CREATING A SUCCESSFUL UTILITY
Booz & Company
If banks want to realize significant cost savings in cash operations and minimize the associated risks, they may have to venture into unfamiliar territory by working more closely with their competitors and building trusted relationships with outsourcers.
In establishing a multi-bank cash utility, banks should take into account the following key success factors:
A Considered Approach to Outsourcing It is important to identify the elements of the cash processes that could be improved internally and those that should be outsourced, as well as to determine where the operations could benefit from increased scale through partnerships. A strong business case can galvanize action to seek the necessary changes, while the strategic plan should make allowance for risks such as security and supplier power.
Protecting Competitive Advantage When entering into partnerships, banks should retain ownership of those cash activities in which they already have a clear competitive lead (e.g., machine placement). Such advantages should be clearly articulated and defended with factual evidence where necessary. Cooperation can be highly beneficial
in areas where it is difficult to differentiate, such as cash processing and logistics.
Cooperation with the Central Bank The central bank is the one major public stakeholder with specialist knowledge of cash operations, and it can appreciate the value of a combined approach involving multiple banks. The central bank is also ultimately responsible for the provision of cash as an essential service and can provide appropriate neutral governance and public oversight to the partnership. Additionally, working closely with the central bank can help banks gain further process improvements. These include increasing the interest-bearing portion of the cash inventory and more efficiently transporting cash between the central bank and the bank cash centers.
Strong Governance over Relationships A rigorous approach to any alliance can give banks the confidence that they are entering a confidential, win- win relationship. The first step should be a letter of intent and business case based on a detailed baseline for every participating bank. At this early stage, an independent third party should manage information, conduct analyses, and ensure fair comparison among banks.
Cooperation can be highly beneficial in areas where it is difficult to differentiate, such as cash processing and logistics.