ATMs & Kiosks

How cash recyclers help meet changing customer needs

The need for improved access has dovetailed with a growth in cash deposits to create a stronger use case for cash recycling in ATMs.

Image: Adobe Stock.

September 6, 2023 by Elliot Maras — Editor, Kiosk Marketplace & Vending Times

Consumers are moving away from cash, but businesses and organizations that think cash is dead will find out otherwise if they choose to stop accepting it.

That much was agreed during a panel at last year's Self-Service Innovation Summit and various reports.

That being the case, cash handling equipment will play an important role for many businesses, and technology advancements are allowing such businesses to serve cash customers more effectively and efficiently.

Cash recyclers, which allow machines to automatically recycle incoming cash to withdrawals, are already providing benefits to financial institutions and retailers that recognize the changing needs of cash customers. A session during last week's Diebold Nixdorf Intersect Program in Las Vegas explored the business case for cash recycling.

Ricardo Dystant of JN Bank Ltd., Gregg Smith of US Bank and Jody Neiding of Diebold Nixdorf Inc. discuss the importance of cash recyclers. Photo by Networld Media Group.

Cash is not dead

"Cash isn't going away," Jody Neiding, vice president, Americas banking portfolio at Diebold Nixdorf Inc., said during a session at Caesars Palace on the business case for cash recycling. "While they're still using credit, they're keeping cash with them."

About 95% of consumers have no plans to stop using cash, according to Diebold Nixdorf research, and one in five payments are still made with cash.

"But it's important to know who's using it," Neiding said. "Age and income drastically drives the cash usage." Persons 55 years of age and older are very reliant on cash. Those with less than $25,000 in annual income are extremely dependent on it, while the underbanked are primarily using it.

While fewer consumers are using cash, those who use it want more versatile access, posing challenges and opportunities for retailers and financial institutions.

"They (cash customers) want 24-hour-access to their cash and whether (or not) they go to the self service," Neiding said.

US Bank has recognized these changes, said panelist Gregg Smith, senior vice president, ATM banking, US Bank. It has also recognized that the cost of handling cash is high post pandemic and rising.

"Our customers want access to the cash," he said. "We want access to the customers' cash, plus we want to reduce that 'technical debt' (resources needing to be budgeted for refactoring)."

Cash deposits rise

The need for improved access has dovetailed with a growth in cash deposits to create a stronger use case for cash recycling in ATMs, the panelists agreed.

In the last five years, the number of cash deposits in ATMs has increased by 18%, Neiding said.

The cash in/out ratio in ATMs — the deposit percent of total cash in the machine — has nearly doubled from just over 20% in 2010 to close to 40% in 2023, according to Diebold Nixdorf research.

"While withdrawals have been declining, cash deposits have been going up," she said. "The deposits have driven the trend to cash recycling."

Recycling offers benefits

Banks using recycling are seeing 20% savings in total cost of ownership, much driven by reduction in cash replenishment processing, Neiding said.

Smith of US Bank agreed, noting that recycling extends the cash replenishment cycle.

US Bank went from a seven-day ATM replenishment cycle to a much longer one, Smith said, and the company is working to achieve a 28-day replenishing cycle.

During the pandemic, there were high turnover rates in employment causing employers to move away from direct salary deposit in favor of prepay cards, also known as payroll cards, Smith said. Employees would go to a non-recycling ATM and deposit their salary and then withdraw cash, causing cash depletion.

"They're sticking in their prepaid cards… then sticking in their US Bank card in and taking your cash out of your dispenser…it's a perfect example of a case where recycling is going to change the way that we view a machine in that market," Smith said.

The recycler also increases the number of notes that can be accepted or dispensed based on an individual ATM's requirements, making it possible to reduce the frequency of cash replenishments.

"With cash recyclers, you're now able to fluctuate your settings by how much you want to take from a deposit standpoint and how much you want to dispense," Neiding said.

"Your own customers are replenishing your ATMs for free," Neiding said. "It creates a delivery mechanism that's creating more long-term value creation related to productivity improvement, but more so, cost reduction."

Note denominations

The panelists agreed that ATMs need to offer more note denominations.

The majority of ATMs, 60%, currently carry only two denominations, while 20% carry three denominations and only 13% carry four, according to a recent Diebold Nixdorf study.

"ATMs need to be able to handle more denominations." Neiding said.

Smith agreed.

"Our customers now are demanding denomination choice," he said. "All 20s is just not going to work anymore."

While improvement is needed in this area, progress is being made.

More ATMs are now offering $100 bills, Neiding said. The second most frequent ATM offering after $20 is now $100. The lower value notes are only there if they are offering up to four denominations.

Additional benefits

Recyclers are also helping financial institutions replace full service branches with ATMs since such ATMs are capable of doing 90% of all customer transactions, Neiding said.

Recyclers also offer greater transparency of transaction activity.

"In the recycling world, we see every step of that transaction, every note that was validated, every suspect note that was identified, and so you can actually give credit much faster and do those claim reconciliations much quicker in the recycling world than we could in a standard dispense and deposit world," Smith said.

Panelist Ricardo Dystant, chief digital transformation and special projects, JN Bank Ltd. in Jamaica, said ATM transactions increased by 25% to 35% after recyclers were added.

"It's a domino effect because something that was just supposed to be for the branches ended up creating something right through the organization…it just really pushed the bucket," Dystant said.

Education needed

"Cash recycling is not like the field of dreams," Neiding said. "You do not build it and they will come. You have to make sure that there's a lot of education and you need to start with your employees."

They need to know it's not about replacing employees, it's about complementing them.

"If they (customers) know how to use it and it's easy for them, they're going to keep coming back," she said.

Smith acknowledged leadership does not always support new technology. You need to explain it and show that it works. Then the moment you show the results, they ask how fast you can scale it.

"That's where the journey really begins," he said. When his superiors saw the results, they mandated recyclers for future purchases.

"It's finally here," Neiding said.

ATMs & Kiosks