Ensuring the Viability of the Cash Cycle: ACMA’s Role in Building Resilience – Ted Devereux & Scott Forster  [Season 2 | Episode #17]

Matt Lewis 00:00:33 Welcome to the P.I.T. Exchange podcast. My name is Matt Lewis, and I am the vice president for Asia-Pacific for Currency Research. And I’ll be your host today. today we’re going to have a podcast about a topic that is central to the future of the cash industry, and that is the resilience and sustainability of cash and the cash cycle. With me to discuss this, I have two leading industry figures. I have Scott Forster from the CPT group and Ted Devereaux from Spearpoint Security in Singapore. So what I’ll do is say, first of all, welcome to Scott and Ted.

Ted Devereux 00:01:27 Thank you.

Matt Lewis 00:01:29 That’s great. And look, maybe just to start off with I’ll go to you first, Scott. If you could give us a brief introduction on yourself, that’d be great.

Scott Forster 00:01:40 Sure. Thanks, Matt. And, great to join yourself and Ted today. So I’ve been involved in the cash cycle for 20 years. Most of that time within cash management company, covering various roles across operations, transformation, growth. International. mainly. Australia, New Zealand, Middle East and Asia. These days I’m a director of the CPT Group. Matt Sykes and I started the CPT Group coming up to about 18 months ago and CPT Groups are a specialized advisory and research firm focused on cash cycle transformation and optimization.

Matt Lewis 00:02:23 Excellent. Thanks, Scott, for that introduction. And, Ted, if I can go to you now.

Ted Devereux 00:02:29 Yeah. I’ve lived and worked in Asia for 50 years. and all that time in the security industry across all elements. So cash and transit, cash management, security officer deployment, alarm systems, integrated security systems, and, storage of data, etc..

Ted Devereux 00:02:52 and the movement of that data. So I’ve got quite used to Asia now. started off really co-founding the, the Guard Force Group in 1977 and stayed with them until 1999 following that, I became the president of Asia Pacific for G-Force, for 2002 to 2011. And then in 2012 formed the Spearpoint Security Group, which is based in Singapore and the Spearpoint Security Group is involved in deployment of security officers in Singapore, cash management in the Philippines aviation support services for corporate jets, including, close protection and specialized services that we provide to the VIPs. and more recently, we were involved in e logistics in the UK. which is the store pick pack and distribution for people who own, Products that need to be distributed through the network. So I suppose basically I mean, I’m a security man with a logistics background.

Matt Lewis 00:04:07 That’s great, Ted, and thank you for that introduction as well. so as I said, we’re going to discuss the resilience and sustainability of cash in the cash cycle.

Matt Lewis 00:04:19 and the way we’re going to to start this is that, back in May, we had a, a panel session in Bangkok at our currency conference that focused on systemic risk in the cash cycle. Now, I’m going to ask Scott Forster. He was on that panel, and I thought this would be a good way to to maybe start and to to start the talk. So if you could, could take us through that. Scott.

Scott Forster 00:04:45 Yeah, sure. so I gotta say, I really enjoyed the panel and to hear the perspectives of some of the senior CIT players Is across the region. I think it’s super important topic right now, and a topic that ACMA, intends to delve into in great detail over the next 18 months because it’s top of mind for our members. so the panel covered, as you said, risk spoke to some of the experiences learnt from Australia, their recent experiences. and it explored, I guess, how likely that risk is to occur elsewhere. And whilst there were some different views across the panel, there were some common themes.

Scott Forster 00:05:33 those common themes are that the economics of cash distribution doesn’t always align with market incentives at lower volumes, and fixed costs remain high. Network effects are significant, and the role of the private providers in delivering a public good becomes increasingly conflicted. And the challenge we have as an industry is that the commercial logic of some of those private providers in some markets is pretty clear, and that they can’t be expected to maintain national infrastructure at a loss. And so, of course, that raises the critical question of who bears responsibility for ensuring continuity of cash. We discussed that consolidation may be required to achieve scale and efficiency, but also that that can create some new risks and unintended consequences. And we spoke to the fact that every market is different in terms of the trajectory of cash. But we explored that regardless of the pace, that process of change brings some pressure points. And then moved on to, you know, what are the things that we can do. And some of the themes there were that it was it was critical that we’re constantly monitoring the health of the system and paying particular attention to some of those indicators of distress.

Scott Forster 00:06:56 That we collaborate early and openly amongst the stakeholders, including planning. What is a future state for an industry look like if and when required, whether that be regulated pricing, whether it be public private partnerships, whether that’s utility models and how regulation might assist to preserve access and support acceptance. And we also spoke to considering lessons from other essential service sectors in the energy waters, telecommunications. I think they bear some parallel in that. If if this part of our industry fails, then the impact is swift and wide reaching.

