Cash-in-Transit (CiT) Management has been one of the most challenging businesses in the world while remaining one of the most essential service as well, especially in these troubled times of pandemic.
Banks are engaging third party CiT providers to reduce costs and risks, which creates a new set of issues for banks. Tracking of such cash movement is fraught with risks of leakage and mismanagement at the field level. In some countries, there is additional risk of heists and robbery, leading to further losses. Overall, there is increased systemic risk and operational complexity.
Current challenges in CiT Services
Let us take a day in the life of CiT providers involved in moving Cash from Banks to their Branches, ATMs and customers. Each Cash movement through the Cash supply chain goes through 6–8 rounds of counting. The average loss arising in counting process is 0.15–0.2%. Statistics in different regions show an increased rate of Cash related crime, especially with those involving internal theft. While the industry has been briskly adopting tamper proof technologies, loopholes remain. Further, CiT providers are paying an estimated 1.86% of the declared maximum value per event or month.
Figure 1 Current State — Cash in Transit
Current processes take 21 to 30 days to complete reporting with 6–8 counting, and reconciliation rounds which may result in cost of managing cash to be about 0.5–1.5 % of the gross cash involved. Another area of operational losses is fake and soiled notes that need to be weeded out in the process and reported back to central banks.
Cash Leakages and Losses
Cash Leakages and Losses occur while transporting cash across the value chain. A significant source of leakages also occurs in the counting process in each leg of the transaction. Reporting soiled and fake currency is another aspect that introduces exceptions. The time and effort taken to count, verify and validate the notes, leakages and losses involves significant risk. In some geographies, the risk of heists and thefts further compound the problems. This can often lead consumer dissatisfaction for Banks and Retailers.
Insurance
CiT providers cover their risks with Insurance, which adds to operational costs. Often, the cover is for a maximum amount in transit or inventory which may vary based on business cycles. In case of Cash-in-transit in vans, again, the cover is taken for full capacity of the van. The real-time inventory varies from point to point as well as with seasonal demands.
Reconciliation
CiT companies are known to take 7- 14 days to count, verify and validate currency notes in their inventory and transit before reporting to their customer Banks and Retail chains. Banks may take a further 14 days to reconcile accounts through the supply chain from their Branches, customers and ATMS before settlement with their CiT providers, leaving a considerable amount of cash-in-float, which can lower liquidity and, hence, profits. Certain Central Banks have stringent measures for having large unreconciled cash-in-float for extended periods, as it has greater economic impact, leading to compliance and regulatory risks.
Distributed Ledger Technology
Distributed Ledger Technology, as the name suggests, is a peer-to-peer network of nodes with Peer-To-Peer (P2P) transactions. As P2P transactions occur between any two nodes, they need to be validated by neutral 3rd parties to ensure immutability, transparency, and non-repudiation. To validate P2P transactions, Blockchain, considered as first generation DLT protocol, uses mining-based transaction, causing to which is slow and very resource intensive. Blockchain throughputs can be under two hundred transactions per second with latencies ranging from minutes to hours in closed, permissioned networks.
Centuries old Double Entry Bookkeeping practices have been used in bookkeeping and accounting. Today, Triple Entry Accounting practices enable real-time transaction validation that can speed up reconciliation.
Aurigraph Distributed Ledger Technology (DLT)
Aurigraph DLT is a mining-less DLT protocol and platform, based on Triple Entry Accounting principles can deliver Real-time Reconciliation and Track-and-Trace across value chains. Aurigraph offers super-scalability of the order of 100,000 transactions per second and sub-second latency with very secure data communication and storage across a Decentralized eco-system such as CiT. With multiple customers spread regions and their ATMs, Branches and Points-of-sale, Aurigraph DLT will reduce operational costs and losses, deliver high ROI with elevated levels of Transparency, Immutability and Non-repudiation. Further Aurigraph DLT is offered on a SaaS model, offering a low-Capex Model, reducing business risk further.
Aurigraph solves critical CiT challenges
Using Aurigraph DLT based CiT solutions, CiT providers can reduce time taken for processing and reconciliation from 30 days to under 7 days, with real-time Reconciliation and Track-and-Trace through the entire Cash supply chain, including Cash Counting Center and Vans.
