Following the cost reductions of the last three years, today’s bet for financial organizations is the increase of productivity achieving in parallel savings in resources. Toward that direction banks are reevaluating their modus operandi, examining solutions and processes that will help maintain or increase their operational agility and efficiency, whilst containing their outflows. 

In 2009 we witnessed banks halt the expansion of their most costly transactions channels, namely their branch and self-service networks, while in some cases they downsized these networks. However, this solution could only be a temporary one and with short-term results, since these two networks remain vastly popular and are the pillars of retail banking transactions. Today, banks are considering more systemic options that will not affect their market shares, and are analyzing the operational cost of each transaction point in a greater detail aiming towards optimization and not cessation. 

For example, as far as the self-service network is concerned, it has been found that the cost managing cash may reach up to 40% of its total operational costs. This cost includes the safe cash transfer and replenishment, as well as the cost of money itself, which derives from stagnant cash that is not being used in a more profitable way by the bank. Similar costs, if not to such extend, accrue from other points of cash storage, such as branch vaults and safes.  

To optimize cash management, software solutions have been developed that forecast at any moment and with increased precision the cash needs of each transaction point, whether this is a branch (ATMs and vault), or an off-site ATM. In a simulation research conducted by Kaunas University of Technology, Vilnius University and the company JSC, it has been proven that the implementation of cash management optimization solutions may reduce cost as much as 20%.

These solutions are based on the use of forecasting algorithms which take into consideration data from the transaction history, the days and hours of operation of the transaction channels (holidays, special days, etc) and other variables which affect cash demand. The variety of factors taken in, allows the exact forecast of the amount of cash to be needed, even for transaction points outside the bank branch.

The benefits emanating from the use of an appropriate cash management solution are significant:

  • Central management and depiction of total remaining cash per transaction point
  • Reduction of excessive cash/stagnant cash at the transaction points by 20-40%
  • Cash management and transfer cost reduction 
  • Reduction of indirect cost of non served withdrawals due to lack of cash 
  • More efficient scheduling and management of money trains
  • Standardization of management and control
  • Central monitoring of accounting, balances and reports
  • Mitigation of risk exposure and losses 

Cash management solutions are extremely versatile and may be implemented at any bank, regardless of size, but also at other organizations with extended cash transaction networks, such as super markets, public utility organizations, etc. With the costs at the point of transaction representing both a major outflow and a key revenue stream for organizations, the business case of implementing such a solution is solid. 

Mellon Market Research & Analysis