What is cash visibility? And why does improving it matter?
Federal Reserve leading effort to increase efficiency, reduce risk, improve customer experience
What is “cash visibility?”
It’s not just what people (hopefully) get when they open their wallets. For participants in the “cash supply chain” – banks, retailers, the Federal Reserve, armored carriers, etc. – it’s the level of clarity they have at any given moment about exactly where the money is.
And cash visibility needs to be improved nationwide.
According to Federal Reserve cash management experts, cash movement along the supply chain is tracked in many places today using manually based clipboard-and-paper systems. While the world runs on digital highways, visibility into the cash supply chain still often depends on actual highways, with armored trucks delivering the data by paper along with cash at different stops.
A service developed by the Reserve Banks, and piloted at the Federal Reserve Bank of Boston, aims to upgrade cash visibility nationwide. It instantly records and reconciles cash deliveries and inventories under a standardized digital system. It’s also at the center of a broader shared Fed and industry initiative called Cash Visibility (capital “C” and “V”).
Fed cash experts say the new service, the FedCash E-Manifest Service, will better ensure accuracy and increase efficiency, saving labor hours and operating costs.
They also say the Federal Reserve’s E-Manifest Service will strengthen the cash supply chain’s resiliency by making it easier to know that cash is where it’s needed – in normal times and in stressful times, such as hurricanes and earthquakes. And they say it will enable businesses to know precisely how much cash they have on hand, so they can invest or allocate it with more confidence.
To encourage adoption of the system, the Fed is working with the armored carriers and financial institutions at the heart of the cash supply chain.
“I think there is a strong case that this will really help improve their work going forward,” said Robert Bujas, an assistant vice president in FedCash Services in Los Angeles. “But at the same time, it requires the financial institutions to make an investment in this and see the importance of this.”
Fed experts say cash supply chain must be more efficient
The idea of a cash supply chain may seem unusual. Cash is often seen as what people use to buy products, not as a product itself. But that’s exactly what cash is to those who need to make sure that consumers, retailers, and financial institutions have the right levels of cash available.
Boston Fed Vice President Lisa Perlini, head of the Bank’s Cash Services department, said key links in the cash supply chain include:
- the Federal Reserve banks, which receive newly printed and minted money from the U.S. Bureau of Engraving and Printing and the U.S. Mint
- the financial institutions that the Fed ships money to or receives it from, depending on their needs
- the retailers, businesses, ATMs, merchants, etc., that the financial institutions supply cash to or receive it from
Armored carriers are also a critical component, transporting cash between all links in the chain.
Today, keeping that supply chain moving is labor intensive, since the transfers are largely tracked manually. Strong checks and balances ensure accuracy, but the system is time-consuming and more opaque than it needs to be, Fed experts say.
Armored carriers key in adoption of new system
Bevery Ferrell, a vice president and branch manager at the Atlanta Fed, said the current system exists partly because people thought cash would just fall into disuse in a digital age.
“Guess what? Cash is still king,” she said. “People know that they can rely on it in any situation.”
Bujas added COVID-19 highlighted the importance of cash visibility as a component of cash resiliency, since demand for cash spiked early in the pandemic.
“In order for us to again meet demand in times of stress, we need to have a supply chain that continues to be available to the consumer,” Bujas said. “Cash visibility will help strengthen our ability to continue to respond to events like this.”
The Fed is working now to show financial institutions and armored carriers that the FedCash E-Manifest Service is worth the investment. Ferrell said the team is focusing first on demonstrating the benefits to armored carriers. If they get on board, she said, their customers will likely follow.
The Fed has successfully tested E-Manifest at the Boston and Minneapolis Feds, and pilot programs are planned at three more locations, Ferrell said.
Adopting new technology and implementing new processes makes this a long-term investment, but improving cash visibility across the entire supply chain just makes sense, Perlini said.
“We know that this has a benefit for everyone involved,” she said.
Learn more about cash visibility here.