Cost of cash for retailers forecast to soar

The introduction of the UK government’s living wage initiative, rising interest rates, the transition to polymer banknotes and the launch of a new £1 coin will all force up the cost of cash for British retailers, claims CMS Payments Intelligence (CMSpi).

The consultancy and analysis firm, which specialises in the field of consumer payments, made the forecast at the recently-held Polymer Planning Summit in London.

According to CMSpi, the various factors will collectively increase the cost of cash for retailers by 50% over the next three to five years even though consumer cash transactions are in decline.

“Retailers are being hit with a double-whammy: falling consumer usage of cash and rising costs of accepting, holding and transporting it,” says Brendan Doyle, chief executive (CEO) of CMSpi. “As the cash volumes retailers receive begin to decline, so too will the efficiency of the processes they currently have in place.

“The Bank of England [BoE] has indicated that interest rates of 2.5% to 3% will likely become the ‘new normal’, so with cash taking on average 4.5 days to get from a retailer’s till to their bank, the cost of holding cash – in tills, safes and in transit – increases significantly.

“Retailers may think the alternative would be to have more collections and get cash into the bank quicker, however increasing the frequency of cash collection services only increases costs further. Add to this increased employee costs due to the living wage and we calculate this will result in the cost of cash going up from around 0.20% to 0.30% (of transaction value) for most major retailers.”

“The future will see a greater emphasis on efficiency and technology-based solutions; meaning that for most major retailers the accepting, processing and depositing of cash takings will look very different than it does today.”

“The developments expected over the next few years could be described as somewhat of a ‘perfect storm’,” says Mark Trevor, commercial director of cash processor Vaultex. “Retailers will have to traverse the staggered introduction of the £5, £10 and £20 polymer notes, the new £1 coin and the Scottish notes. Factoring in the potential interest rate rise and the living wage as well and you have a lot of pressure coming up on costs.”


Related reading