Evaluation of ATM Cash Demand Process Factors Applied for Forecasting with CI Models

Abstract

The purpose of cash management is to optimize distribution of cash. Effective cash management brings savings to retail banks that are related to: dormant cash reduction; reduced replenishment costs; decrease of cash preparation costs; reduction of cash insurance costs. Optimization of cash distribution for retail banking in ATM and branch networks requires estimation of cash demand/supply in the future. This estimation determines overall cash management efficiency: accurate cash demand estimation reduces bank overall costs. In order to estimate cash demand in the future, cash flow forecasting must be performed that is usually based on historical cash point (ATM or branch) cash flow data. Many factors that are uncertain and may change in time influence cash supply/demand process for cash point. These may change throughout cash points and are related to location, climate, holiday, celebration day and special event (such as salary days and sale of nearby supermarket) factors. Some factors affect cash demand periodically. Periodical factors form various seasonality in cash flow process: daily (related to intraday factors throughout the day), weekly (mostly related to weekend effects), monthly (related to payday) and yearly (related to climate seasons, tourist and student arrivals, periodical celebration days such as New Year) seasons. Uncertain (aperiodic) factors are mostly related to celebration days that do not occur periodically (such as Easter), structural break factors that form long term or permanent cash flow shift (new shopping mall near cash point, shift of working hours) and some may be temporal (reconstruction of nearby building that restricts cash point reachability). Those factors form cash flow process that contains linear or nonlinear trend, mixtures of various seasonal components (intraday, weekly, monthly yearly), level shifts and heteroscedastic uncertainty. So historical data-based forecasting models need to be able to approximate historical cash demand process as accurately as possible properly evaluating these factors and perform forecasting of cash flow in the future based on estimated empirical relationship.

Keywords

• computational intelligence
• regression
• time series forecasting
• cash management
• data-based forecasting
• daily cash flow