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Provisional credit

When you own your own business, time is money.

To this day, retailers have to spend hours in their cash room counting the day's earnings, bundling it, bagging it and depositing it into their smart safe cache, so an armoured guard can pick it up in the morning and take it to the bank.

"It's time consuming because they have to prepare that deposit: count it, bundle it, strap it, put it in a tamper-resistant bag, as well as reconcile the day's sales," says Robin Steinberg, director of business development and retail solutions at CashTech Currency Products Inc., a cash technology, products and services company.

What if there was an easier way? What if retailers could use the money sitting in their cash room before it even left their premises? There is and it's called Provisional Credit -- it's very popular in the U.S. and could make its way to Canada very soon.

How it works
Since a retailer's money usually goes into a smart safe that counts it as soon as it leaves the retailer's hand, and because only an armoured guard can open the safe, a bank can confidently determine how much money is deposited.

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"All of these smart safes have a bill validator that will validate and count the bills the moment they are put in the safe and they are also hooked up to a secure Internet network. At the end of the day, a reading of what was deposited that day is complied and sent to the bank," says Steinberg.

Based on that data sent to the bank each day, the bank gives the retailer provisional credit -- prior to the money being picked up by the armoured guard and deposited into the bank that day. Actually, the whole time, the money still sits in the secure smart safe.

The price of convenience
"Provisional credit allows for fewer armoured car pick-ups than ever before, which reduces cost on the merchant and is easier on both the merchant and the bank, but there's a price for that credit," Steinberg continues.

Brinks has begun offering it to customers, but the price has yet to be determined in Canada. In the U.S, the price is said to be less than five-day-a-week cash pick-ups, which amount to about $300 a week. Also, the smart safe is owned by the cash-in-transit company, so it is on them, not the merchant, to reconcile any occasional shortfalls.

"The question is cost versus benefit and who's going to buy-in," says Steinberg. "Conceptually, it sounds like a great idea, but with interest rates the way they are today, what's the price of the money that goes into your account everyday. Is the value of that money worth the cost of the fee to get that provisional credit?"

As recently as 2010, only 10 per cent of the market in the U.S. was using provisional credit -- even though there were an estimated 200,000 candidates at the time -- simply because no one had brought it to them, so the initial slow adoption here in Canada seems to be par for the course.

Aaron Broverman is a freelance writer in Toronto

-- Posed October 7, 2013
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