As consumer-facing financial institutions continue to push the envelope on digital delivery of services, seeking more interactions with physical coins might seem like an odd choice. Indeed, many large banks have phased out courtesy coin counting, believing that the obvious convenience afforded to customers is outweighed by the cost and nuisance of rolling quarters, nickels, dimes, and (especially) pennies. But deploying coin-counting technology can deliver impacts and benefits that go beyond simple customer convenience. In fact, welcoming coins efficiently can be — if not a strategic imperative in itself — a contributor to some of your institution’s primary strategic goals.
Widening Your Catchment Area
Hoping to establish new customer relationships, banks are expanding their physical footprints with new branches, motivated in part by constraints on large-institution M&A. (According to Federal Deposit Insurance Corporation data, 2023 was the first year in a decade in which banks opened more new branches than they closed.) However, for banks seeking a low-cost point of connection to millions of potential new customers — without the cost of opening and operating new branches — coin-counting machines may be a worthy option.
Some 3.74 million people live in U.S. banking deserts — and another 4.06 million people live in areas at risk of becoming deserts. Two-thirds of these banking desert residents live within 10 miles of a Coinstar machine, accounting for a potential $161 million in annual coin volume and account transfers. (A “banking desert” is defined as a population area with no physical bank within 10 miles.)
What’s more, these devices are located in places like grocery stores and other large retailers that customers visit regularly — which means the average person already shops on average 1.2 times weekly in locations with coin-counting kiosks.
For financial institutions that want to meet their customers where they are, tapping into this opportunity by taking advantage of current coin-counting technology can add significant upside.
Today’s coin machines do more than turn coins into paper notes. With no core integration required, their users can transfer coins and cash directly into a checking account from any machine equipped with a card reader — cost-effectively extending the financial institutions reach into sparsely populated parts of the country.
Beyond offering e-gift cards, the option of transferring money to bank accounts has broadened the demographic using coin machines. About 25% of the banks now using account transfer-enabled Coinstar machines have decided to absorb the already reduced fee for this service, making it entirely free to customers, a tacit acknowledgment that it is a win-win for both bank and customer. And Coinstar data shows that affluent Americans appreciate accessible coin-counting too, especially when machines offer low- or no-fee options. For example, counting machines in upscale grocery stores see increased use for e-gift card exchange, which is often a fee-free service — accounting for as much as 13% of transactions vs. less than 3% in budget stores.
Growing Deposits
In the current rising rate environment, growing deposits is a top priority for most financial institutions. At the same time, the industry’s aggregate cost of deposits has been rising (to 2.10% in the third quarter of 2023) and is expected to continue to rise as higher-cost products such as certificates of deposit become a larger part of banks’ overall deposit mix, according to S&P Global. In this context, taking advantage of a new and inexpensive way to tap into a more or less passive source of transfers is something of a no-brainer.
Here are some facts: There are $15 billion worth of coins in the U.S., of which about half ($7.3 billion) circulates and half ($7.7 billion) sits idle (in jars, desk drawers, etc.) The average American household has $113 of coins sitting around, according to the Federal Reserve’s U.S. Coin Task Force. Getting those people, and their coins, connected to the banking system is a meaningful opportunity: Consider that about 5.5 million Americans are paid cash tips, 20% of people prefer transacting in cash, and 55% of small businesses are cash-only, according to the Federal Reserve Bank of San Francisco.
To be sure, the flow of these dollars into a bank account can be difficult. One challenge is that bank customers have a well-established aversion to fees. But new counting machines enable cash transfers directly to checking accounts. This service can be offered at a reduced fee because it can help draw transfers and build a bank’s reputation for customer friendliness. And, when machines also count paper notes, the typical transaction amount can be as much as $500, according to Coinstar data.
Boosting ESG and Sustainability Credentials
Like other businesses, banks and credit unions are increasingly looking to achieve sustainability targets and demonstrate overall environmentally friendly practices. Recycling coins can contribute to such efforts. Depending on the institution’s size and the inclination of its ownership, these goals can come with different degrees of mandatory force. Sustainable practices also appeal to many customers: 76% of consumers say they would end relationships with organizations that treat the environment poorly.
Keeping coins in circulation reduces the need to mint more coins and cuts an financial institution’s carbon footprint. Specifically, the Copper Development Association reports that 86% of the copper mined for consumer products is used for making pennies, releasing 1,377 tons of CO2 annually into the atmosphere.
Employee satisfaction is another sustainability goal for many institutions, and moving coin-counting from the branch backroom to a third-party processor can make a difference. Tellers are more productive when they get back the time spent processing coins. Sparing them from coin-handling duties frees them for more rewarding and profitable tasks.
The reality is that banks actually need more coins — and keeping the coin ecosystem healthy was a key objective of the Coin Task Force established by the Fed, which distributes coins to financial institutions nationwide. Established in the wake of the COVID-19 pandemic, the task force’s mission statement is clear: “To reliably and responsibly facilitate commerce, prompt stabilization of coin inventories is essential to establishing equitable access to coin and improving financial inclusion within the nation’s payment system.”
So coins do matter — to individuals, to the banking system as a whole, and perhaps especially to individual financial institutions. Coin processing may not seem like a game-changing initiative at first glance, but its benefits can be substantial. From building account balances and reaching new customer communities to advancing sustainability goals and improving access for underserved populations, deploying coin-counting technology can contribute to your institution’s strategy and mission.
Kim Raines is Head of Business Development and Client Partnerships for North America at Coinstar.