Technologies for Cash Cycles in different Market Models

Currency Conference
Montreal, Oct. 2005

WOLFRAM SEIDEMANN

Agenda
A Generic Cash Cycle The Tasks of the Central Bank in the Cash Cycle Different Styles of Implementation Requirements to Technical Solutions Solutions matching the different styles

TECHNOLOGIES MATCHING MARKET MODELS

Wolfram Seidemann, Montreal, October 4th 2005, Currency Conference 2005

Agenda
A Generic Cash Cycle The Tasks of the Central Bank in the Cash Cycle Different Styles of Implementation Requirements to Technical Solutions Solutions matching the different styles

TECHNOLOGIES MATCHING MARKET MODELS

Wolfram Seidemann, Montreal, October 4th 2005, Currency Conference 2005

A Generic Cash Cycle

Central bank PRODUCTION ISSUE RE-ISSUE DESTRUCTION SERVICES
Printing plant Cash center

CIT companies Commercial banks LOGISTIC SORTING

Commercial banks SUPPLY TO PUBLIC DEPOSIT

Retailers PAYMENT COLLECTION

Recirculation?
Cash center Counter/ Self-service Cash register Cash center

DEFINITION OF POLICIES

Players follow market principles and Central Bank regulations

TECHNOLOGIES MATCHING MARKET MODELS
Wolfram Seidemann, Montreal, October 4th 2005, Currency Conference 2005

Quantitative model for analysis and optimization

Cash Acceptance Cash Processing Cash-Out

EXAMPLE
Self-Employed 11% Cash Center CB 70% Recycler 0%

Consumer 100%

Retail/ Services 82%

1%

Cash-In 1%

1%

Comm. Cash Center 97%

70%

ATM 70%

Consumer 100%

5% 3% Vending Machines 4%

50% Teller 8% 8%

27% Teller 30% 30%

5%

Branch Back Office 53% Night deposit 44% 44%

39% 4% 43% CIT 47% 47%

Assumptions: 100% corresponds to the number of banknotes (not value) in circulation in the country. No consideration of saving quota, net cash outflow nor possible cashless payment effects.

TECHNOLOGIES MATCHING MARKET MODELS

Wolfram Seidemann, Montreal, October 4th 2005, Currency Conference 2005

Agenda
A Generic Cash Cycle The Tasks of the Central Bank in the Cash Cycle Different Styles of Implementation Requirements to Technical Solutions Solutions matching the different styles

TECHNOLOGIES MATCHING MARKET MODELS

Wolfram Seidemann, Montreal, October 4th 2005, Currency Conference 2005

Central Bank targets in the cash cycle

Besides Macro-Economic Responsibilities:

Banknote availability to meet the demand of cash under all circumstances (incl. provision for crisis) Clean notes in circulation Counterfeit prevention and detection
result in the policy for processing.
TECHNOLOGIES MATCHING MARKET MODELS
Wolfram Seidemann, Montreal, October 4th 2005, Currency Conference 2005

Efficiency Efficiency

Quality Quality// Image Image

Integrity Integrity

Multiple factors determine the Policy

Cost + Risk

Manufacturing Handling / Processing Transportation Demand for cash

Image

General CB policy Culture Public acceptance Global currency?

Policy Policyfor for authentication authenticationand and fitness fitnessstandards standards

Regional specialties Availability Public mindset Alternative payment systems Seasonal differences Crisis prevention

Infrastructure

Regional specialties Density of CCs, ATMs Regional partners

TECHNOLOGIES MATCHING MARKET MODELS

Wolfram Seidemann, Montreal, October 4th 2005, Currency Conference 2005

Agenda
A Generic Cash Cycle The Tasks of the Central Bank in the Cash Cycle Different Styles of Implementation Requirements to Technical Solutions Solutions matching the different styles

