Coin, Coin Everywhere and not a Cent to Spend

At the ICCOS Americas online conference there was, unusually, a coin panel, ‘Coin, coin everywhere and not a cent to spend.’ The focus was on what had happened to coins in the US in the pandemic, why a Coin Task Force had had to be set up and what the situation is now. The panel consisted of Kathleen Young from the Federal Reserve Cash Services Product Office, Ashley Yayock from Walmart, Thomas Strauser from Loomis, JR Davis from Davis Bankcorp and Linda Sherry from National Priorities Consumer Council.

Kathleen Young got to the heart of the problem with her explanation that usually for every 10 coins issued in the US, eight are returned. By the end of May this year only 4 and half came back. This is not a coin ‘shortage’, but a circulation problem.

The Mint normally provides 20% of the coins issued with the balance coming from recirculated coins. In these circumstances, the Federal Reserve just could not mint its way out of the problem, the shortfall was too great.

With the flow of coins around the cash cycle so severely disrupted, the task force was formed and it has been successful in creating levels of co-operation and joint working that have made a difference. Given that there are 10,000 financial institutions in the US, forming a task force to represent every sector of the cash cycle and to be effective was a challenge. The task force consists of 20 organisations with consumers represented by the retailers.

Part of the solution has had to be the introduction of an allocation system to manage stocks. Since it was introduced the allocation has been eased five times and deposits returns are almost back to normal. At the start of the crisis the coin shortage was national, but it is now regional and, in addition, there are now denominational hot spots. The dime (10 cents) and the nickel (5 cents) are currently allocated on a 50% and 25% basis.

Ashley Yayock brought this to life from a retailers perspective, albeit Walmart being the world’s largest retailer. For Walmart the issue was more coins in the wrong place than not enough coins. Walmart has a significant segment of its customers who are unbanked and this has made finding solutions urgent. Walmart has a large installed base of self-service terminals as well as ‘Money Centers’, which means it has a base requirement for coins for these to function. Initially it was only getting 50% 90% of the coins it needed.

Walmart moved to rounding up prices early in the pandemic, always in the customers’ favour. One side effect of this was that if pennies are rounded to nickels, you soon run out of nickels. If nickels are rounded to dimes, you then run out of dimes. Walmart considered using vouchers, but this would have created significant management issues.

Thomas Strauser reported that Loomis has seen revenues down because of less coin wrapping. Customer service has been a big operational challenge. The system was set up based on a stable situation and on a ‘Just In Time’ basis. The need to manually change orders and to work with financial institutions to move stocks to where they were needed meant the existing system did not work well. Customer’s were not able to manipulate their orders before sending them in.

Holdings are now stable, or even up, but allocations at financial institutions are not yet stable. There is still the need to rebalance stocks to be in the places they are needed. A lot of work has been done to facilitate swaps of coin holdings between customers and new tools and reports have been created to do this.

JR Davis noted their own experience with coin redemption taking a nose dive. He noted the implications for society of what is happening, both social inclusion and the longer-term impact on cash. This tied in with Linda Sherry and Consumer Action. Even before the pandemic they had been working to create a coalition for access to cash for the significant number of people earning under $25,000 a year.

She highlighted, as well, the implications for cash based businesses. She pointed out that the low paid have access to mobile phones and so can benefit when coin redemption equipment issues an e-gift card without a fee, rather than the normal fees for using the machines.

Although the situation is returning to a normal cycle, the task force is focused on what happens if the pandemic cycles through again. All of the speakers noted how the new ways of doing things have introduced impressive levels of cooperation, the ability to benchmark against others, and real innovation.

There was a concern that parts of organisations who previously did not engage with cash will now revert away and questions were asked about what will stick and what will not. The switch away from coins through more online shopping and digital spending represents a major challenge if it is sustained, and there was real concern about the financial inclusion implications of this.

The priorities now are how to educate people, retailers and financial institutions to get and keep coins moving, and given that the Federal Reserve now has coin inventory and is shipping it, to ensure that at every stage in the cash cycle organisations are not sitting on stocks. The Federal Reserve’s coin allocation relaxations must flow through to the consumer.

This was an excellent session where the realities of maintaining the cash cycle in a pandemic were clearly described.