About


Take On Payments, a blog sponsored by the Retail Payments Risk Forum of the Federal Reserve Bank of Atlanta, is intended to foster dialogue on emerging risks in retail payment systems and enhance collaborative efforts to improve risk detection and mitigation. We encourage your active participation in Take on Payments and look forward to collaborating with you.

Take On Payments

September 16, 2019


Is There a Generation Gap in Cash Use?

How different are millennials from boomers in their reported payment habits, especially regarding their use of cash? New data from the Survey of Consumer Payment Choice, out this month, lets us look at age segments using the interactive charts accompanying the report.

For example, in 2018, consumers overall made 17 payments a month in cash. Drilling down, consumers aged 25 to 34—that is, millennials—used cash for 15 payments per month. Consumers 55 to 64—the boomers—used cash for 18 payments a month.

It's good to put these numbers in context. Here's a fact that surprised me: the younger group makes more total payments per month (73) than does the older group (67). That means that, as a percentage share of all payments, the difference by age is more pronounced:

  • Millennials: 21 percent of their payments in cash
  • Boomers: 27 percent of their payments in cash

The differences are similar when we look at paper checks, which the younger group used for 2 payments per month (3 percent of their payments) and the older group for 4 payments per month (6 percent).

Payment-method-use-by-age-range

You'll notice in the chart that payments instrument usage has been relatively stable for all the age groups since 2015.

Millennials' relatively lower use of cash doesn't mean, however, that the cashless society is going to arrive any time soon. In 2018, 85 of 100 consumers used cash in a typical month. And, in an analysis that incorporates a complete set of demographic variables plus income, differences by age could prove not so relevant. So, is there a generation gap in cash use? Yes. Does it mean the end of cash? No.

The charts at the website let you look at consumer payment choice by household income group and by the type of transaction. For example, you can examine how consumers' use of payment instruments is different for P2P payments than for bill payments. Check them out.

Photo of Claire Greene By Claire Greene, a payments risk expert in the Retail Payments Risk Forum at the Atlanta Fed

September 16, 2019 in cards, checks, currency, payments, payments study | Permalink

Comments

Post a comment

Comments are moderated and will not appear until the moderator has approved them.

If you have a TypeKey or TypePad account, please Sign in

June 3, 2019


Hitting the Brakes on the Cashless Society

"Reverse ATMs" is a term I learned from reading my colleague Oz Shy's new working paper, "Cashless Stores and Cash Users." At venues that don't accept cash at the register, the patron puts cash into the reverse ATM and a loaded prepaid card comes out. Mercedes-Benz Stadium in Atlanta, for example, is one of the latest venues to adopt this practice.

Speaking of "reverse," I'm sure you know that some states and municipalities are seeking to reverse what may—or may not—be a trend toward brick-and-mortar retailers not accepting cash. Refusing to accept cash has been illegal in Massachusetts, where I live, since 1978. More recent developments:

  • Philadelphia will ban cashless stores beginning in July.
  • In March, New Jersey outlawed cashless restaurants and stores.
  • In May, the San Francisco Board of Supervisors voted to require brick-and-mortar businesses to accept cash.
  • Also in May, Representative David Cicilline (D-RI) introduced the Cash Buyer Discrimination Act, which would require businesses all across the United States to accept cash.

These and other proposed laws are predicated on the idea that people without access to payment cards or digital payments are harmed when they cannot make purchases using their payment instrument of choice: cash. Oz's paper adds to the conversation by examining the choices consumers make at the point of sale, depending on their access to different ways to pay.

Using data from the 2017 Diary of Consumer Payment Choice, Oz found that consumers who own different mixes of payment instruments use cash with different intensity to make in-person purchases:

  • Diary respondents who own neither a credit card nor a nonprepaid debit card made almost 9 in 10 of their in-person payments with cash, on average. The median share of cash purchases was 100 percent.
  • Diary respondents who own at least one credit card and one nonprepaid debit card make about one-third of their in-person payments with cash, on average. The median share was 20 percent.