Matt Lewis 00:07:42 And that’s and that’s good. And that was a good summary of the of the panel there. And you you talked about that. countries are in in different stages of where they are with their cash. And maybe, Ted, you could give us a bit of a perspective of what you’re seeing across Asia.

Ted Devereux 00:08:01 Yes. if you go to the Philippines, for example, as a as a first example, something like 70% of the adults in the Philippines do not actually have a bank account, and therefore cash is very important.

Ted Devereux 00:08:17 one of the biggest problems there is that the bank still insults most of that, and therefore it’s quite costly for them. And we’re seeing some change coming now in that regard. it’s similar in Indonesia, where you’ve got, a very large population, 260 million people. I think it’s 15,000 islands. and you’ve got some real logistical issues. there. And again, it’s about 60% of the adult population don’t actually have a bank account. Count. So there are two real areas there where there is a need to support people with cash and make sure that it’s it’s delivered even into the more remote areas, which is causing problems because again, in the Philippines, it’s 7000 islands. So, you know, logistically quite difficult. But if you go to other places like for example, Singapore, Hong Kong, you know, it’s logistically much easier because the city states almost, and, but we’re seeing a reduction in cash, because people are paying more and more with digital payment methods. so it does vary across the industry, I think.

Ted Devereux 00:09:31 Korea, South Korea is still fairly strong in terms of cash movements, etc.. I think Japan still, because Japan is really an area where there’s a lot of cash available and people still like to use cash. So it does vary a lot across our region. similar in India. I mean, the problems with India, with with logistics, etc.. and there’s still a large number of people who do not actually have a bank account. so I think what we’ve got to be doing is looking at how do we help reduce the cost of the cash cycle? How do we speed it up? How do we work together with the central banks to make sure that we can speed up the cash cycle? And for me, having lived and worked in Asia for the last 50 years, what I find is that we’re still not fully trusted as an industry by the central banks yet. I think we need to grow that, that, that trust so that we can hold cash on their behalf and, and really reduce the movement of cash and recycle it much more efficiently.

Ted Devereux 00:10:41 I don’t know whether that covers it off. well, enough met or not.

Matt Lewis 00:10:46 No it does. It gives us a good flavor of what is. You know, the different states up in Asia and, you know, and I think you touched on, on a on a point there, you talked about trust. But, you know, we’ve talked about how do we get more collaboration in, in the industry, I guess, to to try and speak about these, these very issues. And as you say, that can between whether it’s the central banks, the commercial banks and the and the CIT industry and how do we make that happen. And I think that is is a really important step that that we we certainly need to, need to address. and maybe that’s something that we are looking to try to do with, with, with some of the, ideas that ACMA is doing. And I’ll just quickly go on to Ackman now, which is the Asian Cash Management Association. Now, I might just hand over you, Ted, just just to give us a little bit of a, an insight into Akuma and the role it’s playing.

Ted Devereux 00:11:55 Well, just to go back a little bit into history, Matt, we discussed it at an ICOs meeting. Currency research, ICOs meeting in Hong Kong, in 2010, about forming asthma and the fact that we needed to have more, interface and collaboration with the central banks and commercial banks, etc.. So therefore we felt that a a cross-border, association throughout Asia would, would help to achieve that. It took us until 2013 to actually form ACMA. and spear point is actually, one of the founding members. and the whole idea was, as I think you’re all well aware, is to, you know, build the reputation of our industry, to, make sure that we’ve got codes and standards in place so that we can build that trust cycle. look at where we can find, experts and, intelligence sources to help us be able to grow our business more efficiently and effectively. to to look at the security analysis and threats that we have and how we can mitigate those and make sure that the industry learns from that and uses those that to their benefit.

Ted Devereux 00:13:20 and then obviously, the most important one, which I mentioned earlier, and that is to collaborate, and you mentioned it also in your opening address is how we collaborate with the, central banks. How do we get them to understand that we’re actually professionals and we do a professional job, and therefore we should look at how together with the central banks, the commercial banks and our cash management industry. How do we make sure that cash becomes viable and reduces costs and is available to people, whenever they need it? So that’s really what Acme was about, was to try and drive the change.

Matt Lewis 00:14:03 And so thanks for that. You know, giving us an overview of ACMA and that leads into, where we’re we’re going now with, we have our Asia Cash Cycle seminar coming up in Bali in September. And ACMA are going to hold a workshop there, which will be talking, on ensuring the viability of the cash cycle and looking at some of the challenges and solutions for the future. And, Scott, I know that, you’re going to be heavily involved in that and more than likely be hosting that workshop.

