Fifth Third Bank | All Rights Reserved
Trends in Cash Handling and Evolution of Technology
Brian Downey, CTP
Fifth Third Bank
2 Fifth Third Bank | All Rights Reserved
The Debate: Is Cash Still King?
•Reports of Cash’s Death Are Premature
•The Wall Street Journal Tuesday, December 2, 2014
•Forget Mobile Payments, Here's Why Cash is Still King
•http://mashable.com/2013/07/31/why-cash-is-still-king
•Cash Is King No More As Mobile Payments Soar
•http://www.forbes.com/sites/tomgroenfeldt/2014/10/18/cash-is-king-no-more-as-mobile-payments-soar/
•Cash Is Still King for Small Purchases
•https://www.mainstreet.com/article/cash-still-king-small-purchases
•Why Cash Is No Longer King
•http://insights.wired.com/profiles/blogs/why-cash-is-no-longer-king#axzz3WZ0ekQwJ
3 Fifth Third Bank | All Rights Reserved
Key Currency Trends in the U.S.
Key Trends:
• In the 4th quarter of 2013, the amount spent in retail consumer sales was estimated at $1.187 trillion
• Cash is used 40 - 47% of the time for small value transactions, based on generation type
• Cash dominates small value payments, 66% of payments (Under $10) and 45% of payments ($10 to $25)
• Diary of Consumer Payment Choices
• The amount of currency in circulation within the U.S. has shown steady increases over recent periods.
• After a spike post 2008 recession, cash usage has shown a slight downturn.
• Consumers overwhelmingly choose cash for gifts to other people or for food / personal care items
• Cash handling costs are predicted to increase between 2% to 10% annually
• Cash handling costs are roughly 1% of Sales
Sources: Diary of Consumer Payment Choices, Survey of Consumer Payment Choice, and census.gov/retail
4 Fifth Third Bank | All Rights Reserved
Key Currency Trends in the U.S.
Key Trends:
• Cash is the primary source of small high transaction payments.
• 40% of payments are made with cash
•Cash payments represent 14% of the total value of payments
Source: http://www.frbsf.org/cash/files/FedNotes_Evidence_from_DCPC.pdf
5 Fifth Third Bank | All Rights Reserved
Key Currency Trends in the U.S.
Key Trends:
• Cash dominates small value payments, 66% of payments (Under $10) and 45% of payments ($10 to $25)
Source: http://www.frbsf.org/cash/files/FedNotes_Evidence_from_DCPC.pdf
6 Fifth Third Bank | All Rights Reserved
Key Currency Trends in the U.S.
Source: Diary of Consumer Payment Choices
PAYMENT PREFERENCE BY GENERATION
Cash is used 40 - 47% of the time for small value transactions, based on generation type
7 Fifth Third Bank | All Rights Reserved
Key Currency Trends in the U.S.
The amount of currency in circulation within the U.S. has shown steady increases over recent periods.
8 Fifth Third Bank | All Rights Reserved
Key Currency Trends in the U.S.
Source: Survey of Consumer Payment Choice
Cash Usage spiked in years after the 2008 recession. More recent updates of Consumer payments indicate a slight downturn in the usage of cash.
9 Fifth Third Bank | All Rights Reserved
Key Currency Trends in the U.S.
Key Trends:
• Cash is the primary form of payment for a large number of spending categories
Source: Diary of Consumer Payment Choices http://www.frbsf.org/cash/files/FedNotes_Evidence_from_DCPC.pdf
10 Fifth Third Bank | All Rights Reserved
Traditional Currency Management
Branch Deposits
In Footprint Deposits
Network Vaults
Value Proposition
• Reduced cash handling exp. • Eliminated need for costly Armored services • Direct Teller interaction and Drop Box access
• Risk of employee safety • Time away from the business • Need for multiple bank relationships • Account and Reconcilement complexity • Delayed receivables – impact to working
capital
• Lower cost option to national vaults services • Safe and secure cash delivery • Limits liability of cash in transit • Keeps employees in the store • Opportunity for same day availability
• Armored is expensive – clients responsibility • Armored Carrier Management • Impact on working capital management
• Reduce armored expenses • Consolidate bank relationships • Complete National Coverage • Keeps employees in the store • Opportunity for same day availability
• Armored is expensive – clients responsibility • Armored Carrier Management • Impact on working capital management • Multiple Armored Relationships
Disadvantages
Value Proposition Disadvantages
Value Proposition Disadvantages
11 Fifth Third Bank | All Rights Reserved
Evolution of Currency Networks
Banks are beginning to strategically align their deposit channels to serve the deposit needs of cash intensive Retailers and Merchants.
