediting of cash to accounts. Meanwhile, financial institutions reap the rewards of enhanced efficiency and reduced cash-handling costs. With merchant customers making deposits at self-service ATMs 24/7, bank employees are free to focus on serving more complex and personalized needs, which fosters stronger customer relationships.
The march toward seamless, digital payments shows no signs of slowing down, but cold hard cash is still changing hands on a daily basis. As long as there is currency in circulation, merchants will rely on financial institutions with capabilities to support a growing variety of payment methods that meet their needs, including the ability to accept cash.
