First let me start with a simple definition of a supply chain – according to Wikipedia, “ A supply chain is a system of organizations, people, technology, activities, information and resources involved in moving a product or service from supplier to customer”.
Next, let’s refine that definition to incorporate what is meant by supply chain optimization - again, according to Wikipedia, “Supply Chain Optimization is the application of processes and tools to ensure the optimal operation of a manufacturing and distribution supply chain. This includes the optimal placement of inventory within the supply chain, minimizing operating costs (including manufacturing costs, transportation costs, and distribution costs). This often involves the application of mathematical modelling techniques using computer software.
Lastly comes the concept of yield management – according to Wikipedia this is defined as “Yield management, also known as revenue management, is the process of understanding, anticipating and influencing consumer behaviour in order to maximize revenue or profits from a fixed, perishable resource.”
Now some of you may argue that currency by definition is not exactly a “perishable resource”. However I would challenge that assumption based on two facts: first – currency deteriorates in fitness and eventually perishes and: second – currency that is neither in circulation nor available to be in circulation has at least perished temporarily.
Therefore my simple premise is this – the yield of a note or coin (yield in this case meaning the interest or profit that can be earned from a piece of circulating currency) is directly proportional to its velocity (the speed with which it moves through our hands). In some countries the yield is also related to quality – simply because distributors (commercial and central banks, primarily) can charge different distribution fees according to the quality of the currency. In other words, in some regions of the globe there is a demand for better quality.
To tie the concepts of optimization and yield together as it refers to currency we need to understand the need for money. Without some form of money we would have no way to trade. Without trade we would have no commerce and without commerce we would have no way to better our station in life. Betterment of our situation is as fundamental to the human condition as breathing – we all want to succeed and make a better life for our communities (communities of family, friends, neighbours, countrymen, etc.). Therefore the faster we can make money move the more opportunity we have to profit from that movement. Yet there is an inherent risk – yield can also be negative! If we don’t understand the nature of currency or respect its fundamental influence on all societies we are doomed to experience only negative yield – loss not profit.
In today’s complex world we need the assistance of (at least simplistic) artificial intelligence (aka computer software) to assist us in managing this supply chain. Obviously commercial banks can benefit from such applications. Less obviously and for substantially different reasons central banks can benefit from these applications. Latterly and least obviously cash centric businesses (retailers and casinos for example) can also benefit. Before we can move to a utopia of a cashless society we must master the management of this physical medium. If we don’t we will be the victims of even greater crashes than we have experienced recently – simply because there will be no real medium that governments can use to bail us out. Without a commonly trustworthy medium of value no recovery would be possible.
My advice is to understand the value of currency – whether you live in a glass tower in a large city and “work at a job”, or live in a grass hut on a beach and “work for sustenance” – because one thing is inevitable – currency has always and will always continue to change its nature, value and meaning.
As always – and particularly as a result of this post – your comments are encouraged and most welcome.
A friend of mine forwarded a very interesting video to me the other day. The presentation deals with the demise of physical currency due to it’s irrelevant nature in an Internet enabled global society. I have always been a bit of a Luddite when it comes to the prevalence of cash as the favoured payment medium for most common “everyday” transactions. It is simple, inexpensive and anonymous. For these reasons and others I have always maintained that cash will remain king at least through my lifetime. However, the presenter of this speech Mr. Douglas Rushkoff makes some very interesting observations about the origins of cash, whom it benefits in society and lastly why it’s demise may come more quickly than some of us think.
The demise of cash not a new topic to me, however the seriousness of the paradigm shift being proposed is. I can readily understand the necessity for services such as PayPal, Linden Dollars and SmartyPig (well maybe not Linden dollars as a serious replacement, but that is another topic for debate), which are not necessarily based on a physical medium but that can still be commuted into one. What Mr. Ruskoff is postulating is the complete breakdown of money as a physical medium because it no longer benefits society, but ultimately attempts to control it. If his hypothesis is accurate and this revolution comes to be, we could all stand to get very wealthy by being on the leading edge of the conversion. And if that is the case, who better to take advantage of the evolution than those of us who are most familiar with the old style of money?
