No matter which way you look at it, managing, transporting, storing, processing and manufacturing coins is a costly and labour-intensive process. Despite recent innovations in currency management equipment and operating practices across the cash supply chain, coins still represent significant cost to retailers, businesses, CIT companies, banks and governments that are dependent on coins for their day to day business transactions.
With an increase in the use of alternate payment methods, cash still remains an important and viable payment instrument for many people and businesses across the globe, especially within emerging markets and specifically when making micro-payments, which continues to remain a cash stronghold across the various cash eco cycles.
As the globe continues to grapple with the continuing affects of the pandemic, businesses and supply chains are in a constant state of evaluation as most pivot and consider available options at their disposal to ensure the viability of their businesses now and into the future.
Retail has been one of the sectors most affected by COVID-19, in both positive and negative ways. Grocers, pharmacies, and e-commerce marketplaces are sustaining consumer confidence by preserving the access to essentials such as food, medication, toiletries, and selected “at home” categories, while striving to protect their customers and employees.
The pandemic has underscored the need for businesses to remain fluid with resource allocation and deploy labour that encompasses a broader range of activities than before. These movements will undoubtedly accelerate the move towards a more agile and dynamic environment across the various business sectors.
Unfortunately, as these changes occur, store closures and sharp declines in discretionary consumer spending have crippled nonessential retail; other non-food, apparel, fashion, and luxury products. Many retailers have already had to make tough choices, including temporarily or permanently closing doors, furloughing employees, and more.
REDUCING CASH HANDLING COSTS
Although the percentage of cash transactions has been reducing within certain markets over the years, the processes for handling cash have largely remained unchanged. Most often, retailers task the most expensive employees in the store to count and prepare the cash, which means these employees are not available for other, more profitable customer-focused transactions.
Much has been made about the cost of credit and debit transactions. But the real cost of cash still remains considerable for some retail segments. These costs are often hidden as they are part of a manager or supervisor’s job rather than their complete focus. Optimising these processes through targeted automation can provide hundreds of labour hours per month to businesses to improve their bottom line and overall customer experience.
As businesses continue to re-evaluate their current cash handling costs, they will need to reduce the cost associated with cash processing. Historically, the retail sector has operated on significantly lower margins than other industries, now more than ever, margins are tighter and the competition for customers is even more fierce.
Unfortunately for many businesses, providing change to customers comes with unavoidable costs. These costs have increased in time and despite various technological advancements with currency handling equipment, there has not been any significant solution or strategy to challenge or eliminate the cost of coins within our society.
A LATERAL APPROACH
Coins currently contribute a disproportionate cost within the cash cycle, costing an average of 1.6 times the amount to produce and manufacture when compared to its face value. Most developed economies are making significant losses in minting coins, for example, the U.S is losing around $70M US annually to produce the penny.
As with many things in life you are only as strong as your weakest link and unfortunately, cash’s weakest link is coin. Coin is essential for cash to function and the clearest reminder of this came last year in the U.S where, as a result of the ongoing global pandemic, the production and distribution of coins all but collapsed. As a result, this led to monumental issues across various businesses and how they accepted and managed their cash requirements. The disruption was so significant, that the Federal Reserve set up a Coin Task Force and embarked on a marketing campaign to encourage the public re-introduce their saved-up coins at home back into businesses at the point of sale.
This campaign highlighted an issue which is not only apparent in the U.S but is evident in several emerging and mature markets across the globe. Whilst coins may have historical and social significance, inflationary pressures and more recently hygiene issues have led many people to have a general distain towards coins, particularly with lower denominations, with the majority now being lost, discarded or left indefinitely in coin jars.
Despite there being minimal data, it is estimated there may be tens of billions of coins held in peoples coin jars across the globe. This represent a huge inefficiency and waste both in terms of lost value and environmental costs. The fact that so many coins are never re-used represents considerable challenges to cash circulation initiatives. As long as coins are required to be issued as change, there will still be a need to for them to be minted, stored and transported at disproportionate high costs.
Regardless of its form, any changes to current legacy systems or technological innovations to sustain and protect the core attributes of cash must not discriminate and remain accessible to all those that consider cash as an important and viable payment instrument now and into the future.
“We can’t solve problems by using the same kind of thinking we used when we created them”
McKinsey & Co Payments 2020
US Mint Annual Report 2020