Oz goes on to calculate the cost to the cash payers who do not have credit or nonprepaid debit cards of switching from cash to a prepaid card. He finds that, all things being equal, for some consumers, using cash would have to cost twice as much as using a prepaid card for the cash users to be indifferent to switching. Oz's conclusion: "A complete transition to cashless stores imposes a measureable burden on consumers who do not have credit or [nonprepaid] debit cards." For perspective, 8.5 percent of respondents with household income below the U.S. median ($61,000) did not have a credit card or nonprepaid debit card in 2017, according to the diary.

As this research shows, cash is important to some consumers. The cashless society could be on a collision course with reality.

June 3, 2019 in cards, consumer protection, credit cards, currency | Permalink

Comments

Post a comment

Comments are moderated and will not appear until the moderator has approved them.

If you have a TypeKey or TypePad account, please Sign in

January 28, 2019


A Cryptocurrency Primer

Every day, my newsfeed is full of stories about cryptocurrency, blockchain, and distributed ledger technology. I even see stories on how we can create our own digital currency, a notion that conjures up for me visions of my face on a coin, just like suffragette Susan B. Anthony. Could my own digital currency, known hereafter as the NEDNote, become a reality? My husband is a software engineer, so the technical piece is covered, but maybe offering a primer on the history of cryptocurrency and its confusing and rapidly changing nomenclature is the best place to start before I launch the NEDNote into the cryptographic biosphere.

The concept of virtual currency as a substitute for fiat currency dates back to the 1980s, with David Chaum being credited with introducing digital cash. (Fiat currency, often referred to in cryptocurrency discussions, is legal tender backed by a government or central bank.) Although early attempts at virtual currencies were made in the late ’90s, the anonymous white paper published in 2009 under the pseudonym Satoshi Nakamoto is credited for creating the first decentralized cryptocurrency, Bitcoin, and the blockchain database. And with that paper, a new lexicon began to emerge, some of which I define here.

  • Cryptocurrency, short for cryptographic currency, is a subset of digital currency.
  • Cryptography in the cryptocurrency world refers to the algorithms that encrypt data for transmission. In the analog world, think how the Navajo language was used to transmit secure messages during World War II.
  • Distributed ledger technology (DLT) refers to the infrastructure that allows a repeated digital copy of data to be available at multiple locations. With DLT, transactions take place over a peer-to-peer network, and do not require the use of a central administrator to govern or validate the transaction, but rather employ consensus algorithms to replicate the data across locations.
  • Blockchain is a type of DLT that organizes records in blocks, which are then linked with cryptographic hashes to create the chain. Each block consists of these hashes, data, and a unique timestamp. Because no trusted source or authority exists for the blockchain, it is necessary that data somehow be validated before anything can be added.
  • Validation protocols include “proof-of-work” and “proof-of-stake,” the two primary methods of validating transactions on a blockchain.
    • Proof-of-work involves mining and timestamping, which are key validation computations. Mining both validates transactions and obtains new cryptocurrency. The mathematical calculations performed in the mining process build the hash function that links the block to the chain. Miners are rewarded with new cryptocurrency for their contributions to the validation process. Timestamping tracks historical changes made to the data contained in the block.
    • Proof-of-stake employs a consensus method to determine ownership of the cryptocurrency. This method requires less computing power to complete than does proof-of-work validation but does not reward miners with new currency.
  • A crypto wallet provider is a cryptocurrency storage service that is online (hot wallet) or offline (cold storage). Hot wallets are connected to the internet and are frequently hosted by an online exchange platform. Cold storage, which is not connected to the internet, is viewed as more secure.

For many years, my husband allowed the SETI Institute to harness the excess processing power of our home computers in the search for extraterrestrial intelligence, when we could have been mining for cryptocurrency and making the NEDNote a reality. In my next post, I’ll talk about how cryptocurrencies are exchanged and some of the associated risks.

