Managing the Single Euro Payments Area automated teller machine infrastructure: what does it take?
The European Payments Council ( ) 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 ( ) 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 ( ) 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 , 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 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 's objective to increase the efficiency of wholesale cash distribution based on harmonised processes, the 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 initiative establishes the harmonised logistics required to significantly reduce current complexities of managing the ATM infrastructure and related costs.
invites all players active in the cash cycle to join the action
With due consideration for the long lifecycle of ATM hardware, the 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 will reach out to all relevant stakeholders with specific proposals aimed at advancing this initiative.
Leonor Machado is the Chair of the 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 ( Newsletter, Issue 10, April 2011)
Significant Growth in Cashless Payments in Europe. Yet cash will remain predominant payment method in 2014 ( Newsletter, Issue 6, April 2010)
Overcoming the Homer Simpson in US. How to create a 'less-cash' society ( Newsletter, Issue 2, April 2009)
1The Future of Cash and Payments, 2010.
2Source: European ATM Security Team (EAST).
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