Take some time when you can and watch the following video – then let us know your thoughts…
On January 6, American Banker published an article entitled Mobile Transfers Taking Aim at Cash Payments. It was really an excellent article on some of the new mobile peer-to-peer (P2P) transfer offerings coming to the market in the near future. The article also outlined some of the pricing strategies currently being tested or implemented at a number of financial institutions.
Many of you have heard me speak on the future of cash and have heard me say that the only real threat to cash on the horizon is contactless payments. Cash is primarily used for small purchases and contactless payments are meant specifically for small purchases. You’ve also heard me say that it will be 3-5 years before the infrastructure and pricing is in place to make any real dent in cash usage and I still believe that.
I suppose that one could start a “cash threat” list by adding mobile P2P transfers to contactless payments. P2P transfers are an extremely useful tool and are already in place in much of the world – and not just via PayPal. When I moved back to the US from the UK in 2007, I was shocked that I was unable to move money from my account to another person’s account through my bank. After being able to do it for 2 years in London, I just assumed that it would be deployed in the US when I returned. But no – we’re still talking about it and trying to figure out the best deployment method while the average consumer is using PayPal to do exactly what we keep talking about.
There are two primary issues to be worked out. The first is determining which accounts to use to move money. Some services require you to set up separate accounts that are funded by a bank account to facilitate the transfer. The receiver also has a separate account from which the money can be moved to their bank account. The good news is that, according to the article, we’re on track to take care of this problem by eliminating those middle accounts and going directly between bank accounts.
The second issue is on pricing. There has been a lot of talk about the tolerance of consumers to pay for P2P transfers. I believe that this is wishful thinking. For consumer to business, sure, perhaps the merchant will be willing to absorb some charges. But consumer to consumer? We’re all consumers. Why would we do that?
If you lose the March Madness pool (yes, my mind is already going there) at the office, will you be willing to pay a surcharge to send money to the winner? If you are paying the babysitter or are paying your brother back for picking up takeout, will one of them be willing to pick up the small fee or are you willing to pay it? Or more likely, will you just give him/her a check? Or pay in cash?
As long as there are free payment mechanisms, fee-based P2P transfers don’t stand a chance for widespread uptake. And as long as that’s the case, the threat to cash is minimal. And don’t even get me started on the lack of anonymity….
So you’ve heard me rail on about the unbanked and underbanked for the last couple of weeks and I’m not quite ready to let it go. In addition to outlining the results of the FDIC study, I’d also like to give one final thought on what we as banks do about it.
There have been lots of programs to reach the unbanked and underbanked but all of those efforts have revolved around getting this group of consumers to open bank accounts. Once you open a DDA, you can pay bills by check or through online banking, you have a debit card for ATM withdrawals and payments, and of course you have a safe place to hold your money. But there is a problem…we’re always working from the base of a bank account. Once you have the bank account, we make it easier to use all of the other services.
What if we approached the unbanked and underbanked from the opposite direction? Instead of requiring the bank account, what if we offered the services on a fee basis? This group is already paying transaction-based fees. They’re comfortable with it. What if we offered them what they are already buying from non-bank competitors, with the end goal that we someday move them to a bank account? This addresses concerns on both sides – the bank gets more comfortable with the customer and their habits before opening the account and the customer has time to build up trust in the bank before committing.
Many banks have some fee-based services but there isn’t necessarily a guided philosophy around them and what they can mean to the bank in the long-term. I’m not deluded enough that I think we can change philosophies tomorrow. (Some of you may think I am but I promise I’m not!) But why not consider it? We certainly have a revenue hole to fill in 2010 so we can’t afford to dismiss these consumers.
A final note….I have really enjoyed contributing to Counting on Currency in 2009 and look forward to many more conversations with you in 2010. Happy holidays and best wishes for a happy, healthy and prosperous 2010!S
The FDIC study – take two. In my last post, I focused on the unbanked and some misconceptions about that group. Today I’d like to focus on the underbanked — those households that have a deposit account but rely on non-bank financial services. These are households that are already bank customers but are also using alternative financial services (AFS). The FDIC study provides great insight into what those AFS products are – good information for a bank that’s looking to improve cross-sales to existing clients.
