Issue 11 - July 2011
SEPA for Cash
One Size Fits AllEPC launches an initiative to ensure the efficient management of the SEPA ATM infrastructure
13.07.11 By Leonor Machado
There are almost 400,000 automatic teller machines (ATMs) installed across Europe and the single and multi denomination currency cassettes, which sit inside each ATM's cash dispenser, come in a wide variety of dimensions and sizes. Cash cassettes and ATMs are increasingly protected by Intelligent Banknote Neutralisation Systems (IBNS's), which are activated in the event of a robbery or theft to stain the banknotes with ink (typically red, a purple variant or green). Today, IBNS's need to be customised for different cash cassette models and ATM types. This lack of standardisation in the ATM landscape is one of the factors contributing to the substantial cost of wholesale cash distribution in SEPA.
Expenditures related to wholesale cash distribution amount to 84 billion euros annually (Retail Banking Research: The Future of Cash and Payments, 2010). The long-term solution to this problem - and a main objective of the SEPA programme - is to incentivise a shift to electronic payment instruments. In the mid-term however, it is necessary to increase the efficiency of wholesale cash distribution based on harmonised processes. In line with this approach, the European Payments Council (EPC) recently launched an initiative to standardise the size of ATM cash cassettes and to create interoperability among IBNS's. The EPC invites players active in the cash cycle to join this initiative. Leonor Machado explains how harmonised logistics support the efficient management of the SEPA ATM infrastructure.
Key Information in this Article
Substantial resources are required to maintain the continuous operation of a secure automatic teller machine (ATM) infrastructure. The process involves payment service providers, cash in transit companies and national central banks providing various services in the cash cycle, which rely on frequent, labour intensive interventions.
The European Payments Council (EPC) proposes to standardise the size of ATM cash cassettes and create interoperability among Intelligent Banknote Neutralisation Systems (IBNS's) with a view to reduce current complexities and costs.
Taking into consideration the long lifecycle of ATM hardware, the EPC believes that efforts to create open standards in this area should be taken forward as soon as possible.
In recognition of positive early market feedback, the EPC will reach out to all relevant stakeholders active in the cash cycle, with specific proposals aimed at advancing this initiative.
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Managing the Single Euro Payments Area automated teller machine infrastructure: what does it take?
The European Payments Council (EPC) continuously emphasises that in the long run, a shift from cash payments to electronic payments is a main objective of the Single Euro Payments Area (SEPA) initiative. In the mid-term however, it is necessary to increase the efficiency of wholesale cash distribution based on harmonised processes, because despite political and strategic imperatives to reduce cash usage and the fact that it accounts for a falling proportion of retail payments, cash is still the predominant retail payment method in Europe. According to Retail Banking Research (RBR)1, cash accounted for 78 percent of 388 billion retail payments across the continent in 2008, equating to nearly 301 billion transactions that same year. The total cost of accepting, distributing, managing, handling, processing and recycling cash at the time was 84 billion euros; equivalent to 0.60 percent of Europe's gross domestic product or 130 euros per person. RBR forecasts that there will be a significant increase in the use of cashless payments in Europe between now and 2014, accompanied by a general decline in the number of cash payments. Cash is expected however, to remain the continent's main retail payment method even at the end of this period.
In line with these figures, statistics provided by national central banks (NCBs) demonstrate that the volume of cash in circulation has continued to increase over the past ten years.
In 2010, there were almost 400,000 automatic teller machines (ATMs) installed across Europe2, many of which no longer simply enable cash withdrawals and deposits now that payment service providers (PSPs) have identified the ATM screen as a convenient way to communicate with customers as an inexpensive marketing channel. The fact that more and more ATMs are protected by Intelligent Banknote Neutralisation Systems (IBNS's) is another important trend. These systems are activated in the event of a robbery or theft to stain banknotes with ink (typically red, a purple variant or green). This mechanism enables the identification of stolen notes so that NCBs can withdraw these from circulation.
Substantial resources are required to continuously maintain an operational and secure ATM infrastructure. The process involves PSPs, cash in transit (CIT) companies and NCBs providing various services in the cash cycle, which rely on frequent, labour intensive and manual interventions. Managing an ATM network means ensuring availability of sufficient cash and / or the timely retrieval of funds deposited, handling, transport and sorting of cash, verification of authenticity and fitness of banknotes, and validation of the nominal value of cash in transport once it reaches the designated participant in the cycle.
In addition, interventions need to be fine-tuned to take into account the wide variety of dimensions and sizes of the cash cassettes that are inserted into the ATM cash dispenser. This prohibits efficient storage of large numbers of cassettes in the CIT trucks or in the storage facilities of cash centres. Differences in the size and dimension of cash cassettes also make it necessary to customise the IBNS's protecting the cassette and the ATM.