Photo of Nancy-Donahue  By Nancy Donahue, project manager in the Retail Payments Risk Forum  at the Atlanta Fed

January 28, 2019 in currency, fintech, innovation | Permalink

Comments

Post a comment

Comments are moderated and will not appear until the moderator has approved them.

If you have a TypeKey or TypePad account, please Sign in

June 25, 2018


Down but Not Out

As I noted in my last post, consumer habits are sticky when it comes to cash. Despite the many ways to pay, consumers make almost one-third of payments (by number) in cash. But sometimes cash just isn't an option. You can't use cash to buy a snack on an airplane, for example. This week, I look at factors about merchants that constrain consumers' payment options, including their unwillingness to accept cash for in-person payments or their inability to accept cash for online payments. (My colleague Doug King touched on cashless locations a couple of weeks ago.)

At the in-person point of sale, merchants' willingness to accept a payment instrument could affect the prevalence of cash. Consumers obviously cannot use cash when merchants will not accept it. Recent headlines (here and here) suggest that some quick-service restaurants, coffee shops, and food trucks may be growing reluctant to accept cash. As an example, here's a picture of a sign on a San Francisco food cart in late May.

20180612_RPO_TOP_Cashless_image The flip side of a merchant's unwillingness to accept cash is the merchant's willingness to accept card payments for ever-lower dollar values. And indeed, the average dollar value of card payments is dropping. For instance, the average dollar value of an in-person, non-prepaid debit card purchase fell from $35 in 2012 to $32 in 2016 (Federal Reserve Payments Study: 2017 Annual Supplement). This trend could indicate that merchants are increasingly agreeable to accepting cards for small-dollar transactions.

Consumers show they are aware of evolving merchant acceptance. The 2017 Survey of Consumer Payment Choice reported that consumers rate credit and debit cards highest for acceptance, with cash coming in third. The survey asked respondents to rate how likely each payment method is to be accepted by stores, companies, online merchants, and other people or organizations.

At the online point of sale, cash is not an option. (However, Doug mentioned in that same post that at least one online retailer is trying to make cash possible.) The share of purchases made online is still small—just about 12 percent of retail goods and services by number (2017 Survey of Consumer Payment Choice). Yet over the past four years that share has steadily increased. Data about remote card purchases in the Federal Reserve Payments Study (2017 Annual Supplement ) show the growing importance of online purchases. As Jessica Washington noted in her post in early May, remote card purchases grew more rapidly from 2015 to 2016 than did in-person card purchases, measured by both number and value.

Despite these developments, cash continues to dominate quick purchases. In October 2016, consumers paid for about half of their fast food purchases with cash. They used cash for 62 percent of convenience store purchases (2016 Diary of Consumer Payment Choice).

Cash has had staying power over decades of technological innovation. It may be down, but it isn't out.

To learn more about consumer payment choices and preferences, visit the Federal Reserve Bank of Atlanta's new consumer payments web pages that house a variety of surveys, studies, and research reports on the topic.

Photo of Claire Greene By Claire Greene, a payments risk expert in the Retail Payments Risk Forum at the Atlanta Fed

 

June 25, 2018 in cards, currency, debit cards, emerging payments, mobile payments, online retail | Permalink

Comments

Post a comment

Comments are moderated and will not appear until the moderator has approved them.

If you have a TypeKey or TypePad account, please Sign in

June 11, 2018


Consumer Habits and Cash Use

As my colleague Doug King pointed out last month, cash is not going away anytime soon, Yanny/Laurel notwithstanding. By number, almost one-third of U.S. consumer payments were made in cash in 2017. Every year since 2008, the Survey of Consumer Payment Choice has found that cash is consumers' most popular or next-most-popular way to pay.

Many factors underlie cash's resilience, including access, current shopping habits, consumer ratings, and demographics.

Universal access. Paypal's chief financial officer commented to the Wall Street Journal earlier this year, "I don't think we will ever be entirely cashless, maybe in large part because I don't know if we will ever be in a world that every person has a smartphone or a mobile device."

