Holistic Currency Management Can Save Top Banks $12 Million Per Year

7 August 2008

As financial institutions struggle to strike a balance between meeting customer demand and keeping costs down, new research from TowerGroup urges institutions to take a fresh look at their currency management strategies. This critical function is often the victim of “siloed” decision making for each link in the cash supply chain. TowerGroup finds that a holistic approach to cash supply chain management is the best way to achieve true cost savings, operational efficiency, and transparency.

TowerGroup estimates that savings generated by a truly enterprise-wide currency management program can range from $170,000 annually for a small bank to $12 million for a top-25 institution. Yet because of the various management and cost silos in place at many banks, holistic currency management has been slow to emerge. Banks that decide to deploy cash supply chain management software generally start with a single silo – either ATM, branch, or cash vault operations – an approach that is limited and impractical.

The author of the research is Nicole Sturgill, a research director and the newest member of the TowerGroup Delivery Channels research practice. “Banks find it challenging to monitor the transport of cash, forecast future cash requirements, and keep costs in check all at the same time. This process is complicated further by the fact that most cash management is performed within silos,” notes Sturgill. “Banks need to implement an enterprise-wide currency management program that allows them to optimize cash supply chain costs and more successfully balance the cost of holding cash versus transporting it.”

Highlights of the research include:
• TowerGroup believes that financial institutions deploying new technology for branches and ATMs as part of an overall reengineering effort should incorporate cash management software to further reduce currency costs.
• Currency management software options are the final piece of the puzzle to achieve full optimization – offering an organizational structure that views the cash supply chain as a whole, an on-demand replenishment schedule, and new technology designed to quickly recycle cash.
• Yet TowerGroup also believes that any decision to “flip the switch” and allow new software to make cash decisions for the entire supply chain at once is imprudent. Software alone will not produce cost savings or efficiencies for financial institutions. A change in organizational behavioral and processes is needed to make the successful transition.

Prior to joining TowerGroup, Sturgill was a business development manager at Transoft International. She worked with banks in both EMEA and North America, consulting on ATM deployment strategy and performing operational analyses, as well as specializing in cash supply chain strategy and implementation at client banks. Previously, Sturgill worked at Fifth Third Bank for almost 10 years, holding several positions in Commercial Banking and Operations. At TowerGroup, Sturgill’s research will focus on trends and developments in ATMs, self-service kiosks, contact centers, and cash vaults.

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