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Over the past few years, industry experts have predicted the end of physical branches and that customers would progressively move away from cash transactions. However, in an article that was published in 2012, McKinsley & Co. showed that the share of cash in all American retail payments was still nearly one-third. This has forced financial institutions to re-think their models to better predict the amount of cash they’ll need to accommodate their account holders.

There are many factors that have limited the banking sector from optimizing their cash handling strategies. Here are two of those limits:

Traditional practices remain in place

Cash management practices haven’t changed in years in the banking sector. This is partly due to the fact that financial institutions aren’t willing to update their policies so that they take into account modern and better processes. Reluctance to invest in new technology adds to their intertia.

In most banks, policies are based on cash limits, and strictly prohibit branches from exceeding the centrally mandated levels. The real objectives of such cash limits are to:

  • Prevent the accumulation of excesses
  • Ensure that the entire volume of cash available can be insured
  • Minimize the risks associated with cash management

Such a policy lends itself to doing the same thing that has always been done. And the resulting inefficiencies merely highlight the moribund nature of the practice.

Staff turnover rates are too high

Banks are among the companies that change their personnel very often. This is actually one of the reasons why they’re always advertising teller openings on their websites. With all the time that takes to train new hires, one might wonder why these entities are not revising their hiring strategy. When turnover rates are high, banks get exposed to a variety of issues including:

  • Limiting complicated calculations that may introduce errors
  • Limiting the maximum amount of cash branches should hold
  • Bonding and insurance costs

Addressing all these issues is key to developing modern and effective cash handling practices. Applying any new strategy will require re-tooling the practices and standards currently in place. Specifically, the capturing, storage, and management of the data associated with cash movements in and out of the branches must be automated. Effective cash management strategies must take advantage of the same technological advances that are fueling the changes and growth in electroninc payments. The institutions that can effectively implement automated solutions will gain control and efficiencies that will show up on the bottom line.

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