Shopping habits. Most purchases—nine in 10—are made in person, not online (2015 Survey of Consumer Payment Choice). And when shopping in person, consumers prefer cash for small-dollar transactions. Two-thirds of U.S. consumers report that they prefer cash for in-person payments of less than $10 (2016 Dairy of Consumer Payment Choice). Forty percent prefer cash for in-person payments between $10 and $25.

Consumer ratings. Consumers say cash is the most cost-effective way to pay. The Survey of Consumer Payment Choice asks respondents to rate the cost of using a particular payment method, taking into account that fees, penalties, interest paid, etc. can raise the cost of a payment method, while discounts and rewards can lower it.

Demographics. People with fewer payment options use cash. That includes low-income people who have less access to credit cards as well as people without bank accounts who have no access to non-prepaid debit cards. It also includes millennials, who used cash for almost 30 percent of their payments in 2016 (Diary of Consumer Payment Choice).

You probably already know that card payments dwarf cash payments—almost 60 percent of consumer payments are made with some type of card, whether it's debit, prepaid, or credit. Yet cash persists. Recently, a new acquaintance told me he "never" uses cash. As evidence, he reported that he had no cash in his pocket, explaining "that's because I used my last $2 to buy coffee this morning."

Hmm. What does this say about the health of cash? What Dave Lott wrote in 2016 is still true today: not dead yet.

Next post: Merchant acceptance and the use of cash

To learn more about consumer payment choices and preferences, visit the Federal Reserve Bank of Atlanta’s new consumer payments web page that houses a variety of surveys, studies, and research reports on the topic.

Photo of Claire Greene By Claire Greene, a payments risk expert in the Retail Payments Risk Forum at the Atlanta Fed

June 11, 2018 in cards, currency, debit cards, emerging payments, mobile payments, payments | Permalink

Comments

Post a comment

Comments are moderated and will not appear until the moderator has approved them.

If you have a TypeKey or TypePad account, please Sign in

December 12, 2016


Making Sense of Dollars, Part II

The first of this two-part post took us back to the '60s and a BBC clip that assumed we'd be a cashless society by now, given it was the dawn of the digital age. A half-century later, we're hardly closer to being cashless, and those who predicted an end to cash have been replaced by those who argue that going cashless or to less cash is "for the best." This post recaps oft-cited reasons for abandoning cash, amending them with counterpoints. I trust market determinations more than I do the wisdom of the well-intended, and the free market seems to be in complete disagreement with those who assert we'd all be better off without cash.

  • Cash is expensive as a cost of acceptance for merchants.
    I've talked to many retailers—large and small—who prefer cash because they say it saves them money, especially when compared to credit cards. But what do they know? Many studies show that cash is neither universally nor unanimously the most expensive payment method. Indeed, there seems to be more evidence than not that cash is among the least expensive payment alternatives.
  • Cash makes tax evasion pervasive.
    First, tax evaders have options; cash is not their only tool. Second, tax evasion seems correlated to high taxes (see the National Bureau of Economic Research working papers 6903 and 8551; there are others). Reading further, I find tax evasion is less about opportunity (afforded by cash, for instance) and more about bad tax policy. A revolt was ignited and a great country was born amidst the perception that taxes were too high and unjust. Eliminating cash would not likely have stopped that rebellion, and it's unlikely to fix today's problem.
  • Cash complicates monetary policy.
    Cash can only complicate monetary policy when those making the policy want to use negative interest rates to achieve desired ends. To date, there is little to no evidence that this policy path is effective; certainly it's no panacea. That makes it premature if not fully misguided to decry cash. Even if the policy proves useful, eliminating bills may or may not make it more difficult for savers to hoard. I assert they'll find a way.
  • Cash encourages crime because it's too effective (too liquid, too widely used, "too anonymous").
    By that thinking, once cash is eliminated, we'll need to determine what to do about oxygen and water as there is overwhelming evidence that malefactors use these things to good effect as well. The point is, cash works well for the unjust but also for the just. It accounts for 40 percent of all transactions, as measured by the Boston Fed's survey of consumer payment choice. Here the anti-cash crowd backs off the cry of "cashless," running out a "less cash" compromise. Large notes, some say, are used far more often for illegal activities than not, and the proof seems to be TV shows, movies, and pop culture. Seriously. Don't we have to do better than that before dispensing with a primary bloodline for commerce? There is no denying that the untraceable nature of cash frustrates crime fighting; it also frustrates surveillance against the just. Those who value liberty are likely to continue to value the option to spend anonymously.

