Rumours of the death of hard cash continue to swirl around the business world. But, despite an undoubted decline in the use of notes and coins in recent years as the digital economy has grown rapidly, there is still a significant number of transactions carried out using cash. There are many reasons why this is so, ranging from old habits, worries over security and fraud to straightforward budgeting methods, but the fact remains that while cash might be down, it is certainly not out.
This is borne out by official statistics. Figures recently released by trade association UK Finance and consultancy Accenture, found that 85% of people in the UK now use contactless payment methods on a regular basis. But, according to the survey, cash remains the second-most frequently used method of payment. And the researchers say that while cash will probably continue to fall in popularity over the next 10 years, they expect the rate of decline to slow as its use becomes concentrated among people who strongly prefer it.
This is important for corporate treasurers, particularly those that are in consumer-facing sectors such as retail and hospitality, as they will need to continue to deal with the risks associated in handling the physical cash that is generated, held on premises and transferred to their banking partners. And treasurers need to understand how consumers use cash, as well as what they can do with it once it is in their own tills.
For a significant proportion of consumers, cash remains very relevant. There are two main reasons for this. The first is convenience, the second is budgeting – if people can see exactly what is in their physical wallet, they know how much they can spend.
But there are risks. Theft is a key one. There is also the risk of receiving counterfeit notes and coins, and manual-handling errors during the purchase process. However, consumers likewise can identify the risks of purchasing in a contactless world, and the recent CrowdStrike incident, where many payment systems failed as the result of a computer bug, served to highlight how things can go wrong in the digital world.
So, the first priority for corporates is to be open to receiving cash. Insisting on only accepting card payments for goods and services would bar a certain proportion of customers. A smart business is one that is agnostic over the payment method. But as with the consumer, there are risks associated with handling cash for the corporates. And this is where technology is playing a key role.
Then there is the process of moving the cash from business premises and into bank accounts. In the past, staff may have been expected to take the cash to their local bank branch – again, inherent with risk. But now the availability of external cash collection service providers (‘carriers’) is increasingly addressing this. Working out the balance between frequent collections (which can be expensive) and the physical risks of holding too much cash can be complex – especially when the calculation can vary from location to location. For companies with significant cash transactions, there will be experts who are able to optimise the collection arrangements. But for smaller businesses, they may need help from experts – either at the banks or with the carriers.
For smaller businesses, banking hubs can help to solve this complexity. These hubs are where a group of banks come together to help serve a local community that no longer has a bank branch. They are being created for both consumers and businesses to ensure an appropriate level of accessibility to banking services – this, of course, includes cash deposits and withdrawals. All nine of the largest business banks provide cash-handling facilities at these hubs, which can offer same day clearing and low fees. More and more hubs are coming on-stream with more than 100 expected by the end of 2024.
For example, Barclays and HSBC jointly oversee Vaultex Cash Centres. Opened in 2007, Vaultex is the largest member of the Bank of England’s note circulation scheme. It handles 44% of notes and coins in the UK – £100bn worth of notes and £1.2bn worth of coins each year. With 10 sites based throughout the UK, Vaultex has processed £500bn of cash in the last five years.
Post Offices are also serving this demand, alongside the carriers that can offer a secure, door-to-door service.
In fact, it is probably reasonable to say that business and consumers now have a greater choice in how their cash is handled than ever before – from local branches, hubs, carriers and Post Office branches.
As it has become evident that cash will remain an important part of the economy, over the past five years, market infrastructure providers have invested heavily in applying technology to resolve some of the challenges with cash handling. This includes:
As a result of these and other developments, cash handling should no longer be discouraged by the treasurer but seen as a key payment channel that can be cost effective and of no greater risk than others.
With changing customer behaviours and new technology solutions available, now is a good time to revisit your corporate strategy for cash. What solutions are now available, some of which may have only been in their infancy or in development when your approach was last reviewed? There are more options, and they don’t need to be supplied by a single partner. Some businesses may prefer a one-stop-shop approach, others may like the flexibility offered by turning to a range of suppliers for different services within the overall cash-handling cycle.
There are many options available, so it would be wise to speak to your current banking partners – what can they offer, what advice can they give. But perhaps more importantly, talk to your customers. Understand why they want to use cash and help support them to do so. Cash might not be king anymore, the crown might be slightly tarnished, but understanding a customer’s needs is what makes any business a smart business.
Today, the role of carriers extends beyond mere transportation; they are key partners in supporting businesses with comprehensive cash management solutions, ensuring operational continuity, and enhancing overall financial security.
Traditionally known for their role in physically transporting cash between locations, carriers are integral to ensuring the secure and efficient handling of physical notes and coins, which remains essential for various sectors, particularly retail, hospitality, and services.
In retail environments, carriers can ensure the safe movement of cash from tills to secure storage or banking facilities, reducing the risk of theft and allowing businesses to operate smoothly. They can also play a crucial role in cash logistics, managing cash deposits and withdrawals, and maintaining the flow of cash within the economy.
Carriers can integrate advanced technology into their services. They use GPS tracking and real-time monitoring systems to enhance security and efficiency. Some also provide data analytics services, helping businesses to optimise cash handling processes and improve financial management.
Nick Mayberry is Global Head of Payments and FX at Barclays Corporate Banking
Barclays Bank PLC is registered in England (Company No. 1026167) with its registered office at 1 Churchill Place, London E14 5HP. Barclays Bank PLC is authorised by the Prudential Regulation Authority, and regulated by the Financial Conduct Authority (Financial Services Register No.122702) and the Prudential Regulation Authority. Barclays is a trading name and trade mark of Barclays PLC and its subsidiaries. Find out about the Financial Services Register.