We know industry statistics have shown most banks and credit unions carry 20 to 30 percent excess cash on a regular basis, but since the beginning of the COVID-19 pandemic it has been reported that there is a 20 percent increase of cash in the market. Even the largest armored car carrier in the United States, Loomis, has seen their customers order 24 percent more currency in orders and vault cash in March alone. We’ve previously discussed the many reasons that can attribute to these higher levels of cash including consumers stockpiling cash due to fear of a possible disruption in the supply chain, financial institutions being prepared for potential armored car carrier changes to their delivery schedule, as well as fear of the unknown.
However, this COVID-19 pandemic will come to an end, and as states are beginning to re-open select businesses over the next few weeks, we will begin to see some semblance of normality in day-to-day life again.
The re-opening of the states creates a new looming issue for banks and credit unions as there becomes a need to re-evaluate their cash ordering and inventory management process. As customers and financial institutions become more comfortable as businesses re-open and return to a regular routine, we predict that there will a be a drop in cash demand from the consumer and banks and credit unions will have to adjust accordingly.
There are a few things banks and credit unions need to consider when evaluating their cash levels again. Will cash levels return to their normal ranges from before the pandemic? Will they be able to return to the old ways of ordering cash? Truthfully, we do not know for certain. Each individual financial institution will be different based on changes in customer behavior, locations, and branch operation capacity. For example, Loomis has taken on servicing hundreds of branch lobby ATMs/ITMs during the COVID-19 pandemic that used to be serviced by the branch itself, but because of branch closings the institutions had to adjust their ordering and servicing process. Maybe some branches will open their doors again and return to servicing their own ATMs/ITMs, but maybe branches in densely populated areas remain closed for the time being. Banks and credit unions should not assume that their old ways of ordering and servicing cash will be the same as they were before in pre-pandemic times.
What can banks and credit unions do to be prepared for the uncertainty of the “new normal” when it comes to their cash levels and inventory?
One of the best ways to understand the current and future cash levels is to understand demand vs. usage. We know cash levels have gone up, but financial institutions should be aware of their actual demand and usage across the entire branch network down to the denomination level. We recommend a branch and ATM cash management software like C3 Financial that tracks usage by denomination but will also provide insight into future usage levels based on historical patterns and forecasting. This feature ensures financial institutions are carrying optimal levels of cash for an exact time period. Check out more features to look for in a branch and ATM cash management software in this blog.
Another way banks and credit unions can be prepared is to begin reaching out to critical suppliers and vendors. This includes the armored car carrier, money supplier, or anyone else involved in the institution’s cash supply chain. It is important to stay on top of any adjustments and process changes on the vendors’ end that can potentially impact the financial institution. Don’t forget that some experts say that we might expect a second wave of COVID-19 in the Fall…Make sure you have a plan in place to be able to react in a timely manner when it comes to your cash levels and inventory.
To learn more, register for our on-demand webinar “Crisis Management and CASH: COVID-19 & Future Pandemic Planning” by clicking on the button below. This webinar is in partnership with Loomis and we will be providing a more in-depth look into pandemic planning guidelines, new regulatory changes and review effective ways to address the current cash management challenges to keep your financial institution's cash operations running efficiently.