I was in Budapest recently for a conference on the relative importance and usage of cash and non-cash methods of payments. The primary message from the conference was that cash is reliable, secure, and accessible to people. It was organised by a non profit organisation that is an association of companies dealing with cash management. Before heading to the conference, it seemed strange that there would be multiple companies involved in cash management and logistics in a country. We largely tend to take cash for granted and do not think about the vast logistical network that exists behind the usage of cash.
Here’s a brief glimpse into the fascinating world of cash logistics and management:
First, you would need specialised paper to print the notes on, which is supplied by few companies in the world. The material on which the notes are printed differ from country to country. India uses a pulp made of cotton and balsam, whereas the US dollars are made of cotton and linen. Australia, and a few countries, have shifted to an innovative polymer (or plastics).
The ink used to print the notes are also highly specialised and secure ink that does not get worn out easily. The ink would be made from a special dye that is not available to anyone except the central bank. Then, comes the host of security features, such as the hologram, watermarks, security threads, serial numbers, anti-copy marks, magnetic ink and microprinting. Each of these would be manufactured and supplied by a set of private companies, according to the central banks’ specifications.
Then, for distribution, you would require armoured vehicles to move the cash from the vaults of the reserve banks to the commercial banks and finally to the ATMs. There are private companies that specifically design these armoured vehicles and provide security guards as well. You also need specialised large vaults in commercial banks to store the currency. There are also machines developed exclusive to count the currency notes.
There are companies that manufacture and distribute ATM machines and who maintain them. A separate company would take charge of managing the ATM machine and making sure that they have enough cash to distribute. On the retail side, you have companies that manufacture tills to hold temporary cash required at point of sale. Of course, the complexity of the business determines the level of sophistication required for the cash handling machines. A Casino will require a more customised and complex machine to handle and store cash, as against a corner retail store selling milk. There are also companies that manufacture paper rolls for till and ATM receipts.
This is just a sample of the number of companies involved in cash management in a country.
P.S: I am reproducing the steps involved in cash printing and distribution in India from this Business Standard article:
HOW MONEY TRAVELS: PRESS TO PURSE
* The Reserve Bank of India (RBI) chalks out the requirement for currency notes before the start of the financial year
* The requirement is then communicated to the government
* When the government gives permission to RBI, the central bank raises ‘indent’ or order for printing specific bank notes to four presses
* Papers for banknotes were earlier procured from overseas but now the material is supplied locally
* The security features are installed by the mills first and then sent to the printing presses
* The printed notes are sent to RBI’s 19 regional offices
* There are 4,000 currency chests where the notes are kept
* RBI then raises a voucher for the notes needed
* Banks raise their demand for cash with RBI’s regional offices
* RBI then sends money to banks
* Banks keep the money in their currency chests and engage cash management firms to fill the ATMs
* ATM service providers do a daily calculation of cash required at night for the next day, called indent
* Banks validate the indent and the cash is transferred to the bank branch linked to that ATM
* These bank branches generate their own cash and in case of shortage, they borrow from currency chest
* Cash management companies transfer cash from branches to ATMs
* The companies fill up the ATMs with four ‘cassettes’, which can hold up to 2,500 notes each
* The money is dispensed when customers use their card