News in Brief

Bundesbank Faced with Sorting Flood Damaged Notes

In July Germany experienced severe flooding in some regions, as high as seven metres in the town of Bad Neuenahr-Ahrweiler for example. The result was at least 183 deaths and extensive damage.

It also resulted in significant quantities of banknotes stored in homes and businesses being damaged by flood water contaminated with mud, sewage and oil.

Over €50 million worth of notes have arrived at the Bundesbank, which is now having to process those notes, a task made more urgent because if left they can ‘solidify and become as hard as concrete’, according to Johannes Beerman, an executive director of the Bundesbank.

The notes have to be washed, dried and examined to check they are genuine before any reimbursement can be made. The Bundesbank requires over half of the note to be present for any reimbursement.

The Bundesbank receives €40 million in a normal year.

Zambia Faces an Exceptional Demand for Cash

The Bank of Zambia has said that demand for banknotes and coins has been more than expected this year during the crop marketing season and the general election.

The result is that the Bank, in collaboration with the commercial banks, has had to take extra steps to meet this demand. A part of the response has been to encourage the public to use non-cash payment methods.

The messaging from the Bank suggested that digital payments mean change is not required, and that, ‘the country is still experiencing the COVID-19 pandemic and the use of electronic payment methods provide a safe means by which transactions can be undertaken.

The Bank thus encourages the public to use electronic payment methods as they are safer, quicker and are provided at a lower cost’.

Kenya Sees ATM Numbers Fall

The number of ATMs in Kenya has reached an eight year low as banks close machines.

The Central Bank of Kenya (CBK) reports there to be 2,393 ATMs, the lowest number since 2013 when there were 2,377. The press suggests that in urban areas the population are moving over to digital services delivered by agents, the internet and mobile banking, and the CBK’s annual banking supervision report supports this.

KCB Bank is one of Kenya’s largest financial institutions. It has seen ATM transactions fall by 28%, while mobile, agent and internet transactions rose by 28%, 18% and 82% respectively. As a result, it reduced its ATM network by 12%. On the other hand, cash handled by mobile money agents grew 48%.

50 Years of US ATMs & What is Next

The ATM is 50 years old in the US. David Lott of the FRB Atlanta has recently written about this, as well as looking to the future.

In the 1970s there were attempts to use ATMs for selling stamps or transit fare cards, but this failed because they drove up the need for resupply visits and servicing costs. Adverts were put on the back of receipts, but this was abandoned when it was realised most people just threw them away. Adverts came back though when the Windows operating system allow graphics on the screens.

ATMs experienced a major boost when the law was changed in 1996 so that ATMs were no longer classified as branches and ending limits to where they could be placed. Off-premises ATMs and independently operated ATMs became possible. 60% of US ATMs today are not operated by financial institutions.

The latest change is the establishment of a globally interoperative software platform for Application Programming Interfaces (APIs). This work, taking over five years, has required over 400 companies in 55 countries to work together.

The benefit is new functions such as interactive teller sessions and cardless and contactless transaction support. These functions are needed to keep ATMs relevant in this digital age, and to allow vendors to create new services and revenue streams.

White Paper on Payment Choice

Volumatic, a provider of cash handling solutions, has issued a white paper ‘Consumers Demand Payment Choice’.

It explores whether we are heading towards the end of cash, the impact of the pandemic, the impact of a cashless society and finishes looking at how to create a resilient cash infrastructure.

The paper considers where there is friction in the cash system. For example, the cost of cash processing, cash security and theft risks, resource requirements for checking, banking and till management, the speed of the cash cycle and access to working capital, wastage with cash in transit and the lack of visibility with cash. Vaultex shared data that, during the pandemic, 60% of consumers experienced difficulties with coin devices and 36% experienced problems using cash in shops.

Other problem areas were limited opening hours of banks, reduced access to post offices and branch closures. 20% of small and medium size businesses experienced cash shortages giving change, 34% were affected by branch closures resulting in 40% holding more cash on site.

The paper suggests that the cash industry is innovating to address these issues, for example one-touch point-of-sale cash technology, databases that manage cash in transit, provisional crediting to improve working capital based on cash deposits. Strong networks for innovation have been created that share research, ideas and innovation.

This white paper is an example of that, since it was written with a wide base of collaborators and a foreword by the Bank of England.

Life Without a Bank Account

An interesting article in a publication called Leafly described the problems cannabis growers have in the US with cash.

Cannabis remains an illicit substance in the US. Although a bill is in the Senate, the SAFE Banking Act, which will address safe access to banking for cannabis growers, it has not yet been passed. As a result, many banks don’t want to run the risk of accepting cash from cannabis growers and the risk of extreme penalties or even closure.

The article describes the risks of holding significant sums of money in cash and having to pay all bills in cash, the risk of theft, the accounting problems of satisfying the tax officials that the books are right, that many government authorities and businesses, for example insurance companies, don’t accept cash payments, and not being able to take out loans.

The article describes how a businessman got round those challenges including having a series of safe houses around the city to hold the cash. On the other hand, when he did get a bank account, the cost was high, ‘It’s not cheap. You’re talking about a few thousand to actually have this account per month…’.