Article

The challenges of cash recycling

The demand for cash recyclers is following the demand for financial kiosks. Experts weigh in on the uses, challenges and future of cash recyclers.

June 15, 2006

The author is also editor of www.selfservice.org.

They're small, but they have a big future.

Cash recyclers are still limited in their capabilities and uses. Large cash recyclers hold hundreds of bills, compared to thousands of notes in bill dispensers. But as demand for financial kiosks grows, the interest in recyclers as an alternative to validator/dispenser combinations follows and companies continually improve recyclers to meet the demand.

We queried two experts in the cash recycler field, MEI strategic marketing manager Neil Young, and JCM vice president of commercial sales Dave Elich, to determine the benefits, the challenges and the future of cash recyclers.

KioskMarketplace.com: What are the key benefits of cash recycling?

Young: The immediate advantage is the cost savings associated with reducing the amount of float (bills needed for inventory) required to start up a self-service application. Over the long term, there are costs associated with cash management, which includes refilling the seed inventory and clearing and securing the cash. When retailers use the same cash that is paid in to dispense, they reduce these charges significantly. Recyclers also reduce employee contact with cash, delivering additional savings through reducing commercial cash handling fees, shrinkage and cash room activities.

Recyclers also improve the consumer cash experience by consolidating the input and output of the cash into a single device.

And, in terms of integration and footprint, one device to replace two separate devices means less space required, fewer container bins and cassettes to handle and store cash, and less communication ports required to control it.

KioskMarketplace.com: What indicates the demand for cash recyclers?

Elich: There is a general trend to automate more and more retail transactions and move those interactions to kiosks. When you do that, you have to do it in a cost-effective way, both in terms of size (of the kiosk), and in effectiveness resulting in savings to operator, such as less cash handled daily, less pick ups by armored car service, less inventory. Those combined factors drive the demand.

KioskMarketplace.com: What are current challenges in design and implementation of cash recyclers and how will they be overcome?

Young: Recyclers are complex devices involving mechanical, software and electronic components. The products will be useless at best, and turning away customers at worst, if they are not functioning properly, preventing the system from completing transactions or achieving its throughput targets.

Early entry models have not worked out all the bugs, are not reliable enough, and were not designed to optimize security and dispense the denominations of cash demanded by today's consumers.

Some of the specific challenges are: reliably accepting and transporting low-quality street money, designing a mechanism to make it easy to replenish denominations as needed, determining capacity requirements in terms of specific denomination types (which vary by industry, application, location and geographic markets) and closing the cash management cycle to avoid cash handling on the floor.

Addressing these needs requires the design of a recycler as a complete system. Integrating recyclers into new product platforms such as OEPTs for the quick-serve and c-store industries, and self-checkout systems for the grocery and chain store industries involves first understanding the footprint, power and communications requirements of the component. Then it requires working with a payment systems vendor that understands the requirements, and can provide the tools needed to integrate the component.

KioskMarketplace.com: Do you believe cash recyclers will eventually replace acceptors and dispensers in machines that use both?

Elich: Not only do we expect cash recyclers to replace acceptors and dispensers in kiosks, but we expect kiosks with cash recycling technology to replace more and more cash drawer operations. Think about what happened when VCRs first hit the market. There were issues of consumer acceptance, size constraints and cost considerations. Over time, as consumer acceptance of the product increased, improvements were made and costs came down. Compare that to the automatic transaction industry. Over time, we can expect that operator acceptance of the product will increase and the cost will decrease. There is a marked trend in the industry toward more and more automation, and as that increases, we expect recycling to increase in parallel.