CASH MANAGEMENT AND OPTIMIZATION TRENDS

CURRENCY RESEARCH 2013 REVIEW SEMINAR

Cash Supply Chain Management Agenda  Players / Drivers

 Objectives / Challenges  Solutions

 Implementation Risks  Future Outlook

Cash Supply Chain Management Players/Actors  Central Banks  Wholesale Cash Processors

 Retail Environment

How Much Does Currency Cost? 4

Central Bank

Reporting Year

Currency costs, mln USD

Share of currency costs in Bank’s Operating expenses

Reserve Bank of Australia

2012

54.9

14%

Bank of Canada

2011

54.4

15%

Bank of England

2012

114.9

20%

Reserve Bank of New Zealand

2011

10.7

24%

Bank of Japan

2011

1,038.5

24%

Reserve Bank of India

2012

514.7

27%

Sources: Banks’ published financial statements. Please note that due to differences in accounting and reporting standards these numbers may not always be directly comparable.

©2012 Secura Monde International Ltd

Cash Supply Chain Management

Cash Supply Chain Management

Cash Supply Chain Management

Cash Supply Chain Management Incentives and Drivers

Wholesale Cash Processors  Banks (inhouse cash centers)

 Cash Management Companies

(CiTs)  3rd Party Processors

Cash Supply Chain Management

Cash Supply Chain Management

Cash Supply Chain Management

Cash Supply Chain Management

Source: ABSA

Cash Supply Chain Management Drivers:  Reduced costs

 Improved service level  Improved Business Processes

 Reduced risks  Compliance

Cash Supply Chain Management Annual Costs of Operating an ATM

$38,025

Insurance 3%

Other 9%

Occupancy 10%

Depreciation 10% Help Desk 3% H/W Maint 4% FLM 5% Consumables 2%

Network/Transaction 16%

Cost of Cash 12%

Source: USA Tier 1 Bank

Cash Replenishment 12%

Cash Management 1% Total Cash Related: Interest on Cash 13% 38%

Cash Supply Chain Management

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Cash Supply Chain Management 23

Reduction of time for accepting a bag

-4 % -45 %

Total expenditure for a branch office

-3 % Total expenditure on an ATM

-30 %

-8 % -10 %

Reduction in time of Costs for collection document/data one ATM capture Average daily balances in a branch Source: VTB24

Cash Supply Chain Management Incentives and Drivers Retail Environment  Bank Retail Deposit/Recycling  Merchants  Gaming Sector  Transport and Vending Companies

Balance of Competing Costs 25

Holding cash

©2012 Secura Monde International Ltd

Moving cash

Cash Supply Chain Management

Behavior of the Costs

Costs

27

Cmov – cost of a single cash shipment, incl. handling and transport V – projected annual volume of excess cash to be shipped out Ch – cost of holding a unit of cash per year

Optimal shipment size = √((2𝐶_𝑚𝑜𝑣 𝑉)/𝐶_ℎ )

Total costs

Holding costs

Moving costs

Low sensitivity to error

©2012 Secura Monde International Ltd

Average shipment size

Cash Supply Chain Management Objectives / Challenges  Business Processes (Cash Orders etc)

 Cash Floats  Devices (Maintenance/Availability)

 Reduction in resources (FTE)  Transport / Insurance / Storage costs  Real time control-decisions

Cash Supply Chain Management 2.1 Business Case 1

Forecast of the demand

Although both machines are in the same facility they are treated as different cash points. Each one of them is forecasted to have an optimal total financial and logistical cost of the cash.

Total Cost

€

Transport Cost

Min.

Cash Cost (Interest rate)

# replineshments (frequency)

We use Currency Manager to forecast the demand and Device Manager to monitor the maintenance of the devices.

Source: Prosegur

Retail Cash Cycle Optimization

Retail Cash Cycle Optimization

Retail Cash Cycle Optimization

Retail Cash Cycle Optimization

Cash Supply Chain Management Forecasting & Optimization Solutions  In-House  Network based (IT Infrastructure)  Cloud Based (SaaS)  Outsourcing to CMCs

Cash Supply Chain Management Solution Providers

Cash Supply Chain Management Implementation Risks  Data – Availability and quality  Skilled analysts – Ongoing process

 Buy in - Understanding business rules  Branch roll out strategy

Cash Supply Chain Management Future Outlook  What else can be forecast or optimized

in the cash supply chain?

Cash Supply Chain Management Future Outlook  Standardization: Can this be considered

an industry-wide optimization?

Cash Supply Chain Management

Cash Supply Chain Management Future Outlook  White Label, Multi-Branch Banking

Cash Supply Chain Management

Cash Supply Chain Management

Cash Supply Chain Management

Cash Supply Chain Management Future Outlook  ¿What’s the weather like tomorrow?

Cash Supply Chain Management Future Outlook  Globalization and Multi Country

Forecasting / Optimization

World Cash Trends and Lessons Learned from Global Conferences

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