Each stakeholder will have a dedicated node with its own General Ledger and configured to represent an entity for transactions being recorded locally in its General Ledger. P2P transactions replicate real-world business scenarios and General ledger entries in their respective nodes mirroring real-world bookkeeping practices. With each transaction updated in each stakeholder’s node and the protocol reconciling the transaction upstream, Cash Centers, CiT Providers and Banks will have real-time visibility of cash transacted in Branches and ATMs by Van Crews. Likewise, when cash is counted at each point in the value chain, Aurigraph DLT offers Transparency, Immutability and Non-repudiation to all stakeholders.
Let us now consider a day in CiT business with DLTs and how it would impact business. When Banks move cash to Cash Centers of CiT Providers, it is crediting the amount to the CiT provider but is a peer-to-peer transaction between the Bank and multiple Cash Centers, which gets recorded in the respective General ledgers. At this point the, CiT provider’s ledger must reflect the total sum received at all the Cash Centers. Hence, the General Ledgers of all three stakeholders are updated accordingly.
Along the same lines, cash movement from Cash Centers to Vans before reaching ATMs, Branches or Point-of-Sale, requires extending the above-mentioned pattern downstream to track cash inventory and transit. A robust solution will further capture the note count across the value chain to detect any leakages and exceptions. Therefore, if a bundle of cash must be tracked from a bank to a CiT Provider to an ATM, a Track-and-Trace solution will work best along with Reconciliation. In case of a missed note from the bundle, it will be possible to trace back to the point of the missed count. Cash leakages that occur in transit or at counting stations can be spotted instantaneously than going through lengthy recounts and Tracking effort. CiT providers will b able to determine cash inventory in real time across all locations, irrespective of being fixed or mobile.
Figure 2 Future State of Cash-in-Transit with Aurigraph DLT
At the start of day, a certain Cash Center loads, say, 50 million Dollars of various denominations in a van, partially in loose cash and partially in cassettes, after due counting and verification processes. The Van goes from ATM to ATM, records the opening balance and replenishes as per bank’s instructions and updates information on the DLT for each replenishment at the ATM, the transaction is recorded in the respective DLT nodes of the Van and the ATM. Simultaneously, the Cash Center, CiT Provider and Bank are updated with ATM replenishments and balance cash in the Van in real time. As the van progresses through its trip, real time updates are provided at each stop with reconciliation. As the van collects cash deposits, the Van nodes are updated in real-time. Cash collections from Point-of-sale nodes will likewise synchronize with the van and reporting. All concerned stakeholders, being Banks or Retail customers, CiT providers and Cash Centers would be updated as the transaction is conducted at each point providing complete transparency, immutability and non-repudiation to all stakeholders. At the end of the trip, the van crew needs to drop off the collections and residual cash from replenishments at the Cash Center for which reporting would have been completed even before the van reached the Cash Center. A single round of counting will explicate any variance with an audit trail of the entire trip.
Benefits
- Reduce Leakages in transit and counting processes by 20–35%
- Reduce Counting and Reconciliation time and effort by 30–50%
- Reduces business risks, inventory costs and Insurance.
- Reduce “Cash-in-float” by 15–30%, thereby improving liquidity, cash flows and profits.
- Reduce Insurance Cover to actual inventory than maximum allowed inventory, thus saving over 60% in insurance
About Aurigraph
Aurigraph Distributed Ledger Technology is a mining-less protocol and platform that can deliver super scalability and zero latency, unlike conventional blockchain platforms. As the protocol is based on Triple Entry accounting principles, it can deliver Real-time Reconciliation and Track-and-Trace across value chains, thereby providing to be the ideal platform for Financial Fraud prevention and Reconciliation.
Aurigraph DLT can reduce time and effort required for numerous rounds of counting and Reconciliation in Cash-in- Transit operations by 30–50% in both cash delivery and counting processes. Leakages and losses due to theft, fake or soiled notes can be reduced by 20–35%, hereby delivering significant value to CiT providers, while optimizing Cash inventories significantly.
Aurigraph DLT can reduce Cash-in-Float from 21–30 days duration to under a week to help improve liquidity and cash flows and hence increase profitability of banks and retail chains by 2–4%, while reducing “dead” capital to low decimal values.
Please visit www.aurigraph.io for more details Please follow us on LinkedIn
Subbu Jois, founder, Aurigraph Inc. is the creator and patent holder for Aurigraph, with over 30 years building platforms and solution in fintech, public sector, e-commerce and mobility. For more information, head over to www.aurigraph.io. You can reach out to Subbu Jois on LinkedIn or Twitter
