Optimizing Cash and Liquidity Without Major Overhaul

Vinyl records have had something of a resurgence lately. In 2024, sales of vinyl records grew for the eighteenth year in a row, outpacing CDs, while annual revenue for vinyl grew 7% from 2023 numbers. Listeners increasingly are rediscovering something digital copies and streaming services quite replicate: richer sound, tangibility, and a sense of connection. Cash shares a similar story. Despite the surge in apps and contactless payments, physical currency continues to provide consumers — and community financial institutions (CFIs) — with a grounded, reliable experience and a steady store of value.The Federal Reserve’s 2025 Diary of Consumer Payment Choice found that US consumers used cash for 14% of payments, and more than 90% report using cash for at least some transactions.CFIs can employ digital tools and better governance to modernize cash and liquidity strategy, aligning cash operations with a bank’s stance on risk and technology — without launching massive transformation programs.Digital Tools for Holistic Cash ManagementMany institutions still manage cash primarily at the branch or device level, with decisions driven by local habits rather than enterprise‑level data and targets. For CFIs, the way cash is managed at branches and ATMs directly influences liquidity buffers, funding costs, and the balance sheet’s risk‑return profile.Digital technology can help achieve these goals. Consider a CFI with 5-20 branches and a similar number of ATMs. A combination of data analytics, process automation, and connected devices can help that bank optimize its cash supply for ATMs and branches, coordinate deliveries with armored‑car providers, and integrate cash‑usage data into decisions about funding and pricing.Sharing data across the operation has benefits beyond keeping ATMs and cash drawers stocked. Relying on spreadsheets or gut feel to decide how much cash to order for ATMs often leads to cash‑outs, excess holding costs, or residual fees. Moving to data‑driven forecasting and automated cash ordering can significantly reduce those issues while freeing up staff time.CFIs can also remotely update software‑connected devices to recognize updated security features on paper bills, including new designs such as the upcoming $10 bill. Remote updates reduce service calls and manual interventions, lowering costs and improving operational resilience.Breaking Down Silos in Cash OperationsA CFI’s cash management affects operations, risk, treasury, and retail. Digital tools that cut across silos can give these teams a shared view of cash across branches, ATMs, and vaults, including what the institution pays in holding and cross‑shipping fees. By pulling data from the core, ATM monitoring, and cash‑ordering systems into a centralized forecasting dashboard, CFIs can see cash positions and trends in one place and align decisions on orders, shipments, and returns to the Federal Reserve.In addition to helping forecast cash needs, predictive analytics can make cash services more dependable by anticipating shortfalls and unusual demand patterns. That makes service disruption less likely and supports a more consistent customer experience at the branch and the ATM.Cash Management Is Liquidity ManagementThe challenge is not recognizing that liquidity matters, but calibrating cash and other liquid assets so that branch and ATM inventory supports customer demand without diluting spreads or undermining liquidity stress‑test results. The way physical cash is sized and positioned across the footprint influences both day‑to‑day operations and the institution’s ability to respond during periods of funding stress.Feeding branch, ATM, and vault cash data into ALCO reporting strengthens existing liquidity frameworks — tightening assumptions in stress scenarios, supporting more disciplined limits, and surfacing the true cost of holding excess physical cash. Even simple forecasting models, built on historical branch and ATM usage, can replace rule‑of‑thumb ordering, cut residual cash in devices, and provide more defensible assumptions for liquidity stress tests.Five Moves to Turn Cash into a Liquidity LeverTo begin implementing digital cash management tools and better governance, a CFI can focus on a few targeted moves that link cash directly to earnings and liquidity.

By treating cash operations as a core element of liquidity strategy, CFIs can tighten control over cash balances, cut avoidable logistics and holding costs, and improve resilience to funding stress without a disruptive transformation program.