Last Wednesday, the FDIC released the results of the National Survey of Unbanked and Underbanked Households. The survey found that over 1 in 4 US households are unbanked or underbanked. There have always been outreach efforts by some banks to bring the unbanked into the fold. But as I’ve included unbanked information in my presentations on self-service, I’ve had some comments that these groups are not “good” bank clients so banks don’t see any need to reach out.
The New York Times recently published an article indicating that the percentage of people planning to use cash for holiday shopping in 2009 is up 9.2% over 2008 and this isn’t the first time we’ve heard that cash has made a comeback in 2009. But will it last? Is this a permanent philosophical and practical change? Or is cash actually experiencing death throes as debit cards, prepaid cards and contactless payments continue their steady rise?
Following from Nicole’s post about the choices US banks are facing in their replacement of overdraft fees comes news from UK banks regarding their choice pending final court rulings on overdraft fees there. With traditional straight back and stiff upper lip, the UK banking industry is prepared to answer the demise of overdraft fees with a reinstatement of ATM fees. Said one UK banking spokesperson, “We are an industry, not a charity. People have to remember that it does not cost nothing.”.
Brendan gave a great outline of the new overdraft fee regulations coming into effect in the US in 2010. Given, these are the new Fed rules and we haven’t yet heard what the damage will be from legislation pending in Congress, but at least we have something to work toward now. But what does that mean? In my estimation, banks have four options for how to address the new legislation.
The news hit the wire late last week and now it is official. For those of you who don’t live in the US, a little background before we start. There has been great discussion and debate at the Federal Reserve Bank about changing some of the service fee allowances that financial institutions are allowed to levy their customers. Like other countries (Australia for one, regarding ATM interchange fees) the United States banking regulators have seen the need to start regulating how customers are charged for some of their banking services.
I’m a little off my blog game as I flit from conference to conference this autumn but I’m picking up lots of great information along the way. I started out a couple of weeks ago at the ATM, Debit & Prepaid Forum in Las Vegas which was very well attended. This was my first one and I have to say that it was nice to be among a group of people speaking the same language. While there, I hosted a workshop on successful deployment of self-service. I thought I would share with you a couple of key points that came out of that session.
The subject of this post is a little misleading. For the record I want to state officially that I am neither an exhibitor myself nor do I own a company that exhibits at this event. I work for a company that exhibits at this event and as a result of my employment I have found myself attending the 2008 and 2009 events in Orlando and Boston respectively.
Financial institutions have long tracked the amount of currency they hold in cash vaults, at branches, and in ATMs. However, retail merchants have not been able to manage currency as closely as banks. Instead of simply moving cash internally as needed, as banks do, retailers have had to move cash to and from the banks daily to get credit, gain interest for deposits, and maintain the necessary mix of currency denominations. And they have either had to pay costly armored carrier fees or risk the safety of employees carrying large amounts of cash between the stores and the banks.
The past year or so has been by and large a good one for the currency industry. The economic meltdown has led to increased demand for cash, while the banks and financial institutions, preoccupied with rather more weighty issues than pushing people toward payment instruments that benefit them, have gone quiet on the subject.
Last week, I had the pleasure of speaking at Fiserv’s Cash & Logistics Connect Forum in Boston. While I certainly liked speaking on the topic of cash management in a year when there have been so many interesting changes (and so much more cash in circulation!), I mostly enjoyed meeting so many people who live and breathe currency management on a daily basis.
So how can a bank transform itself to a cashless branch without scaring away the customers that still want and need to come to the branch? Any hardware manufacturer will be happy to tell you how as it relates to the layout and functionality. But the key question is how to do it in such a way that the branch is more profitable and the customers are not alienated.
Hello faithful reader! For those of you who have been reading this blog since I made my first post almost two years ago you will have noticed many changes. It started off as some things do – simply as an experiment in new media directed at the men and women who slave tirelessly at the business of making sure we all have enough cash in-hand to buy the things we want and need each day.
