Cash recycling is about to shake up US banking

Managing cash volume and replenishment for ATMs can be a complex puzzle. From logistics and security to resource allocation and escalating cash-handling expenses, the limitations of traditional approaches are becoming increasingly evident. In recent years we have seen financial institutions employ cash recycling technology to solve for some of these challenges. While cash recycling has become an integral part of the banking ecosystem in many areas across the globe where access to cash is vital to financial inclusion efforts, in the U.S., automated cash recycling is just now emerging as a compelling solution that provides substantial benefits to financial institutions.

What's driving cash recycling?

The key driver for cash recycling technology is the increasing cost financial institutions face when managing cash, as it remains a major and mandatory part of a financial institution's day-to-day operations, accounting for nearly 50% of ATM network operating costs. Worldwide, the amount of cash being circulated through ATMs is increasing in aggregate, signaling that it will continue to be a mainstay as a form of payment. The value of currency in circulation passed $2.26 trillion in the U.S., a 28% increase compared to February 2020, while cash is the most used method for payments under $25.

In the U.S., cash availability remains a critical need, not just in underbanked communities, but also in large metropolitan areas like Los Angeles, where the local government is considering a ban on cashless businesses. According to a recent YouGov survey commissioned by Diebold Nixdorf, 82% of respondents would not sign up with a new primary provider that does not offer convenient access to cash, showcasing the importance of availability. Relying on legacy banking infrastructure to address evolving customer needs is increasingly becoming unsustainable, and financial institutions are coming to realize that the long-term cost benefits of offering more denominations, thanks to flexible cassette configuration, will be vital when attracting and retaining banking customers.

Cash access

Access to cash is also crucial for consumers who do not use traditional banking services and for those unfamiliar with digital means of payment, and it remains the most used form of payment for low-income households. As a result, 93% of consumers have no plans to stop using cash. Therefore, the self-service channel is becoming even more important due to the increasing consumer demand and the need for financial institutions to optimize operational efficiency. Thanks to cash recycling technology, newer ATMs can also reach rural populations in locations where it has been historically difficult to service communities or financially unfeasible to maintain a physical branch.

The automation opportunity presented by cash recycling can provide banks with 20% savings in total cost of ownership and reduce cash replenishment efforts by up to 75%. By creating a closed-loop recycling environment that automatically moves money through the system, it has the added benefit of prolonging cash-in-transit (CIT) intervals and drastically reducing CO2 emissions — in some cases, reducing the number of visits by 80% over a year. From higher and more flexible cassette capabilities to multi-denomination/currency support, cash recycling technology enables banks to optimize their cash processes while freeing up staff for more high-value customer interactions, which is particularly important in an environment where we see a scarcity of skilled resources and a sharp rise in workforce costs.

What's the benefit?

Meanwhile, large financial institutions have been successful in migrating 40% or more of all deposits to self-service channels, as consumers have grown more accustomed to using ATMs for deposits. Cash recycling supports all these initiatives by not just keeping more cash actively in circulation, but also by making it possible for more denominations to be dispensed at a time when consumers are not satisfied with ATMs that only offer $20 bills. Cash recycling also enables small- and medium-sized businesses (SMBs), to deposit larger bundles more easily through self-service. This provides cash that can be immediately recirculated through the ATM to use for cash-out transactions, which in turn helps reduce cash-related costs for financial institutions.

The benefits of cash recycling continue to be realized around the globe, and it's only a matter of time before financial institutions in North America begin implementing the technology more frequently. With cash management costs continuing to increase, they will be looking to find the right balance between maintaining cash availability while optimizing logistics and idle cash costs, all while meeting security requirements and controlling risks. Cash recycling presents the next big opportunity for financial institutions, as the automation of cash deposit transactions allows customers to essentially replenish a bank's ATMs for free, simultaneously lowering costs, maximizing efficiency and improving the customer experience by enhancing their self-service offering.