CMSPI - State of the Industry Report - 2025

2 PAYMENT METHOD PROFILES: CASH

Merchant outlets, AT branches and cash vaults typically work according to a “hub and spoke” model as illustrated in Figure 2.2.: Hub and Spoke Model

Secondly, many merchants decide to walk their cash to the nearest bank branch. From here, the bank will transport the cash to a cash vault before the value is credited to the merchant’s bank account. Although this method avoids the cost of AT companies, it is often considered risky and merchants may not be located close to their nearest bank branch. Finally, many merchants have on-site ATMs which they can replenish using POS cash. However, many merchants choose not to replenish ATMs using their own cash due to issues such as note quality issues and cash shortage risks, and instead replenish ATMs using an AT service, often at the same time POS/safe cash is collected.

AT Branch

Cash Vault

AT Branch

Merchant Outlets

AT Branch

Figure 2.2

Despite this labor-intensive cash handling process, cash can often be cheaper for merchants to accept than cards and other payment methods. The supply of notes and coins into the economy is generally controlled by the currency’s central bank, for example the Federal Reserve in the United States. In the U.S., the 12 Federal Reserve (Fed) Bank branches are responsible for overseeing the cash processing and cash in-transit (CIT) industry. The Federal Reserve operates 28 cash processing locations around the U.S. and uses these locations to distribute U.S. currency and coins to financial institutions domestically and worldwide. Banks in the U.S. order notes and coins from the Fed and deposit their excess banknotes with the Fed. This is slightly different to the Bank of England’s Note Circulation Scheme (NCS), which allows its four members to “supply banknotes to their customers from a number of cash centers located around the U.K.,” 117 meaning that unlike the U.S., the U.K.’s central bank is not involved with processing cash. The Fed mission is to maintain consumer confidence in U.S. currency and to meet demand for U.S. currency in the event of a disaster. The Bureau of Engraving and Printing and the U.S. Mint are responsible for production of notes and coins respectively. Both government entities are responsible for replacement of cash out of circulation and for increasing the amount of cash in circulation as well.