Matt Lewis 00:14:41 So maybe just touch on that and then we can build out a little bit more about some of the things that we’ll talk about. and some of the things that will assist, with, with, with ensuring the future of the cash cycle.

Scott Forster 00:14:58 Sure. Well, I guess there’s two parts to, to Bali. the first is the ACMA workshop and then the panel a couple of days later. the the workshop tends to, I guess, explore trends that are happening in markets around the world that have kind of lived some of the challenges. What was done, what worked, what hasn’t. the objective is to identify straight from the horse’s mouth, being the infrastructure providers, the challenges that they face in the cash cycle, and then attempt to develop a view of practical, industry led solutions that support Sustainability. So we’ll explore some of the structural fragility and cash infrastructure, sustainable business models, what some of those risk mitigation strategies might be. And then of course the role of policy and innovation. I’m kind of hoping that our members and those that attend take away or go away with eyes wide open as to some of the risks in terms of sustainability and some of those strategies to combat those threats.

Scott Forster 00:16:11 And as an organization, Akama walks away with, I guess, capturing what our members see as the real risks where they need support. And that sets our program for for the 12 months that follow.

Matt Lewis 00:16:27 Right. So that’s. Yeah. Go on.

Ted Devereux 00:16:31 Just suggest something there. I mean, I think one of the things that I’ve seen over the years in Asia and is, is the commercial banks and the central banks are really concerned about the cost, how much it’s costing them to actually process cash, redistributed, etc., etc.. so I think, you know, one of the things I’d like to see in our workshop is, is where we look at how are we going to help them reduce their costs, but at the same time, make sure that cash is available to the public and to the people who need it. so I think it’s important that we’re able to discuss things like, for example, holding cash on behalf of the central banks and redistributing it, about brown label ATMs, where there are several banks are using the same ATM, which reduces their cost.

Ted Devereux 00:17:25 looking at, how do we sell cash between banks, banks who’ve got excesses and banks who’ve got a deficit? How do we how do we work with the central banks to help them reduce their cost of moving cash around. Do they need all the branches they have? Can they reduce those branches? So I think there’s a lot we can discuss. And hopefully one of the key things in my mind, and I mentioned it earlier, is about getting the trust so that they understand that we actually are professionals doing a professional job.

Matt Lewis 00:17:56 Yeah. And that’s and as I said, I think that’s a really important point that we’ll be looking to get across at the workshop. now, we did touch on it. And this is the whole thing is about at the end, the importance of cash. And and as I say, really trying to make it more efficient, more cost effective. Because I think what we have seen, in particular of late with, with a number of crises that have happened, you know, you can see where there is really an important role for cash.

Matt Lewis 00:18:35 if there if there ever is some level of failure. we saw that recently in Spain as an example. so I don’t know if you’ve got any further comments on maybe Ted, you’ve sort of have some comments on, on on those lines as well.

Ted Devereux 00:18:54 Yeah. I mean, I think clearly we need to look at how do we support the people who use cash. How do we make sure that cash is available not just on the day to day for people who prefer cash? but also when a crisis occurs, when there’s a failure of the, of the communication systems, when there’s a failure, as in in Spain and Portugal of power which, which knocked everything out, you know. So how do we make sure that that people can get access to cash and can still go and buy things? and I think cash and digital payments need to live side by side. Right. You know, the one is not better than the other. and I think one thing that lots of people don’t really understand is the cost of digital cash.

Ted Devereux 00:19:45 You know, of digital payments, should I say not digital cash? Digital payments. it is expensive, and I don’t know whether you’ve seen it that here in Australia, but a number of retailers now charge 1 or 2% on top if you use your, your card or your or your debit card or your credit card or some other form of digital payment, they will charge you 1 or 2% in addition. because of the cost to them. And that’s what a lot of I think people don’t understand is that to especially to the small to medium sized businesses, the cost of digital payments. And that’s something we need to to address.

Matt Lewis 00:20:29 And you’re right there. Yes I am. You know, those surcharges do come through. And you’re right. I think it is. It’s about choice. Is is the big is also the big. The big thing I, I feel with, with cash is ensuring that we, you know, cash is there is a, it’s a choice of payment for the public. and you’re right.

Matt Lewis 00:20:52 And these are the some of the things I know that we’ll be speaking about in the workshop to try and ensure that it remains, a choice. and also, you know, how we can how we can assist to make it more efficient, and make it more available. Make it more available.

Scott Forster 00:21:10 I think it’s well documented that cash continues to serve an essential role, whether it’s, as we said, resilience in the time of crisis or for financial inclusion, or for the communities and individuals who depend on it daily. but but I do think what we discussed routinely is from a pure access to cash viewpoint, and I think we need to just keep talking about that emerging risk to the infrastructure that enables the circulation of cash as volumes decline. And that’s what we’ll focus on in Bali.