I have heard and seen editorials in the past few weeks warning of the complacency that comes with narrowly escaping an economic depression. These same editorialists are asking the same questions – mostly of our leaders – why are they not warning us of not heeding the lessons we apparently just learned. If this recession was so quick to fix (I said quick, not inexpensive), then why can’t we just continue with our cavalier ways. If it happens again the governments and central banks will just bail us out again, right?
If you haven’t considered the cashless branch before, you may be asking “Why?”, quickly followed by “How?” I could do entire presentations and research notes on this topic, so I’m probably not going to do these questions justice here. But let me just hit on some highlights on the “Why” today and the “How” in my next post.
I’ve been working in currency management since 2001 and although my last year at TowerGroup has allowed me to branch out (pun intended) into new areas, I’m always excited when I get a chance to write a research note or give a presentation about currency management. It’s my warm blanket on a cold day – my comfort zone – so I’m thrilled to have an excuse to spend time on it on a regular basis.
I guess it must be official, if Ben said it. Today at 10:56:40AM Eastern Time MarketWatch started spreading the news, “Fed Chief Bernanke: The Recession is Likely Over”. Watch your words here folks, the vocabulary is littered with exception traps! Here’s another classic, directly quoted from the closing lines of their newsflash, “Bernanke noted that many economists now expect the labor market to recover slowly. But he said this was only a forecast and might be wrong”.
Has the consumer learned their credit-aversion lesson yet? Ask this question of any cash manager at a bank – whether in retail (Branch and ATM) or in vaults and their answer is likely to be in the affirmative. I have not heard from any of my cash management network that the demand for cash has started to fall off in recent months. In fact anecdotal evidence would seem to support the idea that we are all using our cash – and only cash – as a simple yet effective way to control our spending and consequently bolster our meager savings.
The height of confirmation that one is doing something of meaning for a community (to me at least) is when others want to voluntarily join in to help make it even better. This small contribution to the voice of the currency community has been so confirmed – a second time! First it needs to be [...]
As readers will know I have noted with interest the gestation of proposed financial institution regulatory and policy changes. First was the question of Who would be made responsible; would it be just one government department?; more than one?; would non-government bodies be involved? After that question was settled we moved on to What were they going to do, to Whom and How? These are the threatening three questions that (in my humble opinion) still cause affected professionals to lose much sleep.
In a past life I worked for one of the premier currency sorter manufacturers, which is primarily where I cut my teeth in this business. One of the things that impressed me then (and still does now) is the technology that goes into authenticating currency. One technology in particular that I saw as revolutionary was the ability to read the serial number of a note as it flew down a track on a sorter at something like 30 feet per second. The system not only reads the serial number but can compare it to a known database of “authentic” notes and “tracked” notes (the latter having been identified as used in criminal activity).
As many of you will know from reading past posts in Counting On Currency, I am a great supporter of the International Commercial Cash Operations Seminar, which is normally held every 18 months or so at a “destination city” in North America.
The organizers of the ICCOS events made a decision last year to expand their very successful formula first to the EMEA region and (soon to be announced) to the Asia region. Based on the success of the most recent even held this past March in Chicago, I am certain that attendees of the first ICCOS EMEA to be held in Amsterdam, The Netherlands.
Imagine my surprise (and delight at the timely irony) when I discovered the business model that is unfolding as a type of eBay for cash. In this scenario, you register an account with the likes of Licuro.com, Moneyaisle.com or Spaarbod.nl (brush up on your dutch before visiting that last site!) and put your cash up for auction.
There are few people in the developed world who have not been affected in some way by the economic meltdown that started in ernest last year. One of the fundamental shifts that I see occurring is the real skepticism we now approach our financial services with.
We have all heard the litany of requests from governments, eco-agencies and individuals as they call for the mobilization of the individual to assist in making the planet a healthier place to live. So how does this apply to the currency management supply chain? Interesting question – and one that (surprisingly) has an answer.
