April 27, 2018

What do bank branch closures mean for retail?



As more and more of us take care of our banking needs online or on mobile devices, the need to go in to a local bank branch and see a friendly face is fading fast. In the first half of 2017, more than 1,700 bank branches closed their doors, and the second half of the year continued the downward trend.

The decrease in branches raises two interesting issues for retailers:

  • How could this change individual stores’ deposit procedures?
  • Should you offer cash back to meet customers’ cash needs, and if so, how do you manage each store’s cash on hand?


Deposit dilemmas

If your company requires deposits to be hand-carried to the bank, what if there suddenly isn’t a nearby branch? The options are limited, and each carries its own pitfalls.

  • Direct employees to make deposits at another branch farther away. In this situation, increased drive time takes the employee, most often a manager, away from the store for even longer and adds to the cost of mileage reimbursement.
  • Change banks for that location. Managing multiple banking relationships can be hard on corporate employees who have to handle varying requirements and documentation related to each bank.
  • Add armored car service for this location. Though 86 percent of retailers use armored car service in at least some of their stores, service can be costly and is not available to many remote locations.  
  • Ship or mail deposits to the bank. Without the proper tools, this can be a complicated, time-consuming proposition, but shipping deposits does help you protect your funds and your employees when compared to hand-delivery.

A recent AFP roundtable of retail treasury professionals detailed the common struggles of dealing with deposits, with many participants noting the difficulty of getting store funds to the bank securely while controlling costs. As bank branches decrease, the problem could only grow for some retailers.

Cash-back conundrums

Retailers have an opportunity to provide a useful service to customers by offering cash back during checkout. In addition to dwindling bank branches, ATMs are carrying higher-than-ever fees – meaning your customers will increasingly be looking for other ways to access cash. However, make sure offering this service doesn’t create operational issues for your stores.

  • Examine cash use and demand at your stores. Understand the cash going in and out of your stores each day and ensure that your deposit and ordering policies are being followed. Holding too much cash or placing emergency orders can wreak havoc on profitability.
  • Determine the most frequently requested cash-back amounts and denominations. Knowing stores’ cash use by denomination allows you to offer customers cash back in combinations they can’t get at an ATM. It also helps you prevent cross-shipping – the costly practice of ordering and depositing the same denomination in the same period.
  • Clearly define store policies on cash back. When both your staff and your customers know the rules of giving and getting cash back, there won’t be any confusion or upset customers holding up checkout lines. Establish cash-back limits and make sure any signage at the register matches the prompts on the terminal screen.

Even changes outside the retail industry can affect your business, so it’s important to look ahead for new opportunities, as well as examine your policies and procedures frequently. Staying agile in the ever-changing retail landscape will ensure you remain competitive.