In discussions with various industry players, it would seem that in an ironic twist, despite the multitude of electronic and digital alternatives, the use of cash is actually increasing. Therefore, a continuous and concentrated effort is required to protect it from falling into the hands of criminals.
According to Richard Phillips, joint CEO of Cash Connect Management Solutions, the lower income groups in South Africa have more cash at their disposal than ever before, and this has led to more cash being in circulation. Added to this, consumers in general are slow adopters of banking and electronic payment technologies. It is estimated that 67% of South African adults are unbanked.
Not only is it more expensive to use technology and bank electronically, but given the instances of credit card and ATM fraud as well as all of the various forms of identity theft that are widely reported, the average consumer is sceptical and feels much more secure with cash. This may well be a result of not understanding the technology on offer, but it is the consumer’s reality and it affects their decision-making accordingly.
He says that the cash contribution to the GDP in the early 2000s increased annually by an average of 2.5%, whereas the amount of cash in circulation over the last 10 years increased on average by 25%. According to the ATM Association, approximately 60% of retail consumers still use cash to make their payments, and 84% of all global payments remain cash. Cash remains favoured for high-frequency, low-value transactions.
Christo Terblanche, MD of G4S Deposita and acting MD of G4S Cash Solutions, adds that cash accounts for 80% of all payment transactions. Cash is over 27 centuries old and has been a trusted form of payment for many years as it allows full and final settlement of accounts instantaneously and provides complete anonymity.
With its increasing popularity, one would imagine criminals are becoming more adept at producing counterfeit banknotes. However, Terblanche feels that, conversely, crime fighters are actually improving their ability to detect and deter counterfeiting.
Phillips believes that a large part of the growth of cash in circulation in South Africa can be attributed to the significant and growing size of the informal economy. Due to the nature of it, the informal sector is difficult to measure precisely as its activities are not recorded. It is however estimated that the size of this sector is in the region of 28% of the country’s GDP, which makes it worth approximately R165 billion.
This would make it 2.5 times bigger than our entire agricultural sector, and nearly 70% the size of the mining sector. This sector would in most instances be made up of lower income earners, largely using cash to make payments for groceries, food, transport (including petrol), clothing, entertainment, children’s education and airtime.
Cash is an attractive business
Is cash handling still such a dangerous occupation as it was a few years ago? The incidents of heists have decreased so is it still important to pay for specialists to handle your cash?
According to Terblanche, when pressure on the economy increases, there is often an increase in the popularity of cash mainly due to the cost associated with electronic payments. This is especially prevalent when minimum limits are placed on credit cards, so people will tend to use cash for purchases of lower value while electronic cards are used for higher value items.
Clive Strover, CEO of Bullion IT, says that the USA and Europe have been great drivers of the move from cash to credit card transacting. However, at a recent conference held in Barcelona, Spain, it was determined that the converse is actually true on an international level. Here in South Africa, cash reigns supreme except in the upper LSM shopping centres, where credit cards are used for high-end purchases.
Interestingly, while the incidence of heists has decreased, the incidence of business robberies continues to grow. The main target of criminals in business robberies is cash. To minimise the opportunity for these robbers to gain access to businesses’ cash, they need to secure their cash in a robust cash acceptor such as the Category 4 vault supplied by Cash Connect.
He explains that the robustness of the cash acceptor vault gives the cash management company the ability to assume the risk for the cash from the time it is deposited into that vault, until the moment it is deposited into the business owner’s bank account.
“Robbers know when business premises are protected by a Category 4 vault, and this will almost always cause them to reconsider the attack and ‘deflect’ their attention to another, more vulnerable business that is unprotected or that may be using lightweight, soft skin devices,” he says.
Dealing with temptation
Terblanche agrees that one needs to disincentivise criminals by making use of appropriate technology such as cross pavement carriers, onsite counting and recycling facilities and protected cash in transit (CIT) vehicles. There is significant pressure on the industry to devise cash handling solutions that reduce the risk, as is apparent in the adoption of more innovative cash solutions in certain malls. Using cash handling specialists will allow businesses to apply the best solutions to their specific requirements.
Cash shrinkage can occur at several places along the cash handling value chain, both onsite and once the cash has left the business site to be banked. Internally, cash is exposed to many opportunities for theft or losses to occur, each time it is handled and/or counted by staff. It is also exposed to the risk of on-site robberies unless adequately protected, for example in a hardened vault.