Ted Devereux 00:21:46 Yeah, I absolutely agree with that, Scott, because you see in in places like the UK, a lot of the ATMs in the more rural areas are being closed down. So, you know, you’re now making it very difficult for people to actually get access to cash who need access to cash.

Ted Devereux 00:22:02 and this is because of the cost, the perceived cost by by banks, commercial banks as to the cost of cash, when they could outsource that more and therefore reduce their cost.

Matt Lewis 00:22:16 You know, and that’s that’s right.

Ted Devereux 00:22:19 Just that we really need to, work together with the central banks. We really need as a, as a, an association, as ACMA, because we are representing Presenting cash and transit cash management businesses across Asia. How we can get the central banks to understand that we are professional, that we do do a good job, that they can benefit from us, and therefore the cost of cash can reduce and therefore cash can be made available. and rather than a shrinking network, the network can be kept in place so that people can get cash. you know, when I mentioned earlier about the problems in, in the Philippines and Indonesia with, you know, large numbers of adults not actually having a bank account, and that’s because of the infrastructure. So, you know, the infrastructure has to be in place to be able to let these people actually get access to, to cash, and be able to pay with it and, and go to a bank and deposit it and do all those things that they want to do or to a machine and deposit it.

Ted Devereux 00:23:27 So I think it’s it’s about how do we get the central banks to work together with us, or we work together with them, whichever way around you like to to to do it. so that we can speed up the whole cycle. and we can make sure cash is available in, in whatever circumstances occurred. You know, ACMA are having a bi annual gathering or conference, and again, this is all around bringing in central banks and trying to work with them and get them to accept that we are an essential part of the cash cycle.

Matt Lewis 00:24:04 All right. That was great and and wonderful to really dive into the ACMA workshop and what we’re you know, what what we’re going to run through. what I might just ask for now is, and, we’ll start with Ted, maybe some some closing comments or what you’re thinking. that’ll be that’ll be good for the cash industry.

Ted Devereux 00:24:31 I think I’ve mentioned most of it, but my view is that we’ve really got to work as an industry to reduce the cost of cash, because if you I mean, all my conversation with banks, commercial banks over the years has been, you know, I remember going to talk to one of the major banks in Hong Kong, and they said that the cost of cash was 50% of their cost.

Ted Devereux 00:24:50 But included in all that, obviously, is the branches, the ATM network, the cash and transit movements, the processing of cash, etc., etc.. but, you know, there’s there’s much we could do to actually improve that. and another big issue for a lot of the banks is coins. And how do we make sure that the coins get gathered. And actually it’s a bigger issue for the central banks because of the cost of minting the coins in the first place. So how can we help them recycle the coins more efficiently? More effectively? How can we help the the the retailers instead of having to have a daily collection of cash. It’s a weekly collection. It’s put into a safe. It’s counted into the safe. So it’s all protected. and then a weekly collection. Yeah. So you can reduce the costs. Because for me, it’s it comes back to not only for the commercial banks, but the central banks, but the retailers. It’s about cost. Cost of cash. How do we help them reduce that cost?

Matt Lewis 00:25:57 And that’s great.

Matt Lewis 00:25:59 And as I say, and I think they’ll be some of the things we dive into. Scott, I’ll hand over to you now.

Scott Forster 00:26:06 I agree with Ted. It’s about collaboration. but probably from a different perspective that’s facing into the challenges together. And to reiterate some of the comments from earlier that we observed through the through the Bangkok panel. genuinely monitoring the health of the system and collaborating as to what the future might look like. I would say I’m looking forward to Bali to, you know, capture the challenges of the industry and trying to generate some industry led solutions, but then spend some time trying to elevate those insights to a strategic level and then engaging with the banks and the policy makers to to drive some action. Because I think this is a really, really important topic as we face into very quickly changing cash cash industry.

Ted Devereux 00:27:00 I fully agree, Scott. That’s absolutely right.

Matt Lewis 00:27:04 All right. Well that’s great. I want to thank you both for joining me on the podcast today. I think that as we’ve said, despite digital growth, cash remains critical to, for a lot of reasons. Financial inclusion, economic stability, ensuring we’ve got payment system resilience. And I do agree. Now is the time for the industry for industry wide collaboration, you know, so we can develop a forward looking approach to cash management. so I want to thank everyone for listening to today’s podcast. as I said, we, have an event, our Asia cash cycle seminar coming up in September in Bali. we’d love to see you all there. And you’ll be able to join myself, Scott and Ted as, as as we go further into some of the topics we discussed today. Thank you all for listening.