It is undeniable that the financial technology space struggles defining innovation. Innovation has become synonymous with words like new, exciting, disruptive, modern, mutative, novel – to name a few. In a recent report, the Institute of Competitiveness and Prosperity declared that because of the interpretive nature of its definition, innovation has become interchangeable with invention when invention should be just one part of the process of innovation.
With the recent wave of new fintech start-ups touted en masse as both innovators and disruptors, we have to question if “new, exciting and modern” is enough to offer true innovation when a large number of these companies are unsuccessful. The issue arises when companies begin to invent before recognising what it is they are trying to achieve, leading to a proliferation of “solutions” looking for a problem.
Looking at innovation from an ATM perspective, the same issue arises. A quick Google search will tell you that the ATM of the future will be integrated with AI, have a robotic component, incorporate biometrics and be completely card free. This might indeed be the case, however, innovation doesn’t have to be confined to the futuristic and exciting. Robotics, for example, might well have a place in the development roadmap for ATMs, but today it isn’t financially viable and doesn’t solve the problems we face here and now.
Enter cash recycling at ATMs. Cash recycling isn’t actually new. The first cash recycling ATM was implemented in Japan in 1982 and is a more established phenomenon in BRIC countries such as China (2002) and India (2014). It is, however, arguably the most innovative development in recent years for self-service terminals. The premise is simple: customers and businesses alike can deposit cash at an ATM which will be automatically recycled for immediate use.
Why is this more innovative than contactless cash ATMs, NFC enabled ATMs and the tablet-esque super screens being rolled out by the Bank of America, for example? These innovations have purpose – contactless cash terminals allow customers to withdraw cash without their card, NFC enabled terminals offer the same premise, but with additional security; and 32-inch screens give financial institutions the opportunity to use more screen space for advertising, upselling and cross selling and to offer video tutorials. Recycling cash is admittedly not the most “exciting” innovation, however, it offers the functionality that best falls into the innovation category from all of these examples and here’s why:
It is feasible. Cash recycling ATMs are tried, tested, readily available and benefit the everyday consumer, the small business owner and the financial institution rolling them out.
It is relevant. Businesses and consumers no longer have to visit the bank branch to deposit money which is both convenient for them and in turn drives efficiency within a bank branch.
When paying money in at a bank branch, typically tellers must maintain minimum cash levels and cannot exceed the maximum cash limit in order to mitigate risk. When a teller is low or high on cash they have to buy or sell from the vault which is a dual control transaction and requires a supervisor. This removes two people from serving customers for approximately ten minutes at a time.
In fact, by using a cash recycling mechanism cash is only counted once, rather than the three times typical of a teller. A recycler can take cash in, authenticate the denomination and validity of the bill and store cash for later use. Any equipment or software brought in to automate a process needs to offer the trifecta of speed, accuracy and cost saving to be beneficial to both the business implementing it and the customers using it.
It is perceived as relatively new. Cash recycling has only been discussed in the mainstream financial media over the last two years regardless of its invention in the 80s, so whilst the idea isn’t new, the widespread application is.
It increases security. Cash never leaves a secure environment, there is a reduction in the need for cash deliveries and secure armored trucks and the human risk aspect of handling cash is removed.
It decreases costs. The costs of managing, transporting and handling cash are not to be underestimated. To put this in perspective, as a general rule cash handling expenses are said to represent approximately 40 per cent of the costs of running an ATM. According to ATM Marketplace, recycling alone reduces this daily expense to between 18 and 25 per cent by significantly lowering the costs associated with labour and security.
Another factor to take into consideration is the potential lost interest associated with over filling ATMs. If an FI doesn’t use an effective cash replenishment system to ensure efficiency, a study by BAI found that some machines hold up to 40 per cent more cash than needed. When these amounts of cash, technically in circulation, are multiplied by the number of ATMs in a network, the potential interest lost is not something that should be ignored.
In conclusion, it is this combination of saving time, money and resources that makes cash recycling the most innovative value-added service for ATMs today. ATMs are evolving to offer more security and more functionality, predicted by many hardware vendors to be able to perform in excess of 90 per cent of the operations that occur in branch by the close of 2018, and cash recycling will play a huge part in this transformation.
According to GijsVan Wulfen, a well-known international author on innovation: “An innovation is a feasible, relevant offering such as a product, service, process or experience with a viable business model that is perceived as new and is adopted by customers.” Suffice to say, the recycling component for ATMs ticks all the boxes.