Transforming money movement in the bank branch

Published October 15, 2020

 

Today, when a consumer wants to transfer money to someone else, they frequently hop onto an app or service like Zelle®, Paypal or Alipay to move their cash instantly. But many others still head to one of their financial institution’s branches to manage their transactions including deposit/withdrawal, transferring money, especially in large amounts, or complex transfers. That’s because the branch is a physical endpoint that turns financial instruments like checks, money drafts and wire transfers into money.

The branch facilitates a cash network putting money into their customers’ personal and business banking accounts so they can use it for paying bills, money orders, buying foreign currency, or loading a prepaid card among other needs.

In this article, we’ll shed some light on how financial institutions can improve managing physical money movement and minimize the complexity and cost of it as they look to right-size their branch networks.

 

Reasons for money movement between bank branches

Why do financial institutions move money around? So, they can meet the needs of their customers, whether that’s adding money to an account, withdrawing it, transferring it to another account within the branch or to another branch, as well as buy/sell between tellers in a branch. Simply holding their banking customers’ deposits in a vault doesn’t help the financial institution make money – it needs to offer and sell loans, so they can gain interest on those and drive revenue.

 

Why do financial institutions move money around? So they can meet the needs of their customers, whether that’s adding money to an account, withdrawing it, transferring it to another account within the branch or to another branch, as well as buy/sell between tellers in a branch.

COVID-19 put consistent money movement under the spotlight when financial institutions found it a challenging time to support their branch network and their customers. Many financial institutions were physically constrained by older systems that were not agile enough or able to adapt easily to provide cash or access to services to support their customer needs. And as branches re-opened, there is a real need to review lessons learned.  According to a Simon-Kucher Partners survey, after COVID-19 lockdown, banks must not inhibit their ability to grow deposits, service customers and expand wallet share over the next 18-24 months as they build a resilient, agile bank distribution and servicing model.

 

Transforming branch money movement: Reducing the expense

Financial institutions need cash on hand in their branches for a variety of reasons: to handle withdrawals, stock ATMs/ITMs, fill cash drawers—and their vault. They facilitate money movement inside their branches using a “buy/sell” of cash between tellers or devices, such as ATMs. They can also use the “buy/sell” process to move money between their own branches to manage cash availability and keep ATMs stocked.

One of the main challenges for banks is that moving money between branches can be costly and determining how much cash to have on hand is complicated. On the one hand, branches don’t want to have too much cash because excess cash cannot be invested. At the same time, they need to fulfill their customers’ needs with enough cash and in the right denominations, but if they don’t have enough on hand and need to immediately get a cash order they will likely face a hefty fee.

 

One of the main challenges for banks is that moving money between branches can be costly and determining how much cash to have on hand is complicated.

On top of striking the right “cash-on-hand” balance, branches also have the following things to consider:

  • The Federal Reserve requires every bank branch to always have enough cash to cover 10% of their customer’s total deposits. 
  • There are expensive fixed costs for vaults.
  • They need to keep security in mind. For example, the fewer times their ATMs need to be stocked and cash-in transit services used the better.
  • In general, it is expensive to move money around so minimizing movement is always a priority.
  • Cash-in transit itself can be a handful for banks partly because they have to comply with regulations and security legislations, so banks must offer them the visibility they need to meet the requirements.
  • Forecasting funds isn’t an exact science for banks mainly because their expenditures are both anticipated and random. So, requests for cash have to be adjusted accordingly keeping in mind that the need to avoid having excess cash on hand.

 

In general, it is expensive to move money around so minimizing movement is always a priority.

So how can financial institutions better manage the physical movement of cash into the branch as well as between their tellers, devices and wider branch network? They can work with partners like NCR who automate buy/sell solutions with a channel services platform that offers modern connected branch services helping to drive money into the branch. What’s more, a modern channel service platform can also enable remote deposit and pre-staged services for merchants to preorder cash and coin for their businesses and pick up with little physical interaction with a branch teller or from a self-service locker.

 

So how can financial institutions better manage the physical movement of cash into the branch as well as between their tellers, devices and wider branch network? They can work with partners like NCR who automate buy/sell solutions with a channel services platform that offers modern connected branch services helping to drive money into the branch.

With a modern services-based platform using APIs, light weight service orchestration and cloud, financial institutions can swiftly respond to changing branch money movement needs, improve cash forecasting with cash management  and cash-in-transit solutions and save the bank money, time and hassle from them and their customers.

Financial institutions are also increasingly turning to ATM cash recyclers—indeed cash recycling is the fastest-growing segment globally for all types of ATMs. Cash recycling ATMs can accept, validate, sort and store banknotes quickly and reliably. They allow for deposit and dispense from the same cassette, reducing the number of ATM cash replenishments required. They can also reduce cash-in-transit costs, minimize cash handling, improve fraud management and more.    

Traditional bank vaults are iconic—movies have been depicting them in tension-filled scenes for decades, but yesterday’s vault is being replaced in many bank branches with virtual vaults. While many of them are still have the same physical vault properties, now they do more than just store money. Virtual vaults use software that gives branch managers automated, real-time information and check image capture that they can use to better manage their cash on hand estimates.

 

Traditional bank vaults are iconic—movies have been depicting them in tension-filled scenes for decades, but yesterday’s vault is being replaced in many bank branches with virtual vaults.

What’s clear, is that financial institutions must work on future-proofing money movement for their branches.  They need to review their physical money movement infrastructure, ensuring it can easily connect with new digital touchpoints and be able to quickly respond to customer needs helping to bring more money into the bank.

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