The Curious Case of Correspondent Banking 2.0

Curious Case of Correspondent Banking 2.0 | Diebold blog

A New Perspective on Cash Recycling

In the retail banking industry, one of the most common themes we see is the quest to drive efficiency. A major pain point in the system is cash management and transportation. Cash replenishment costs alone can add up to more than 30% of the cost to manage an ATM network.

It probably comes as no surprise then that Diebold works with many financial institutions to examine every aspect of their cash management journey, identifying inefficient processes and areas where new technology can make a difference. One fascinating use case we’re exploring in Latin America is an entirely new approach to a well-established regional banking strategy.

Most South and Central Americans (as well as inhabitants of some Middle Eastern countries and other pockets around the globe) are familiar with a remote banking service commonly known as Correspondent Banking or Agent Banking. For those new to the idea, a quick description may be in order.

Latin America is primarily a cash-based society. Our banks are often full of people – customers and non-customers – queuing up to deposit money, cash checks, pay bills or conduct remittances. Additionally, many of our consumers are “underbanked” due simply to the lack of banking services in remote areas. For all of these reasons, Correspondent Banking has developed.

In this scenario, a lottery agent, post office or other non-financial business partners with a financial institution to offer banking services at their own commercial establishment. While availability of services may vary from place to place, the partnership helps alleviate some of the congestion at traditional bank branches, and reaches a much larger percentage of the population through small businesses in villages and remote areas.

I believe there is an even bigger opportunity still waiting to be tackled, however. That opportunity lies with cash recycling. We call it Correspondent Banking 2.0, a premise that migrates consumers from correspondent tellers (i.e. the cashier behind the counter) to cash recycling self-service terminals.

In this new scenario, cash recycling ATMs perform the same duties and enable the same functionality as a banking agent, while reducing the cost of transactions dramatically. But even more compelling is the efficiency gains FIs can realize by reducing their cost to manage the cash in the ATM.

How?

Small business owners with a cash recycling ATM on site now have the ability to do their nightly cash drops directly at the self-service terminal. In the morning, the ATM is full of cash and ready for consumers. Cash in transit (CIT) and drop box visits can be drastically reduced as the symbiotic relationship between consumer and business owner fuels the self-service terminal with much less interaction from the FI.

Cash recycling is a safe, effective, cost-efficient way to encourage financial inclusion, not just in Latin America but around the globe, in areas that are cash-based, with many residents living in remote areas. In the coming years, I predict we will see more cash recyclers used in this innovative way, as banks look to extend their reach and offer additional touchpoints for their consumers. Cash recycling is a win-win solution for both FIs and consumers.

Let’s talk further about how cash recycling self-service terminals could drive efficiencies and encourage financial inclusion for your institution. Contact us today.