Fifth Third Covers the Hidden Costs of Cash’s Last Mile

Watch more: Need to Know: Fifth Third Bank, Robert Norman

Cash still matters in a digital economy. Much of the world has gone digital, yet for millions of consumers, cash remains a critical payment method. It still accounts for roughly 30% of tender, particularly in small, everyday purchases where it is fast, familiar and universally accepted.

Robert Norman, senior vice president of cash logistics strategy at Fifth Third Bank, said: “We have seen that there’s a high adoption of cash users in two specific areas: The convenience stores and the quick-service restaurants.” Transactions at these establishment tend to have lower payment values, and the households that frequent those establishments also embrace the use of cash more readily than other cohorts. Bills and coins have made a comeback in the wake of the pandemic.

The continued use of cash has operational consequences, with costs that come with reconciliation and deposit.

He broke those costs into three categories: “There’s labor that’s associated with that from the retailer. There’s safety, too,” as employees handle the cash, “and then there’s the efficiency and the movement of that deposit, which is really where the bank’s main core product offering began with.”

Those categories translate into tangible expense tied to armored car pickups. On the labor side, if employees spend part of their shift reconciling cash, that translates into additional labor expense and time lost.

Norman added: “In a traditional world where there’s no technology, you have an employee that accepts it during their shift, they’re going to hand that off to a supervisor to count that, prepare it for a next day, maybe there’s a manager to recount it before they prepare a deposit to go to the bank. So that’s three touch points at minimum that are going on.”

The effect on reconciliation is even more striking. “Today, you have to wait for that to cycle through the process as a retailer. So that’s costing you money by not having access to your cash,” Norman said.

Making Cash Behave Like Digital Payments

Norman described the shift technology brings: Technology can improve the last mile of cash. We can make an actual bill of legal tender behave like a digital payment by capturing its value the moment it is placed in a secure device.

He explained that smart safes allow retailers to digitize the value of cash at the point of deposit: “We think that that piece of it is 100% when technology makes this bill or these notes a digital payment now. So now we’ve enabled that deposit to happen through more of the digital world of moving that data, while the physical piece sits there still. And then that really should be the last time that that retailer thinks about that note, because really that’s now the bank’s money sitting in a safe that’s inside of their location.”

Cutting Down Reconciliation and Unlocking Liquidity

The impact for treasury teams is significant. “Most retailers will drive these projects … to get more efficient through their treasury team because of that acceleration of the deposits and that liquidity … you’re now moving 96% of the process to closure within 24 hours, and then you’re just dealing with those adjustments and those exceptions,” Norman said.

That contrasts sharply with the status quo: “You’re talking about potentially 30 days for them to actually reconcile their bank accounts … to their point of sale,” Norman said of franchisees. With Fifth Third’s system, reconciliation can be largely complete in days instead of weeks, freeing working capital that would otherwise be idle.

Innovation and Cash’s Future

Looking ahead, Norman argued that cash’s future is not static but innovative. “We have companies coming together to try to secure cash as a long-term payment. And we’re also at the table talking about how can each of us in our respective worlds that we own get more efficient, collectively, together,” he said.

Of the prospect of cash entering the digital age more fully, Norman concluded: “I live and breathe it, and I’m a real believer that we’re only at the beginning of the opportunity that’s here.”