“Hey, do you have change for a dollar?” The once simple act of breaking a dollar has become increasingly difficult due to disruptions in the regular supply and distribution of coins. Is there a coin shortage? Not exactly, because the United States has plenty of cash and coins floating around. However, many financial institutions and businesses cannot access an adequate amount of coins to service their account holders and clients. So, what is going on?

The Root of the Problem

According to reports from the Federal Reserve Bank of Atlanta, the United States has approximately $47.8 billion in coin currently in circulation. On top of that existing supply, the Federal Reserve also announced that the U.S. Mint is running at full capacity and it will produce 1.65 billion coins per month for the rest of the year. Where is it all then? Well, a lot of it is sitting in piggy banks or stuck between couch cushions across the nation! In normal times, many Americans take their coin collections to financial institutions to deposit or perhaps to a coin-counter at a grocery store to turn into cash or gift cards. Once deposited, these coins can circulate throughout the economy, as businesses pick up change orders and use coins in everyday commerce. Unfortunately, the ongoing pandemic has brought everything to a grinding halt since many Americans are limiting their trips outside to reduce their potential exposure to the virus. Thus, the cumulative effect of so many individuals choosing to keep coins at home, in wallets and piggy banks, is a nationwide disruption in the regular circulation and supply.

How are businesses responding to the shortage?

You may have seen businesses in your hometown displaying signs stating they can only accept card payments or exact change because they do not have enough coins to make change. For some, the shortage may have pushed them away from being “cash-only” to quickly adopt credit or debit cards. For others, however, there may be less of an impact due to an earlier digital payment push, perhaps at the beginning of the coronavirus lockdown in late February and early March. As a payments geek, I have been pleasantly surprised by the ingenuity and rapid deployment of new payment experiences by all manner of small businesses. But, what will happen to these new digital or contactless payment experiences as the pandemic continues? Will we see people return to old ways, like cash, once conditions improve? Or, will the pandemic forever alter the landscape of electronic payments and produce a new generation of Americans with little, or perhaps no, experience with cash and coins? Only time will tell!

How is the industry responding?

The Federal Reserve convened the U.S. Coin Task Force in July to bring together leading experts from financial institutions, merchants, coin machine operators and related other groups to provide insights on possible ways to improve distribution and supply. The task force issued a preliminary report on July 31 in which it committed to producing materials to educate consumers about coin circulation and recommend best practices for financial institutions to encourage account holders to bring in coins. One bank in Wisconsin even initiated a special program offering a $5 incentive for every $100 in coins deposited by its account holders, and I have heard of similar efforts by EPCOR members. Stay tuned to News You Can Use to learn about any new developments from the task force.

What can your institution do now?

Although we cannot look into a crystal ball to seek exactly what payments will look like after the pandemic, it is a safe bet that digital payments will be important. The shift from paper to digital began long before the virus hit, and the underlying causes of that shift, like account holder demographics and easily accessible smart phone technology, will continue to push innovation forward. Financial institutions should continue to position themselves for success today and tomorrow by gaining and applying more knowledge of the range of digital products and systems impacting payments.