More and more financial institutions are making the move to utilizing Software as a Service (SaaS) instead of incurring the expense and required internal effort to setup and maintain in-house software solutions. Let me point out that SaaS applications are not about to replace core banking systems anytime soon. However when it comes to managing discretionary services that are free of risk when it comes to identifying personal information (see previous post) financial institutions both large and small are now seriously considering such applications.
Albina Community Bancorp in Portland, Ore., Friday reported losing $1.8 million in the fourth quarter, compared with a $60,000 loss for the same period in 2008. […]
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Informally known as Bankstats. It consists of: money and lending; monetary financial institutions' balance sheets; further analyses of deposits and lending; external business of banks operating in the UK, public sector debt and the money markets (including gilt repo and stock lending); sterling commercial paper, other debt securities, capital issues; fi […]
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Since nobody has mentioned it so far: To be able to sell Linden Dollars, you must have bought at least a small amount of them before. 8 days after your first real money transaction with LL, you are eligable to sell Linden Dollars. You should check your Billing/Trading Limits for that. […]
This is not completely correct:There s a difference between "Payment Info on File" and "Payment Info used". To have ""Payment Info registered", it's sufficient to follow Irene's suggestion/helpful tip. You don't need to be a premium member to have "Payment Info" registered.Please, also see here: htt […]
The FAQ doesn't really give many answers on how to resolve it, past contacting Support.What is the Risk API?The Risk API is a programming interface available to third party exchanges. It uses a complicated algorithm to identify accounts with nonstandard activity and determine the risk of fraud compared to standard activity, with respect to trading Linde […]
Purchase from LindenX or XstreetSL?see this wiki entry for lindenX Purchases . or go to http://www.secondlife.com/support click "new ticket" then open a ticket. select "billing and $L" and then select billing type as "LindenX" then fill in the transaction amount and date and time. once you have filled in the ticket a billing sup […]
Hello Victoria, try contacting your Credit Card company or Paypal to see if there's been a problem with your payment method, see Linden Lab Official:Credit Card Failure and Linden Lab Official:Why did my billing agreement with PayPal fail?For further help and advice contact the Billing Team, phone numbers on the Support front page at https://support.sec […]
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First let me start with a simple definition of a supply chain – according to Wikipedia, “ A supply chain is a system of organizations, people, technology, activities, information and resources involved in moving a product or service from supplier to customer”.
To tie the concepts of optimization and yield together as it refers to currency we need to understand the need for money. Without some form of money we would have no way to trade. Without trade we would have no commerce and without commerce we would have no way to better our station in life. Betterment of our situation is as fundamental to the human condition as breathing – we all want to succeed and make a better life for our communities (communities of family, friends, neighbours, countrymen, etc.). Therefore the faster we can make money move the more opportunity we have to profit from that movement. Yet there is an inherent risk – yield can also be negative! If we don’t understand the nature of currency or respect its fundamental influence on all societies we are doomed to experience only negative yield – loss not profit.
In today’s complex world we need the assistance of (at least simplistic) artificial intelligence (aka computer software) to assist us in managing this supply chain. Obviously commercial banks can benefit from such applications. Less obviously and for substantially different reasons central banks can benefit from these applications. Latterly and least obviously cash centric businesses (retailers and casinos for example) can also benefit. Before we can move to a utopia of a cashless society we must master the management of this physical medium. If we don’t we will be the victims of even greater crashes than we have experienced recently – simply because there will be no real medium that governments can use to bail us out. Without a commonly trustworthy medium of value no recovery would be possible.
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I suppose that one could start a “cash threat” list by adding mobile P2P transfers to contactless payments. P2P transfers are an extremely useful tool and are already in place in much of the world – and not just via PayPal. When I moved back to the US from the UK in 2007, I was shocked that I was unable to move money from my account to another person’s account through my bank. After being able to do it for 2 years in London, I just assumed that it would be deployed in the US when I returned. But no – we’re still talking about it and trying to figure out the best deployment method while the average consumer is using PayPal to do exactly what we keep talking about.