This results in a lack of interoperability among these systems. Managing the diverse hardware and IBNS's also requires time consuming training to be delivered for, and undertaken by, staff members responsible for handling the equipment.
An EPC initiative to standardise the size of ATM cassettes and create interoperability among IBNS's ensures increased efficiency based on harmonised logistics
In line with the EPC's objective to increase the efficiency of wholesale cash distribution based on harmonised processes, the EPC recently launched an initiative to standardise the size of the ATM cash cassettes and create interoperability among IBNS's.
The provision of an open ATM cash cassette standard will decrease maintenance costs. The economies of scale resulting from the introduction of common standards in this area will lead to further cost reductions. Making standard size receptacles available will also allow empty cassettes to be replenished with deposits retrieved from a different ATM in the same locality. This standardisation initiative therefore responds to, and takes advantage of, the trend to deposit cash at ATMs. Last but not least is the environmental benefit; a 'one size fits all' approach allows CITs to efficiently store cash cassettes in their trucks thereby reducing the number of cash transport journeys required.
Interoperability among IBNS's will also increase the choices of providers active in the cash cycle. These providers will no longer be forced to rely on specific IBNS's compatible only with a limited number of cash cassette models, ATM types and / or ATM cassette delivery cases. Standardisation in this area ensures streamlined procedures when activating or deactivating these systems. As a result, less time and effort is required to familiarise staff with the wide variety of procedures existing today.
In summary, the EPC initiative establishes the harmonised logistics required to significantly reduce current complexities of managing the SEPA ATM infrastructure and related costs.
EPC invites all players active in the cash cycle to join the action
With due consideration for the long lifecycle of ATM hardware, the EPC calls on all players active in the cash cycle to engage in its standardisation initiative. Standardisation of containers used in the aircraft and naval industries might provide some useful insight and best practices on how processes can be put in place. Early dialogue on this subject has already taken place among CIT companies, ATM manufacturers and IBNS developers at the European ATMs 2011 conference, hosted by the ATM Industry Association (ATMIA) in June this year. In recognition of the positive feedback received, the EPC will reach out to all relevant stakeholders with specific proposals aimed at advancing this initiative.
Leonor Machado is the Chair of the EPC Cash Working Group.
Related article in this issue:
Related articles in previous issues:
Dare to be Bold: Electronic Legal Tender is an Option. A SEPA legal tender model spanning both cash and electronic payments (EPC Newsletter, Issue 10, April 2011)
Significant Growth in Cashless Payments in Europe. Yet cash will remain predominant payment method in 2014 (EPC Newsletter, Issue 6, April 2010)
Overcoming the Homer Simpson in US. How to create a 'less-cash' society (EPC Newsletter, Issue 2, April 2009)
1The Future of Cash and Payments, 2010.
2Source: European ATM Security Team (EAST).
Other articles in this issue
13.07.11 What is Your View? - EPC invites stakeholders to participate in consultations on the SEPA Scheme Rulebooks and the SEPA Cards Standardisation Volume - Book of Requirements By Ugo Bechis and Javier Santamaría 13.07.11 EPC Goes Social - EPC invites stakeholders to connect to the newly launched EPC social media platforms By Gerard Hartsink 13.07.11 EPC Plenary Meeting Update - Main decisions taken in June 2011 By Gerard Hartsink 13.07.11 Change is Inevitable... - 'Except from vending machines' (Robert C. Gallagher): the impact of new standards proposed by the CPSS-IOSCO for financial market infrastructures on payment service providers By Dermot Turing 13.07.11 Get Ready for More - Basel III marks only the beginning of increased regulatory scrutiny of the payments market By Ruth Wandhöfer 13.07.11 A Closer Look at Innovation in Retail Payments - Central bank research in preparation: a report on first findings of working group established by the Committee on Payment and Settlement Systems By Dirk Schrade 13.07.11 Facing the Facts in July 2011 - The EPC Newsletter tracks the progress of SEPA migration By Gerard Hartsink 13.07.11 Direct Debit: Killing it Softly - Reflections on the likely demise of one of the most popular payment instruments in Europe By Javier Santamaría 13.07.11 The Art of Integration - Finnish Government Shared Services Centre for Finance and HR simultaneously migrates to SEPA and new IT systems introduced at central government agencies By Mikko Grönman (Interview) 13.07.11 Arrested Development*** - Inconsistencies between European Commission´s objectives threaten to hamper SEPA progress By Gerard Hartsink 13.07.11 SEPA Direct Debit for Billers: the Creditor Identifier (Go Get It!) - EPC Newsletter series provides support for billers preparing migration to the SDD Schemes By Javier Santamaría and Herman Segers
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