12 Fifth Third Bank | All Rights Reserved
The Smart Safe Timeline
2000 2007 2011 2012 2013 2014
Innovation...
Smart Safe Industry provides Retailers with
alternative delivery deposits
Vision...
Expansion into different segments with a managed
services approach
Dedication…
Key Industry players made the right investments to expand the smart safe
technology
CIT and Safe companies develop a solution for Retailers
to allow store receivables in safe via Bill Validator
technology
Bank’s expand business model
with CIT companies to provide next day provisional credit to
Retailers
Providers expand market offerings
working with multiple safe
providers creating an agnostic solution
Device Management Strategy will begin to
revolutionize the availablity of data and
how the network is managed
Market expands to provide recycling
capabilities
Provisional Credit
Safe Technology is transitioning from “Steel Boxes” to a complete currency management solution
13 Fifth Third Bank | All Rights Reserved
Technology Advantage and Value
Save Labor Improve Decisions
Earlier automated currency verification
Improve access to working capital
Optimize in-store currency
Reduce armored pickups
Decrease change orders
Optimize cash inventory
Early automated capture
Transaction logging
Management reporting
Real time transactional data
BAI/Treasury workstation integration
Reduce cash handling during service hours and closing
Eliminate bank trips
Improve floor presence of management
Enhanced customer experience
Improve Deposits Efficient Operations Mitigate Losses
More time on the floor with customers & staff resulting
in an increase of sales
Reduce armored service days by 50% to 75%
Reduce cash losses by 40% to 60%
Eliminate approximately 2.5 days of “dead” cash
Reduces in-store working capital by 25-75%
Spend time on what’s most important to you and your customers, while reducing the cost of
managing currency by 15% to 30%
Retailer Testimonials
Benefits that impact treasury, operations and loss prevention
14 Fifth Third Bank | All Rights Reserved 14
Holistic Currency Solutions
VRU Phone Ordering
Web Tracking/ Orders
Mailing and Tracking
Email and
Fax Reporting
Deposit Only Smart
Safes
Cash Recycling
Smart Safes
Branch Network
Bank Vault Network
Network Virtual
Vaults
15 Fifth Third Bank | All Rights Reserved
U.S. Consumer Payment Trends
16 Fifth Third Bank | All Rights Reserved
Show of Hands
• Pay with cash whenever it is an option?
• Not carrying any cash with them currently?
•Experience where not having cash caused an issue?
•Card swipe down, parking garage, tipping, splitting a meal, etc.
17 Fifth Third Bank | All Rights Reserved
Trend: Carrying Cash
• Roughly eight in 10 people carry less than $50 cash in their wallets on a regular basis
• Almost 50% of Americans carry $20 or less each day
• 9% of Americans carry no cash at all
• 7% of Americans carry more than $100 each day
Source: bankrate.com / http://www.washingtonpost.com/blogs/wonkblog/wp/2014/05/12/whats-in-your-wallet-probably-not-cash/
18 Fifth Third Bank | All Rights Reserved
Changing Consumer Payment Trends Impact
Key Trends:
• Financial Awareness / Budgeting Post Recession
•Cash Envelope Budgeting Approaches
•Made popular by financial teachers like Dave Ramsey
•Data Breaches
•Target, Anthem, others
•Consumers wary of data exposure
•Movement to enable cash payments with technology
•According to the FDIC - “20.0 percent of U.S. households (24.8 million) were underbanked in 2013, meaning that they had a bank account but also used alternative financial services (AFS) outside of the banking system.”
•https://www.fdic.gov/householdsurvey/
•PayNearMe – offers a cash network to make electronic payments
19 Fifth Third Bank | All Rights Reserved
Key Currency Trends in the U.S.
Key Trends:
• E-commerce Usage is increasing steadily to almost 7% of retail sales
• E-commerce typically not cash related transactions
Source: http://www.census.gov/retail/mrts/www/data/pdf/ec_current.pdf
20 Fifth Third Bank | All Rights Reserved
Changing Consumer Payment Trends Impact
Key Trends:
• Displacement of some traditionally cash transactions like Taxis.
•Uber / Lyft
•Some people don’t even carry cash (show of hands)
•Taxis never seem to want to take a card (the card reader is broken)
•Adoption by business travelers
•Uber Usage increased from March 2014-2015 from 16% to 47% of business traveler expense reports
•Receipt automatic
•No cash required
•http://www.pymnts.com/news/2015/uber-winning-over-business-traveler-market%e2%80%8f/
•In 2014 New York City alone reported 175 Million taxi trips at an average fare of $13.40 each.
