This September, Glory Global Solutions (Germany) GmbH held a two-day conference in Berlin for the banking and retail sectors. With a theme of “Banking and Retail 2.0: The market in transition”, the GLORY INNVOVATION 2016 conference saw guest speakers and attendees intensively and controversially discuss new concepts for optimising cash cycles; as well as shifting cash supply and other banking services to the retail sector. All attendees agreed on one point: In view of current challenges such as the low interest rate policy or digitisation, collaboration between banking and retail, especially with regard to cash management, may in future lead to reduced costs, new business models, and the continued provision of high-quality services to customers across the board.
Cash management at the point of sale reduces costs
The central topic of many of the presentations, as well as the final panel discussion, was the optimisation of cash cycles though enhanced collaboration between the banking and retail sector. Despite the rise of digital payment methods, cash continues to be the number one payment method in Germany. Yet retailers and banks, the main stakeholders within the cash cycle, incur substantial costs by using cash. These range from running the cash machine network and cash logistics provided by cash in transit companies, right through to investment in cash management systems and labour costs in retail stores. In view of the low interest rate, many banks charge service fees for delivering cash, which involves additional costs for retailers.
According to Arno Eitz, partner at ARKADIA Management Consultants, the costs for cash payments in Germany amount to more than €10 billion in total each year. He believes there is great potential to cut this cost, commenting that “If banks and retailers collaborated, they could reduce costs generated by cash payments at the point of sale alone by up €600 million each year”. In addition, the trend of branch closures in rural areas would be counterbalanced if retail stores could offer these banking services. The exact form of collaboration depends on individual framework conditions. Collaboration would be particularly worthwhile for cooperative banks and building societies, which are traditionally regionally based and have a presence across wide areas.”
Collaboration still in its infancy
Yet to date, attempts to establish collaboration between the banking and retail sectors have been hesitant. During the course of the panel discussion, it became clear that the primary cause for this was the difference in cultures of between the two sectors. It was therefore proposed that the banking and retail sectors need “couple’s therapy” in order to overcome the mistrust which exists, and to work through difficult issues such as investment in equipment and technology. While this raised questions such as ‘Who should take the first step?’, ‘Who invests how much?’, and ‘What should the business model look like?’, in view of the increasing pressure from digitisation and low interest rates, it is envisaged that banks and retailers will find solutions to overcome these areas and collaborate more closely in future.
One such solution is offered by the start up Barzahlen.de. Using Barzahlen.de as an intermediary, customers can pay for their online purchases with cash. They receive a payment slip including a barcode via email as a PDF, SMS or as a file for smartphones, and pay the outstanding amount in cash at the checkout. The online shop is informed immediately that the customer has paid and that they can send the goods.
The “supermarket bank” business model also offers benefits to both sides. “Banks need to fill fewer cash machines with cash as well as obtaining new customer contact points, whilst retailers save costs and can work more efficiently if the cash cycle is more local. Excess cash, which is collected by cash in transit companies at a cost and has to be brought to the bank, can be re-dispensed quite easily and put into circulation”, recapped Hagen Höhl, Head of Retail Europe at Glory Global Solutions, who moderated the panel discussion.
Basic banking services in the retail sector
The retail sector should, however, stick with this basic service and not take on any banking services aside from paying in and dispensing cash – such as consultancy or the conclusion of contracts. The panel discussion attendees were in agreement on this point: Marco Atzberger (Member of the Executive Board of EHI Retail Institute e.V), Dr. Harald Olschok (Managing Director of BDGW), Andreas Hünnebeck (Portfolio and Product Management at Fiducia + GAD IT AG), Robert Aschoff (Managing Director of and sole shareholder in EDEKA Aschoff LMVH GmbH) and Bernhard Werning (Managing Director, Bernhard Werning Bäckerei Konditorei GmbH). Supermarket staff, for example, would need special qualifications to provide additional banking services. This would require extensive training and would also be subject to the strict regulations of the banking industry.
Making branches more attractive
Alongside the closure of branches, especially in rural areas, which banks can counterbalance by collaborating with retailers in the supply of cash, financial institutions are under pressure to strengthen their personal relationship with customers. Personal contact in branches forms a key customer touchpoint and enables opportunities for consultancy and new business. Therefore “Branch Transformation”, the reshaping of branches through innovative concepts and technology, was a key topic of discussion. “Banks should not only focus on reducing costs and raising fees, but also on making their existing branches more attractive and optimising customer experience. The focus of branches up to now has been on transactions; but in the future banks should focus on their fundamental strengths – human interactions and personal advice”, said Oliver Kapahnke, Managing Director of Glory Global Solutions (Germany) GmbH. “One solution which could help implement new branch concepts is Glory’s TellerInfinity™. This multi-function device provides the classic bank teller service in the form of a teller-assisted self-service, whilst also making the branch more attractive and removing barriers. Classic processes such as cash management are therefore made more efficient, and staff is freed from routine tasks. This leaves more time for consultancy and customer service. The branch therefore becomes a high-performance service centre”, added Oliver Kapahnke.