TECHNOLOGIES MATCHING MARKET MODELS

Wolfram Seidemann, Montreal, October 4th 2005, Currency Conference 2005

Different Style Characteristics of Central Banks

How How the the CB CB defines defines the the level level of of its its involvement involvement

Delegated

Involved
restricted to basic CB tasks

Controlled

partial consideration of commercial issues full offering of commercial services

How How the the CB CB implements implements the the necessary necessary services services
TECHNOLOGIES MATCHING MARKET MODELS
Wolfram Seidemann, Montreal, October 4th 2005, Currency Conference 2005

Commercialized

Processing rate of circulated notes in different styles

5

banknotes processed

Source: G&D study, 2003 -2005

Return Frequency [1/year]

Controlled style

> 2.5 per year

banknotes processed > 1.0 per year

Involved style

banknotes processed < 1.0 per year

Delegated style
10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

Unfit Rate

TECHNOLOGIES MATCHING MARKET MODELS

Wolfram Seidemann, Montreal, October 4th 2005, Currency Conference 2005

Agenda
A Generic Cash Cycle The Tasks of the Central Bank in the Cash Cycle Different Styles of Implementation Requirements to Technical Solutions Solutions matching the different styles

TECHNOLOGIES MATCHING MARKET MODELS

Wolfram Seidemann, Montreal, October 4th 2005, Currency Conference 2005

Common understanding of definitions with all players

Central bank CIT companies Commercial banks Commercial banks Retailers

Recirculation?
Printing plant Cash center Cash center Counter/ Self-service Cash register Cash center

Setting of standards (e.g. definition for Fit / Unfit / ATM-fit), simple and enforceable rules and regulations.
TECHNOLOGIES MATCHING MARKET MODELS
Wolfram Seidemann, Montreal, October 4th 2005, Currency Conference 2005

Consistent Sensor Technology

Central bank CIT companies Commercial banks Commercial banks Retailers

Recirculation?
Printing plant Cash center Cash center Counter/ Self-service Cash register Cash center

Fitness criteria determined in production quality control, Qualified equipment at all level (eg. ECB recycling framework)
TECHNOLOGIES MATCHING MARKET MODELS
Wolfram Seidemann, Montreal, October 4th 2005, Currency Conference 2005

Controlling physical flow by information technology

Printing plant Cash center Cash center Counter/ Self-service Cash register Back office

Process-Analysis Cost BenefitAnalysis Cash-CenterSoftware

Vault Management Software

Management Information Systems

Depending on policy different kind of information required for optimized control of the overall cash cycle.
TECHNOLOGIES MATCHING MARKET MODELS
Wolfram Seidemann, Montreal, October 4th 2005, Currency Conference 2005

Agenda
A Generic Cash Cycle The Tasks of the Central Bank in the Cash Cycle Different Styles of Implementation Requirements to Technical Solutions Solutions matching the different styles

TECHNOLOGIES MATCHING MARKET MODELS

Wolfram Seidemann, Montreal, October 4th 2005, Currency Conference 2005

Different models require different technical solutions

Central Hubs Distributed networks

Production environment, High volume Efficiency, System performance Cash center software systems

Network environment, Lower volumes, distributed capacity Coordination, Management Information Systems Supply chain management

For different styles, different technology will drive efficiency

TECHNOLOGIES MATCHING MARKET MODELS
Wolfram Seidemann, Montreal, October 4th 2005, Currency Conference 2005

Summary: Technologies matching market models

Superior machine readable features, standards for authenticity and quality, leading edge robust sensor technology and software solutions will leave the central bank the freedom to choose different policies and its efficient implementation.
TECHNOLOGIES MATCHING MARKET MODELS
Wolfram Seidemann, Montreal, October 4th 2005, Currency Conference 2005

Giesecke & Devrient Group Worldwide

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Mexico City

Sao Paulo Johannesbourg Buenos Aires

Knoxfield

TECHNOLOGIES MATCHING MARKET MODELS

Wolfram Seidemann, Montreal, October 4th 2005, Currency Conference 2005