Cash Makes a Comeback
Economic volatility has caused a surge in cash usage, and research shows it’s here to stay. Is your cash handling system up for the challenge?
The slow decline in cash usage that continued into this decade came to a grinding halt with the 2008 recession. In recent years it has actually turned course, marking a significant increase in cash usage among some key demographics. As consumer conservatism has spurred a drop in reliance on credit, more shoppers are using cash for purchases than they are swiping credit cards and paying later.
Just this month, Bank of America announced that it would begin charging consumers a $5 per month fee to use debit cards, and many other large banks are following suit. The move by the banks coincides with the enacting of the Durbin Amendment – which caps the amount banks can charge merchants for processing debit card transactions – and is seemingly an effort on the banks’ part to recoup some of the more than $10 billion in revenue they’ll lose at the hands of the legislation. Bank of America’s announcement has already been heavily protested and will have major implications on consumers’ retail payment decisions. Specifically, if banks transfer the cost of debit card usage to consumers, we expect consumers to respond in part by turning back to cash. In fact, a recent Associated Press-GfK poll of consumers found that 66% would choose another payment method if a $5 monthly debit usage fee were imposed by their bank.
For retailers, the resurgence of cash is a bright spot in an otherwise gloomy period of slow sales growth. Cash transactions cost less to process than credit and debit, so many retailers are revising their payment processing systems budgets to include solutions that bolster their cash handling processes.
The most recent figures from the Federal Reserve are from 2009, when American consumers made 6 billion ATM withdrawals with a total value of $647 billion. That marked a 3.8% increase in ATM withdrawals over a three-year period. Of course, ATMs aren’t consumers’ only source of cash. According to the research firm Aite Group, consumers’ use of cash stands at $1.2 trillion per year. This certainly puts to rest the notion that we’re headed toward a cashless society.
A majority 54% of U.S. adults cite cash as their preferred form of payment, according to the recent Consumer Payment Trends report from market researcher Packaged Facts, which pulls data from consumer research firm Experian Simmons. A more recent study from Aite Group even raises the ante on cash, finding that 62% of U.S. consumers would rather pay with cash than credit. Today, only about half of U.S. adults are considered “active” credit card users, and according to Experian Simmons, “active” credit card usage includes consumers who’ve made a mere single purchase on credit in the past 30 days.
Even in a scenario where overall cash usage declines at a rate of 17% every 12 months, it would be nearly 200 years before the annual value of cash transactions fell below $1 billion.
Regardless of how they’re procuring it, U.S. consumers are certainly carrying and using cash more than they used to. What’s more, the two fastest-growing segments of the U.S. population are millennials and Hispanics, according to the U.S. Census. Botof these demographics display an above-average propensity to use cash. They’re typically service-sector workers who don’t have direct deposit, and many of them are “unbanked” citizens who cash their paychecks and spend their greenbacks, rather than deposit their pay in a bank account.
All these dynamics culminate at the point of sale, where cash retains its crown. Fittingly, retailers are investing in systems to help them manage their cash intakes securely, accurately, and efficiently. Networked, weight-based cash counting devices are the foundation of this effort. As is the case with a growing number of business technologies, the cloud is enabling Web-based cash management tools that integrate cash counting equipment into back office business processes, creating real-time, any time, accurate data on any till associated with a networked electronic cash counter. Tellermate’s T-knx solution provides one such example. T-knx can collect cash data from one or thousands of distributed T-ix series devices and process that data in the cloud. From there, users access the data via a Web interface that graphically presents key performance indicators to management. This allows them to drill
into till-level data at the location, point of sale lane, and associate levels. Managers are able to make informed decisions and immediately plan corrective action.
Some retailers make the false assumption that they don’t handle enough cash to justify the investment in a cash management solution. But the trend toward increased cash usage is changing that, and the investment is not great – it includes the purchase of the hardware and software application, a minor amount of integration, and minimal training. In return for that investment, retailers are saving time, verifying count accuracy and deterring fraud. Retailers benefit from potential expense recovery in the form of reduced training costs due to standardization and compliance, reduced audit costs due to the ease and availability of information, and less employee theft due to the ability to conduct remote spot audits. As the amount of cash filtering through retail establishments increases, these returns only get bigger.
With cash usage on the rise, Tellermate continues to develop solutions that make it the most efficient, least-expensive form of payment retailers accept. With the idea of a “cashless society” nowhere on the horizon, a small investment in modern cash handling technology will go a long way for retailers of all sizes.
About the Author
Jim Stone is the director of marketing for Tellermate Group. Tellermate group is a leading provider of cash management solutions in retail, banking, QSR, and leisure. Tellermate is trading with a global footprint with its head quarters in Newport, Wales.