There is at least one official push to rid society of cash, and its sponsors include card networks, who would stand to benefit were cash to disappear. Anyway, legislating safety that overpromises and hides the harm it can do holds considerable risk.

Photo of Julius Weyman By Julius Weyman, vice president, Retail Payments Risk Forum at the Atlanta Fed

December 12, 2016 in currency | Permalink

Comments

Post a comment

Comments are moderated and will not appear until the moderator has approved them.

If you have a TypeKey or TypePad account, please Sign in

December 5, 2016


Making Sense of Dollars, Part I

A 1969 short on the BBC's Tomorrow's World made bold predictions about where computers would take banking. If you haven't seen the clip, I encourage it. It's fascinating, especially if you bear in mind that at the time, computers were still more the stuff of science fiction than reality while banking was staid and stubbornly unchanging. In the barely four minute segment, a card was "dipped" (not to mention authorized with a PIN) and a check was shunned—presuming its disfavor in the face of auto-charging and other electronic payment options. The obsolescence of paper filing systems was projected and branch/conventional banking was guaranteed to diminish if not utterly fade away. Among all the prescient predictions, they tossed in this throwaway: "If cash is to become the first major casualty of the computer revolution,…" Oops.

Amid relentless predictions of its demise, folding money remains. Prognosticators have left off predicting cash's downfall since its resilience has repeatedly put to lie such ideas. Instead, folks have taken to advocating against it. Even there, anti-cash champions seem willing, for now, to settle for us just agreeing to "less cash" rather than forcing us to go "cashless" in a lurch. Listed below are the main arguments of anti-cash advocates:

  • Paper-based transactions are inefficient, making cash expensive as a cost of acceptance for merchants. While I see this argument less often than the others below, it pops up enough to earn a place on the list.
  • Cash makes tax evasion pervasive and simple. For businesses that are cash intensive, it's difficult to verify sales and income. In some of the articles I've read, tax evasion deserves its place among the most heinous of crimes. It's stealing, no arguing about that, but for this post's purpose, the main point is that cash is at the heart of tax evasion…or so I've heard.
  • The latest evil that cash has foisted off on the unsuspecting is it complicates monetary policy. Cutting interest rates below zero is made difficult by the existence of cash because savers can withdraw and hold cash outside of the banking system. This hinders if not fully defeats the purpose of taking interest rates into negative territory.
  • I've saved the biggest for last: cash enables and encourages crime like racketeering, drug and human trafficking, terrorism, to name the headliners. Paper money underpins the vilest criminal enterprises because, among other things, it defines liquidity, is almost universally accepted, and provides absolute anonymity.

So there it is. Case closed, yes? Well, let's not say that quite yet. If you're interested in the other side, you will have to wait until next week's post. I rarely see the counterpoints other than for them to be mentioned and dismissed. Critical thinkers may be interested in seeing both sides before deciding the fate of cash.

Photo of Julius Weyman By Julius Weyman, vice president, Retail Payments Risk Forum at the Atlanta Fed

December 5, 2016 in currency | Permalink

Comments

Post a comment

Comments are moderated and will not appear until the moderator has approved them.

