What Bankers Should Think About the End of the U.S. Penny
By Nicole Volpe, Contributor at The Financial Brand
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At the Super Bowl last February, President Donald Trump surprised viewers by announcing in his halftime interview that the Treasury would stop minting new pennies. Within weeks, lawmakers from both parties picked up the baton, and by May 1 parallel bills had been introduced in the House and Senate to retire the one-cent coin. The legislation marked the culmination of a debate that has persisted for years. The penny — long scorned as a money-loser — was now on its way out.
In response, the financial industry mostly shrugged. A few observers, in line with then much-in-the-news calls to reduce government spending, welcomed it as a modest act of thrift. Generally, however, the end of the U.S. one-cent piece otherwise drew little notice — not from small banks, not from big banks, not from fintechs.
But that indifference might be worth a second look, because the penny’s end might in fact offer deeper lessons for everyone who cares about retail financial services.
Sure, the penny is the most annoying hard currency we have; the passage of time alone has made it far less useful. Certainly for banks, counting, rolling, and processing coins is a low-return, high-effort activity. But the fact we let it get to this point — maintaining the penny even as it cost 4 cents to mint each one — is a reminder of the scale and fragility of the physical currency ecosystem. “The penny may not matter: It’s not about whether we need one more coin,” Coinstar CEO Kevin McColly says. “But the way we frame the discussion does. We’re asking the wrong question.”
Dig deeper:
- Three Less Obvious Reasons to Give Coin Counting a Second Look
- Small Change, Big Bucks: Why the Coin Economy Should Matter to Bankers
The question we should be asking, McColly believes, is this: “What happens when money — or some subset of money — stops moving?” In his view, the demise of the penny reveals a blind spot about the movement of physical currency: Too few people pay attention when it stalls, when the systems that support everyday commerce, especially for cash-reliant customers, start to break down.
This brings us to the first lesson:
Circulation Breakdown vs. Declining Demand
What looks like declining coin use is often a circulation breakdown, and financial institutions that ignore this fact risk overlooking billions in dormant, spendable liquidity.
If the penny is going away, many assume it’s only a matter of time before the rest of coinage, and perhaps cash itself, follows suit. But that expectation, says McColly, reflects another problematic assumption: That we are on an accelerating, straight-line path to the end of cash — of any denomination.
Here’s the thing: Whether we’re talking about the so-called coin “shortages” of the early pandemic or technofuturist visions of decentralized currencies for all — when a coin, even the penny, freezes up, it exposes a gap in a system that should otherwise be flexible, resilient, and open.
It’s no secret that billions of dollars in loose change sits idle in jars, drawers, glove compartments. This money is not being spent, deposited, or recirculated. It’s not being leveraged as a way to draw people into the financial system. Cash and coin still play a critical role in everyday transactions, accounting for 16% of the money that changes hands. They matter especially to customers who are older, lower-income, or simply prefer cash. Even people who prefer debit or credit use cash 16 to 20% of the time.
When circulation slows, access tightens, friction increases, and the system that connects physical money to the broader economy starts to wobble… What happens to those customers — now and in the future? What happens to that money?
The pandemic made that fragility visible. Coinstar deposits dropped more than 60% in a matter of weeks. People experienced coin “shortages” but it’s more accurate to say there was a breakdown in money movement. The breakdown stemmed from the same sort of supply chain issues that were prevalent elsewhere in the global economy at the time — sudden dramatic shifts in demand and in buying habits, drastic reduction of in-person transactions, and the outright shuttering of certain categories of business. “It was a circulation problem,” McColly says. “And circulation is the thing no one is set up to monitor until it’s too late.”
And that leads to lesson number two:
When Banks Hand Off Coin Services
Stepping away isn’t neutral: When financial institutions step away from coin services, they solve a short-term operational issue but introduce long-term friction.
For many financial institutions, coin handling quietly faded from view years ago. It was expensive, operationally messy, and out of step with the industry’s continuing digital transformation. Customers could go elsewhere — often to a Coinstar kiosk — and most didn’t complain. Some banks even enable customers to move their money from a Coinstar machine to their account via a debit card. Over time, the default stance became simple: coin is someone else’s problem.
That handoff came with hidden costs. For customers who still use cash, coin remains a necessary part of everyday transactions. When financial institutions step back entirely from coins, without offering any simple alternative system, friction increases. Small businesses struggle with change. Consumers find fewer ways to cash in loose coins or access rolled coin. What seems like a narrow operational decision becomes a broader blind spot in service and reach.
For financial institutions like credit unions who care about their local businesses, the flow of cash and change helps raise all boats in the local economy. McColly notes that when someone uses a Coinstar machine at a grocery store, their grocery carts for that visit are on average bigger than normal.
“Coin is part of the cash economy,” says McColly. “And the cash economy is part of financial access.” In many rural or underserved communities, cash remains a primary means of payment. Stepping away from coin services doesn’t make those realities go away. It just makes institutions less relevant in the places where they still matter. “Maintaining choice is paramount,” McColly says.
So we come to our third lesson:
Why the Future is Both, Not Either/Or
Institutions that assume their operations should be narrowed to a digital transaction-only future, as quickly and directly as possible, risk gaps in access, inclusion, and trust.
The mistake isn’t just walking away from coin. It’s assuming there’s no longer a need to support physical currency at all. Many institutions are racing toward a digital-only model, but that strategy risks their relationship with whole swaths of the economy. Breaching trust and access in this way would be neither good for business nor good for society.
The real challenge, McColly says, is not choosing between formats but supporting both: “The future isn’t digital or cash. It’s both. Layered. Context-based.”
That dual reality demands a different kind of planning — one that respects consumer behavior, acknowledges policy inertia, and avoids false dichotomies. Payment preferences shift slowly, especially in market segments shaped by mistrust of, or effective lack of access, to digital tools. And even where the shift is underway, removing infrastructure too quickly can create more friction than progress.
“The idea is to build a true bridge to the future by giving consumers a way to ‘on-ramp’ their cash into digital money ecosystems, including digital wallets,” says Kim Raines, Coinstar’s Director of Business Development for North America — without forcing them to abandon the familiarity and utility of physical currency. The company’s Retail Remote Transfer service does exactly that, Raines says, letting financial institution customers transfer coins and cash directly into their checking account through its kiosks.
“While many companies feel pressure to cave to digital adoption, we must also continue to create flexible options that expand financial opportunities while respecting consumer preferences,” McColly says. That means continuity — maintaining reliable, functioning systems for physical money even as digital options expand.
“We’ve spent a lot of time thinking about what to phase out,” McColly says. “Maybe we need to think harder about what to maintain.”
