Cash is something Americans like to keep on hand, even though they're not using it quite as frequently as they once did.

What’s your cash strategy?

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Some speculate that cash is headed to obsolescence. But if a cashless society is truly inevitable, consumers certainly haven't gotten the message yet.

In fact, seventy percent of Americans indicate that they typically make some or all of their weekly purchases in cash, according to a recent survey from the Pew Research Center. While that is admittedly down from the 75 percent who indicated as much in 2015, it's not exactly the precipitous dip some of the cashless doomsayers have been trumpeting.

Because cash is simply what they grew up with, baby boomers remain among those most likely to fall back on the greenback. But other studies suggest that millennials are almost every bit as likely to reach for paper over plastic. Indeed, Facebook IQ found that 57 percent of millennials prefer to pay with cash when the only other alternative is credit.

This cognitive dissonance has thrown the FI industry for a loop: How do you future proof your operations around paper currency while battling pervasive theories that, according to a recent Gallup survey, have convinced 2 in 3 Americans that they'll live to see the day cash goes extinct?

It's a complex question with a simple answer: You need a cash strategy. 

"Cash handling expenses run between 4.5% and 15.3% for retailers."

Cash costs
Pardon the pun, but cash costs money. Within the retail segment, cash handling expenses run between 4.5 percent and 15.3 percent, according to analysis conducted by IHL Group in 2018. These numbers are mirrored in the FI sector, with McKinsey reporting cash costing between five and ten percent of bank operational budgets. 

This is true even for the FI monoliths: As Reuters reports, even the big boys like Bank of America, JPMorgan Chase and Wells Fargo are feeling the heat as they struggle to reduce cash costs. While JP Morgan's initial strategy of reducing staff on hand yielded short term returns, the broader results, according to CFO Marianne Lake, were unhappy customers and long wait times.

"We're paying attention to what our customers are telling us about the experience in branches," JP Morgan CFO Marianne Lake said in response to the blowback. "We've added some tellers there, and a few bankers."

The fact that cash costs can't be shrunk even as usage dips poses a serious challenge for banks and credit unions. As McKinsey points out, keeping cash operations lean and efficient is the only way to stay above water with the industry in flux. To this end, here are a few tips that can help develop your cash strategy within the branch:

Don't sacrifice service
As the JP Morgan example underscores, often the first to fall in the war against cash cost is in-branch service – with disastrous results.

"There are fundamental costs associated with running a broad retail franchise," Bob Hedges, leader at consulting firm A.T. Kearney, told Reuters. "You can move to part-time help, you can let the carpet get a little more worn, but these are just short-term tactics."

We've written extensively about how exemplary customer service is the cornerstone of branch success, so there's no getting around the fact that FIs simply can't afford to cut corners there. Instead, cash cost reductions need to be tackled head on, calling on banks to…

Leverage the power of automation
With the substantial human cost of handling cash, automation represents an area where costs can be significantly reduced if factored into a operational strategy. In light of this, AI driven cash management systems – like cash recyclers, sophisticated ATMs and Interactive Teller Machines (ITMs) – are helping retail banks optimize their services. This technology allows banks to increase efficiency, security and cost management at the branch level.

Observe and follow trends
Student debt is proving to be quite the albatross for millennials, many of whom owe tens of thousands of dollars to pay off their tuition. CNBC reported twentysomethings put $351 per month, on average, to reduce their debt load.

This may explain why young people tend to have fewer credit cards, with millennials averaging 2.52 per person and Generation Z approximately 1.44, according to Experian's State of Credit study. With Generation Z also among the chief users of branches, investing in cash recyclers can provide the accounting and security your branch needs to address spending and money handling trends. 

Efficient, optimized cash management is a cornerstone of a fully functioning financial institution; big or small. Ultimately, determining the best cash management strategy can be a tricky balance of understanding consumer needs and mapping them to the hardware and process capabilities available. BranchServ has the technologies and service experts that can help you refine and execute your cash strategy. For more information about what we do and what systems we have to offer – like the LTA-350 cash recycler – please contact us today!