Phillips cites statistics indicating that over 94% of business robberies occur with insider participation. Cash is also stolen whilst in transit to the bank. Although cash businesses are largely aware of the threat of cash shrinkage that they are exposed to, they are not always aware of its extent, who is responsible for it, how they are doing it, or how to stop it. As a consequence, they run the risk of making ill-informed choices which do not necessarily fulfil the basic requirements needed to prevent or at least reduce the risk.
Terblanche says that it is critical to reassess the current supply chain policy, automation of cash handling processes and ways in which to shorten the cash handling cycle. Because third-party cash handling is a grudge purchase, suppliers need to educate customers on the exact benefits they can derive in terms of safety and wellbeing of employees and customers, reputation and insurance risk.
Strover comments that due to the constant threat of armed robberies, there is a high level of stress placed on both employees and customers. Cash handling companies need to stress the benefits that accrue from using a cash handling service and/or instrument.
He explains that by using a product such as CashGuard, there is an automatic elimination of cash related employee theft (cashier and back office), hence an elimination of cash related disciplinary and CCMA hearings associated with such actions. The fear of armed robbery is also removed since the cash is contained in a secure, sealed and tamper-proof unit. This automatically instils retailer brand confidence in both employees and customers. Another upside is that the amount of time needed for management to cash up is drastically reduced, freeing them up for other managerial tasks.
Cash solutions
Bullion IT guarantees its customers that they will save at least 80% on the purchase of CashGuard because of the savings it creates, from the day the system is installed. The system is purportedly so successful that cashiers have been known to resign once it is implemented since they realise that the store is no longer a soft target. CashGuard effectively handles the cash management process from the moment a customer pays cash for his purchase to the moment the cash is deposited into the retailer’s bank account.
CashGuard consists of a note recycler controlled by the casher and a coin recycler operated by the customer. Notes are fed into the recycler and all currencies are automatically counted and the correct change is issued. A prototype system, currently in the testing phase, will see the back office stop being eliminated due to a device attached to the emptying box.
Phillips says that Cash Connect Management Solutions is a specialist service provider in the payments space. “We provide a 100% holistic cash management solution for our clients. This is aimed at giving a business complete peace of mind, and it enables the business owner to deal with one company for all their cash management needs, from drop in-store to value in the bank.
“We improve both operational and cost efficiencies in the business, enabling the business owner to spend more time focused on developing their business’s potential than on protecting the cash they make from it. Our Category 4 vault range is a real deterrent to armed attacks, and this not only protects the cash, but more importantly the business owner’s staff and customers as well.”
He says that they connect the device via GPRS to their management system (WebFlo) through which they can monitor and administer the value chain. The customer’s cashiers are able to deposit the cash receipts continuously throughout the trading period, thereby removing the cash as a target in store. The deposit transactions are transmitted to the company’s WebFlo and processed into direct credits to the customer’s nominated bank accounts. Cash Connect assumes the risk for the cash from the moment it is deposited into the vault.
G4S offers an end-to-end reliable cash handling solution for the self-service, retail and financial sectors, that includes both front and back end solutions, cash recycling and cash payments. All solutions are customised to suit a wide range of cash handling requirements.
These services include the safe collection, processing, counting, recycling and dispensing of cash. G4S also offers ATM hard and software solutions, ATM engineering, bank branch automation solutions, cash in transit, cash online, cash processing, CASH360 retail solutions, high value logistics and insurance.
Employing specialists gets results
Both Phillips and Terblanche assert that a better understanding is needed by customers of the importance of protecting cash and the people who deal with it, by employing the services of specialised cash handling companies who know and can mitigate against the risks. The aim is to convert traditional cash control processes to an automated end-to-end cash management service that will ultimately save money.
“Believing that automation will add costs to the business is simply a myth. The truth is that automation will lead to anything between 10% and 45% on overall savings to the business. The traditional costs of managing cash in a business include in-store cash insurance, cash in transit insurance, the cash in transit service fee, cash shrinkage between till and bank, the cost of funds arising from the delays of up to three days before the value is available in the bank account, the bank cash deposit fee and the cost of the back of store, cash counting supervision,” says Phillips.
Heading Strover’s wish list is that banks would become more lenient on their lending policies for stores wishing to purchase cash management solutions. The reality is that by reducing fraud and theft of cash in stores, there will be more money to deposit into the bank. A win-win for all stakeholders.
Not only is there a significant saving derived from deploying appropriate and reliable cash handling services, but the safeguarding of employee and customer lives is substantially increased. The old adage ‘penny wise, pound foolish’ has a very sobering applicability in this instance.
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