December 8, 2016

Cash back | 3 things retailers need to do

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With banks closing physical branches and fees to use ATMs climbing to their highest levels ever, consumers are looking for other ways to get their cash. One of those ways is at retail stores: At the Federal Reserve’s last count, there were 1.4 billion cash back transactions made with an average value of $33, and a recent survey by 210 Analytics revealed that 29 percent of shoppers choose to get cash during the checkout process at a retail store.

If you’re not offering this valuable service to your customers, you might want to get on board – offering cash back can give you a competitive advantage, driving traffic to your stores and increasing loyalty. If you are letting customers get cash back, it’s probably time to take a look at your policies to make sure they’re not working against you.

 Who’s using cash back services?

Who’s taking advantage of cash-back services? According to the 210 Analytics survey, it’s often women and younger shoppers. Thirty-one percent of women said they opted for cash back during retail checkout.

Millennials use cash back more than any other age group (37 percent, up from 31 percent in 2014), the survey said. Only 4 percent of shoppers 18-24 said they got their cash from a teller at a bank – which certainly tracks with the trend of banks closing branches because fewer customers are visiting physical locations.

The Federal Reserve’s just-released 2015 Diary of Consumer Payment Choice showed that respondents age 18-24 were the most favorable toward cash — 38 percent noted cash as their primary payment preference. With younger shoppers choosing to pay with cash more than other age group, the cash back trend seems poised to grow even more.

 

Why do shoppers choose cash back during checkout?

Nearly all shoppers surveyed by 210 Analytics agreed that cash back is a great way to get a small amount of money (97 percent) and is convenient (94 percent). Avoiding ATM fees was the aim for 77 percent of respondents, and 74 percent said getting cash back was safer than using an ATM.

 

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What do you need to do?

Offering cash back enhances customer experience by letting your customers take another item off their to-do list quickly and conveniently. To prevent it from becoming a burden on your back office, you’ll need to revisit your policies and procedures. The cost of cash is an important factor in determining how you handle cash back.

  1. Examine deposits and change orders by day of the week at a representative subset of stores.

Are the stores ordering more funds on certain days of the week because of cash-back demand? Or holding back cash deposits for fear of needing it to provide cash back services? Both increase risk and affect the cost of cash – and, in turn, your bottom line.

Are stores making emergency change orders to get more cash if they run short? For some stores, because of their location or the company’s banking relationships, emergency orders aren’t even possible. In that case, a store manager will often transport large bills to a nearby bank for change, increasing cash exposure and risk.

Your operating policies might warn against practices like these, but sometimes, store managers or other key employees might do them anyway in an effort to help or just get through the day as best they can. That’s why it’s important to dig into what’s actually happening in your stores – not just what you’ve dictated.

 

  1. Determine the most frequently requested cash back amounts and denominations.

Retailers have an advantage ATMs don’t: letting a customer choose how they want their cash. This flexibility can draw in customers, especially if they’re concerned about safety and convenience like survey respondents.

Find out if certain denominations are more popular than others, and account for that in your operating policies surrounding depositing and ordering cash. When you examine your cash demand by denomination, you might find that your policies are outdated or there is too much room for “judgment calls” by store personnel. Putting the onus on store employees to make these calls causes bank and transportation fees to creep up because their services are used unnecessarily.

 

  1. Clearly define store policies on cash back

Recently I was paying at a store, and the woman in front of me requested $60 cash back on the terminal keypad, but the cashier informed her that $50 was the maximum amount she could get. The retailer’s policies weren’t in sync with their technology, and it left the customer visibly frustrated.

It’s important to clearly define your policies for everyone involved and make them consistent throughout the enterprise. Can a customer can request multiple transactions to get additional cash back? Is a customer eligible for more cash back if they are a member of your loyalty program? Establish and communicate clear policies so that both employees and customers understand the rules.

 

As with so many areas of your currency operations, taking a detailed look at your policies – and how they’re put into action – can dramatically improve the efficiency of offering cash back. Then you’ll know you’re offering your customers a service that’s valuable to you both.

 

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Image: iStock