If you have a TypeKey or TypePad account, please Sign in

November 7, 2016


The Downside of a Wide Paintbrush

Fall is the time of the year that I normally do my exterior home painting and touchup. During the summer, I noticed that my deck and stair metal support poles were a bit dull and had some rust spots, so that was to be my project. The poles have a 4-inch diameter, so I was in a bit of a quandary over the best width paintbrush to use—a 2-inch or a 4-inch. The 4-inch brush would provide faster coverage so my football-game-watching time wouldn't be compromised, but the 2-inch brush would give me greater control and reduce drips and splatters. I went with the expedient choice, and it turned out to be a mistake, as my coverage was uneven with plenty of drips and splatters.

I mention this story because I recently appeared at the National ATM Council's (NAC) annual conference. NAC is an industry trade organization representing nonfinancial-institution ATM owners/operators in the United States. I was asked to speak primarily about the Fed's research into the use of cash as well as the current chip card and terminal deployment status. After my presentation and in the subsequent days of the conference, I was approached by a number of owners/operators telling me that their banks had recently terminated their longstanding relationships; they were deemed to be "high risk" since they were in the currency business. Many were scrambling to establish new banking relationships and wondering why this was happening.

Being an old ATM guy, I was a bit surprised hearing about this action due to the built-in controls on ATM currency settlement and reconciliation that severely limit the ability for an ATM owner/operator to launder money through an ATM. It would be very easy for the bank to spot an imbalance if the money being replenished far exceeded the currency paid out by the ATM. There is still the concern, of course, regarding the initial load (deposit) to establish the account to ensure that those are legitimate funds, but that concern exists with the establishment of all banking relationships by any type of business.

Financial institutions certainly have the obligation to develop a risk management strategy and determine which types of business activities they deem acceptable versus those considered high risk. Supporting ATM operators with their currency needs could be considered a niche business with some unique requirements and may not be the best allocation of resources for all financial institutions. At the same time, bankers may not want to paint a business with the wide brush of "high risk" just because they deal with currency as a major part of their business operation. To do so may force many of these operators to shutter their units, which often are located in areas where there is not a wide choice of ATM locations.

Photo of David Lott By David Lott, a payments risk expert in the Retail Payments Risk Forum at the Atlanta Fed

November 7, 2016 in ATM fraud, banks and banking, currency | Permalink

Comments

Good article, Thank you for your comments.

Chris Waters
National ATM
NAC Board member

Posted by: Chris Waters | November 23, 2016 at 08:49 AM

Post a comment

Comments are moderated and will not appear until the moderator has approved them.

If you have a TypeKey or TypePad account, please Sign in

July 25, 2016


Cash: Reports of Its Pending Death Are Greatly Exaggerated

I usually chuckle when I read an article forecasting the impending elimination of cash from the U.S. payments system. It seems the frequency of these articles is steadily increasing, and I wonder why. What do these people have against cash? Yes, I can somewhat understand the argument about trying to abolish the penny when it costs more to produce it (1.7 cents) than its face value. Canada, New Zealand and Australia have done so, and their citizens' lives don't seem too dramatically altered.

There is no question that consumers continue to embrace card-based payments as an alternative to cash and checks, none more so than the millennials. Critics of cash portray it as a payment method with a number of negatives including harm to personal safety (robbery) and its being expensive to acquire or process. Yet research by the Federal Reserve through its 2013 Consumer Payment Choice Survey project shows that 89 percent of the population continues to have at least some cash, and the number of currency notes that the public holds continues to grow. Additionally, while prepaid cards have made an impact on the un- and under-banked, cash is still an essential form of payment for them.

But as the 1964 Bob Dylan song goes, "the times they are a-changin'." The survey demonstrated the potential increasing influence on the future of cash that millennials might have, as more than 60 percent of those surveyed as "cash-adverse" (they never hold or spend cash) fall into the millennial age range. But will this behavior persist as they grow older and build their financial resources? The survey results provided some conflicting data for this group that hopefully will be resolved in the next survey to be conducted in the fall. For example, while they claim to not hold or use cash, nearly one-fourth indicated that cash was their preferred payment method.

