Understanding Cash Handling in Modern Banking
What do we mean when we say ‘cash handling’? It simply describes the processes and procedures organizations use to manage and account for physical currency in the form of bills and coins. Despite the rise of digital transactions, cash remains a significant part of the economy, and effective cash handling is crucial for businesses to ensure operational efficiency, security, and compliance with regulations.
For a retailer, cash handling involves managing daily operating cash and cash payments until the funds can be deposited into a bank account or they receive provisional credit. This includes tasks like cash counting at the start and end of shifts, reconciling cash tills, and preparing bank deposits. Mismanagement at any point can lead to discrepancies, losses, and even security risks.
For banks and credit unions, cash handling is even more complex. It involves managing the cash coming into and going out of a branch while adhering to the branch’s cash limit. Every cash transaction, internal or external, must follow strict cash handling best practices to meet regulatory requirements and prevent fraud. This includes meticulous records, regular audits, and security measures to protect both employees and assets.
Cash Handling in Retail Bank Branches
Here, we’ll focus on cash handling in retail bank branches—also known as branch cash management. Cash deposits and withdrawals are the customer-facing cash transactions typically seen in a branch setting. Customers visit branches to deposit earnings, withdraw funds for personal use, or exchange denominations. However, behind the scenes, there are many internal cash processes required to manage cash operations efficiently.
Some of these activities include forecasting cash needs based on historical data and upcoming events, placing cash orders to replenish supplies, processing cash deliveries from CIT services, and preparing cash pick-ups for surplus funds. All of this is part of managing branch cash inventory found in the vault, teller workstations, ATMs, etc. Accurate forecasting is essential to avoid both cash shortages, which can hamper customer service, and excess cash holdings, which tie up capital and increase security risks.
The High Cost of Cash Handling
Cash handling is expensive. The reality is that cash handling and cash management have a direct impact on branch staffing requirements and operating expenses. Traditional cash handling processes require skilled labor to count, sort, and balance funds. Trusted management staff often act as dual control to add security and accountability to certain processes, such as accessing the vault or performing large transactions. Labor costs are a significant portion of a branch’s operating budget, and hours of valuable labor are spent managing cash instead of engaging with customers or performing revenue-generating activities.
As transaction volumes decrease in branches due to the rise of online and mobile banking, each transaction costs even more. The fixed costs don’t decrease proportionally with transaction volumes. The more time and labor required per transaction, the higher the transaction cost, making traditional cash handling increasingly unsustainable.
How to Lower Cash Handling Costs
Banks and credit unions can lower cash handling costs with cash automation. Machines like teller cash recyclers (TCRs) automate tasks like cash sorting, counting, and balancing. A TCR processes cash faster and more accurately than a human, significantly reducing the potential for human error. With an electronic record of every transaction, TCRs make end-of-day balancing easier and more efficient, eliminating the tedious manual reconciliation processes that can lead to discrepancies and require additional time to resolve.
By reducing dual control transactions, TCRs free up supervisors and managers for more valuable work, such as customer relationship management or overseeing branch operations. In the average branch, after implementing TCRs:
- Tellers spend 1.5 to 2 hours less per day handling cash.
- Time-consuming vault buys and sells are reduced by 75%.
These time savings translate into labor cost reductions and allow staff to focus on activities that enhance customer satisfaction and drive business growth.
Turning Low-Value Work into Valuable Opportunities
Manual cash handling is time-consuming and keeps tellers focused on cash. When tellers are focused on cash, they’re not focused on customers. It’s an expensive arrangement that no longer makes sense in today’s competitive banking environment, where customer experience is a key differentiator.
When a TCR automatically processes a transaction and a teller no longer needs to sort, count, or re-count cash, they can serve customers more efficiently in a shorter total transaction time. But more importantly, TCRs shift a teller’s focus from cash to the customer, creating a valuable opportunity to connect, build trust, and help identify other financial product and service needs. This enhanced customer interaction can lead to increased customer loyalty and cross-selling opportunities, contributing to the branch’s profitability.
Cash Automation Redefines Cash Handling in the Branch
Cash automation technology fundamentally changes branch cash management. Teller cash recyclers not only resolve many of the inherent security and accountability problems of cash but also redefine branch cash handling and potentially, the entire branch experience.
For instance, cash recyclers may replace traditional cash drawers on the teller line or enable new applications like teller pods or universal banker desks, where staff can perform multiple roles rather than being confined to cash transactions. They can be used in innovative branch designs like open-concept layouts or micro-branches that operate with minimal staff. When used alongside other cash automation technologies like Interactive Teller Machines (ITMs) and self-service kiosks, TCRs anchor cash operations in branches designed to meet a variety of customer needs, from full-service transactions to quick, self-service options.
Explore New Possibilities with Cash Automation
But these are just a few of the possibilities. When cash is so completely secured at the point of use and under digital control, there’s no need for traditional constructs like physical barriers (e.g., glass partitions) and dual control processes that have historically been necessary to prevent theft and ensure compliance. Banks and credit unions are free to explore innovative branch models that prioritize customer engagement and convenience.
For example, branches can adopt an open floor plan where tellers and customers interact more casually, enhancing the customer experience. Staff can be cross-trained to handle a variety of tasks, acting as universal bankers who can assist with transactions, provide financial advice, and promote products and services. This flexibility can lead to more personalized customer service and stronger relationships.
Embracing the Future of Cash Handling
Implementing cash automation technology is an investment in the future of banking. The long-term benefits include reduced operational costs, improved staff efficiency, and enhanced customer satisfaction. Financial institutions that embrace technology are better positioned to stay competitive in an industry where innovation is key.
Cash automation represents more than just an operational efficiency—it’s a transformative shift for banks and credit unions. By minimizing the manual tasks associated with cash handling, teller cash recyclers, and other automated solutions allow branches to operate with greater security, accuracy, and speed. Most importantly, they empower staff to focus on what truly matters: building relationships with customers and delivering personalized financial services.
As branches continue to evolve in response to changing customer expectations and technology advancements, cash automation will be a key factor. It frees institutions to explore more customer-centric models and innovative branch designs that enhance both the customer experience and overall branch performance. Embracing cash automation is not just about cutting costs; it’s about strategically positioning the branch network for future success.