•$2.3 Billion annually in taxi fares in one city. •http://www.nyc.gov/html/tlc/downloads/pdf/2014_taxicab_fact_book.pdf
21 Fifth Third Bank | All Rights Reserved
Changing Consumer Payment Trends Impact
Key Trends:
•Greater regulation and control around cash
•Anti-Money Laundering (AML) controls
•IRS looking to close tax loopholes opened by cash •https://www.frbatlanta.org/banking/feature/110417_portals.aspx
•Cashless Policy
•Delta, Continental, United, AirTran, Virgin America, Alaska, Frontier, and Midwest all are cashless airlines •http://www.nbcnews.com/id/34331231/ns/travel-travel_tips/t/airlines-want-your-money-not-your-cash/
22 Fifth Third Bank | All Rights Reserved
Changing Consumer Payment Trends Impact
32% of Apple Pay customers “forgot” using their phone at a merchant was an option –
InfoScout 73% of Millennials would be “more excited about a new offering in financial
services from Google, Amazon, Apple, PayPal or
Square than from their own nationwide bank –
Millennial Disruptor Index
51% percent of smart phone owners used mobile
banking in the past 12 months, up from 48
percent in 2013 – Federal Reserve
50 million mobile apps are downloaded daily, 95% are abandoned within a month –
SkyHook
56% of customers would adopt a more
complicated transaction for greater security –
Comrade mobile trends
69% would convert to mobile payments if merchants offered
specific discounts – Nielsen
Consumer Confusion
Is my phone
compatible for
mobile
payments?
Does this
merchant
take mobile
Payments?
Is my
information and
payment
secure?
I have too many
apps and
irrelevant offers
I trust my bank,
but they don’t
offer relevant
mobile apps
23 Fifth Third Bank | All Rights Reserved
Changing Consumer Payment Trends Impact
Apple Pay has not dominated market in its infancy, seeing limited transaction
volume since its launch
Who will drive acceptance &
usage?
Gartner estimates mobile payments will top $720 billion by 2017, up from $235
billion in 2014
Who will capture this volume?
New wallet entries are looking to own the transaction from spend data to
revenue share
What role will Banks hold and
how does it affect their business
model?
Major tech companies (Google, PayPal, Samsung) acquiring payment related
technology increasing speed to market while broadening wallet offerings
What is the strategy of these tech companies’
mobile wallet efforts?
24 Fifth Third Bank | All Rights Reserved
Banks Adapting to Consumers
When Asked: “Which companies are the most innovative”? 1
3 When Asked: “What wallet provider would you choose, if offered”?
Gang of 5 PayPal, Apple, Google, Amazon, Facebook Payment Networks = MC, Visa, AMEX, Discover Mobile Networks = ATT, Verizon, Microsoft, Sprint Banks:= BOA, Wells, CitiBank, US Bank
Graphs & Stats via Javelin , Google, Yankee
25 Fifth Third Bank | All Rights Reserved
Banks Adapting to Consumers
• Financial Institutions must leverage their relationships to increase adoption and position themselves in the new payment ecosystem
• Nearly half of all mobile banker users are likely to select their own bank
• Once a consumer designates a preference card, the vast majority of interest/revenue remain with that card
• Habit is a powerful force, and inertia alone can drive longer-term issuers that immediately ascend to top of wallet
• In 2014, “66% of the population has an interest in transacting on a mobile phone” and “84% us their smart phone while in the store”
Graphs & Stats via Javelin , Google, Yankee
Mobile payments at physical merchants are less than 1% of total payment transactions
Yet…
26 Fifth Third Bank | All Rights Reserved
Banks Adapting to Consumers
Key Trends:
•Banks are changing how they interact with customers
•Branch Transformation
•Changing consumer needs and competitive pressures to control costs
•Digitally Enabled Branches
•Speed and Efficiency / Deeper Engagement
•More Self Service
•Greater Capabilities at ATMs
•Video Branch Tellers
•Mobile Society
•Greater mobile banking adoption
•Mobile Check Solutions
•Online Banking
•Some Banks are Shifting Focus from Brick and Mortar to investing in mobile •http://thefinanser.co.uk/files/infosys.pdf
•https://www.bai.org/bankingstrategies/article.aspx?Id=32d6c46b-29dd-494a-aea8-0c00e08c3295
•http://www.banktech.com/channels/bank-of-america-will-close-more-branches-with-increasing-mobile-usage/d/d-id/1296790?
27 Fifth Third Bank | All Rights Reserved
Payments Evolution
Payments 1.0
Transaction Transaction
Electronic Data
Transaction
Security
Mobile
Omni-Channel
Analytics
Payments 2.0
Payments 3.0
Pa
ym
en
t E
vo
luti
on
28 Fifth Third Bank | All Rights Reserved
Thank You - Questions