The anonymous nature of cash is often cited by governmental and law enforcement officials as a reason for using it for illegal business transactions or tax avoidance. But perhaps most importantly, cash has almost universal acceptance and, in times of natural disasters, may be the only payment method that can be used for the purchase of goods and services. The reality is that cash is the payment method used by two-thirds of consumers for transactions under $10. While vending machines and parking meters are being enhanced to accept card and mobile payments, and the prepaid gift card has eliminated a lot of $20 bills in birthday cards, it's extremely difficult for me to consider a world without cash. And I believe history is on my side. Although many new payment methods have been introduced, I don't know of any that have been eliminated over the last two hundred years. So I take reassurance as I open my physical wallet and there among my various debit and credit cards, my $23 in cash sits waiting to be spent. I suspect that cash will continue to exist for centuries after my own obituary has been written.

Photo of David Lott By David Lott, a payments risk expert in the Retail Payments Risk Forum at the Atlanta Fed

July 25, 2016 in currency | Permalink

Comments

Post a comment

Comments are moderated and will not appear until the moderator has approved them.

If you have a TypeKey or TypePad account, please Sign in

May 9, 2016


Follow the Money!

This catchphrase originated in the movie All the President’s Men. It is usually used in politics and means to follow the trail of corruption to the source. This catchphrase came to mind when I attended a panel discussion, “Cash Visibility & the Supply Chain: Tracking Your Cash,” at the NACHA Payments Conference last month in Phoenix. Besides the moderator from the Federal Reserve, the panel comprised a representative from GS1 US (the United States affiliate for the international standards body for supply chain management), a banker, and two big-box merchants.

Throughout the industry, cash handling is well-controlled and secure, but it can be inefficient and prone to error and duplicative work in the quest to minimize the ever-present potential for loss or theft. It is ironic that something as valuable and fungible as cash is tracked in some cases with less sophistication and efficiency than a package delivered to a consumer. State-of-the-art supply chain logistics that have long been in use for retail giants like Walmart and Target are just now being pursued among cash industry partners through the Cash Visibility initiative.

The idea behind this initiative is to apply the latest supply chain logistics to the collection, transport, reconciliation of deposits and orders, and distribution of cash among banks, cash processing facilities, merchants, and the Federal Reserve Banks. The Federal Reserve Banks are in the mix as the wholesale suppliers of cash to banks.

Depending on the type of big-box merchant, cash purchases at the point-of-sale can range from 10 to 25 percent or more of total payments. That's hundreds of billions of dollars in annual sales that need to be withdrawn and deposited at banks for retailers that deal in cash. The following is a representation of the proposed process for improving the wholesale and retail delivery of cash:

Future-cash-cycle-management-image
Source: GS1 US. Used with permission.

The panelists identified the following benefits once the system is widely adopted:

  • Faster resolution of discrepancies between origin and destination
  • Improved data accuracy with reductions of staff time, errors, and exceptions due to reduced manual data entry and paper records
  • Value-added information on status and value of cash in transit
  • Automated custody instead of manual paper-based systems that exist today

It was further noted that as the initiative gains traction, other improvements can be realized such as the depositor and receiver having real-time access to where cash is in transit and when it will arrive at its destination.

Various proof-of-concepts are being planned for later this year from the partners participating in this initiative. Partners include the Federal Reserve, financial institutions, armored carriers, retailers, and solution providers. One early finding at a cash processing facility where the concept was tested was an average reduction in staff time involved in cash handling from six hours to two hours. This web page offers more information on the initiative and how to get involved. Similar programs are under way in France and Germany.

Prior to the session, I would not have guessed there was any opportunity to advance the evolution of cash to a faster and more secure payment system.

Photo of Steven Cordray  By Steven Cordray, payments risk expert in the Retail Payments Risk  Forum at the Atlanta Fed

May 9, 2016 in currency | Permalink

Comments

Post a comment

Comments are moderated and will not appear until the moderator has approved them.

If you have a TypeKey or TypePad account, please Sign in

Google Search



Recent Posts


Archives


Categories


Powered by TypePad