Cash Processing Solutions – a Well-Kept Secret

Cash Processing Solutions (CPS), the clue to whose activities is in its name, describes itself as one of the industry’s ‘best kept secrets’. The company was acquired from De La Rue by Privet Capital in 2016 and was growing at 25% per year until COVID hit. But it is optimistic that, with the world emerging from the pandemic, growth will be back on course, bolstered last month by a multi-million pound order from India for four of its CPS 9000™ Single Note Inspection Systems.

Currency News spoke to Barrie Foley, who was appointed Managing Director in 2019, to find out more about the company’s portfolio, its plans for growth, and where it sees itself and the cash industry going in the next few years.

Q: First of all, can you describe your background and how you came to join CPS?

A: I’ve worked for several big blue-chip companies, including Exxon, Mars, Invensys, and Smiths Detection, with a lot of experience in growth. My background is engineering, I’m a Six Sigma Lean manufacturing graduate, and I have also worked for Mars in sales. So I have some broad experience of growing companies and managing the journey of growth.

Privet Capital have implemented a number of good initiatives that stabilised and grew the business. It grew 20-25% per year for the first three years of their ownership and I was brought in to deliver that next stage of growth for the business, because of my experience in that area. But then we got hit by COVID, so obviously it didn’t quite work out how we planned.

However, I think we are well on our way now to continue that growth trajectory as we exit COVID.

Q: We’ll come back to COVID later. In the meantime, can you describe CPS today – your products and your customers?

A: CPS is an independent business with a sole focus on offering our customers a full suite of cash processing solutions, including hardware, software and services.

Our hardware solutions include the 9000 series of single note inspections systems for state and commercial print works, the 7000i series of high speed sorters with our patented image detection system (IDS) for fitness sorting and authentication, the V series of compact high speed sorters and the X Range desktop sorters.

Our flagship software solution is ECM™, an enterprise level software platform focused on managing the flow of cash both within and beyond the cash vault, with key customers being central banks, commercial banks, CITs, casinos and retailers. ECM is the market leading software solution in this space, with the largest installed base globally.

Q: In terms of sectors, which are your core markets and what’s the rough split of your business?

A: Central banks are still the biggest customer base for us, around half of the business, combined between the sales of new machines, software and the service and maintenance.

After that it would be commercial banks and CITs, around 40%, although I don’t necessarily separate them because in so many places they are essentially performing the same role. The next 10-15% is split between casinos and retailers. Credit unions are probably in the single digit percentages.

We expect the retailer and casino sector to grow quite considerably as a percentage of our business over the next couple of years. The casino market is an area we really haven’t touched until recently, and thanks to a partnership with JCM, we expect that to grow significantly, particularly in North America but also globally.

Q: And in terms of hardware versus software versus services, what is the split of these businesses?

A: Our hardware business, including machine sales and service, is roughly 80% of our business, with the remainder being software solutions.

Software is the future of this sector, the ability to understand what is happening in real time is imperative to gain productivity and adapt to changing needs. The ability to extract data from machines and the overall operations is important, but performing analytics on that data and providing real actionable insights is far more valuable.

CPS is very well positioned to succeed in this area. ECM is already the market leading software solution for managing cash operations, our sorting machines are all designed to output rich data sets (although our software is machine agnostic, so we are not limited to only our own machines, and can be sold separately) and our analytics capability means that we deliver solutions that can provide a complete overview of a customer’s operational and banknote performance.

Our vision for the business is to become a true solution partner for our customers. That means working with them closely to understand their business and identify their needs, as well as the most appropriate solution for them (our full suite of products allows us to do that), then developing the right commercial proposition to deliver that through OpEx (operational expenditure) models and long term service partnerships.

It is imperative that we are able to deliver flexible solutions in these uncertain times, that allows our customers the freedom to adapt to their changing needs.

Q: What is your business model and your core skills?

A: Looking at the question of ‘is cash going to grow?’, what I identified with CPS is that it doesn’t matter if cash is growing or not. If you have the best technology and solutions that add value, provide flexibility, improve efficiency and are combined with high levels of customer service, customers will want that whether cash grows or declines.

Our business model is all about market share, not necessarily about market growth. Looking at CPS, it’s a quality company and an experienced and knowledgeable people, with the opportunity to get an increased market share in all segments.

The solutions are very good but we are not well known enough in the market, so we are probably the best kept secret in the industry. We haven’t done a good enough job of telling people what we can do and why they should choose CPS.

Q: In addition to JCM for the casino market in North America, you have also established partnerships with Hunkeler and Vaultex. Can you describe these.

A: The partnership with Hunkeler has been developed to provide the full suite of solutions to our central bank customers, from processing through to online destruction. We work with them to build the full package of equipment and solution to sell to the customer.

Vaultex is a long term partner for CPS, as both a user of our hardware and, more recently our ECM software solution, but also a product development partner, where we innovate together to develop solutions that improve their operations and potentially other customers as well. We also work closely with Vaultex Consulting Services, to support them in their engagements globally.

Q: What is your structure around the world?

A: We have a regional business model, split into four regions – Europe & CIS, MEA, Asia Pac and the Americas. Each is responsible for both sales and service for our customer base in its region, with the intention of building on and improving customer relationships. The regions are supported by a central structure for Operations, Marketing, Finance and HR.

Our core skills as an organisation are focused on product development, particularly in the areas of note transportation, sensor development and software development. Additionally, a core competence of our organisation is service and maintenance; we have over 350 staff in our service organisation globally, and pride ourselves on delivering consistently high-quality service to our customers.

Dallas remains our high speed sorting assembly and engineering hub, with sub-assemblies being procured from all over the world. It has long been our Centre of Excellence for high speed sorters (7000i and 9000), and our focus now is on investing in the site and its staff to cope with the large increase in orders we have received in recent months.

We also have a second engineering hub for the V Series of compact high speed sorters, which is based in Fareham in the UK. Compact high speed is making a big splash in the commercial bank and CIT world because they’re looking at efficiency and productivity of assets, and the V Series delivers the capabilities of high speed sorter in the footprint of a desktop sorter.

ECM software is a critical component of our business as it provides the ability to deliver a total solution to our customers. Combining data from sorting machines and vault management systems and then running real time analytics on operational performance and banknote information will be more and more valuable as we move to a less cash environment.

Q: So now onto COVID. What measures have you taken to ensure business continuity during the pandemic?

A: We instigated a COVID committee for the business very early in the pandemic and this has met on a weekly basis to manage all aspects of the impact of COVID on the business, from operations to customer support to staff health and wellness and travel. Operationally we have instigated home working for all those that could (for example, software developers) and then put in red and white teams in our factories and engineering teams.

We had to adapt. For example, we had to train our sales teams in how to communicate more effectively via video calls, and we set up a virtual demonstration environment to take our products into our customers’ homes, where we had their full attention because they’re sat at home too trying to manage COVID themselves.

If you look at what happened as a result of our training, we’ve had some big wins during COVID, such as the large one recently secured in India, and a multi-million contract in the Asia Pac region for our X Range. In addition, we have won major high-speed opportunities with banks in Europe, and a framework agreement for at least five high speed machines for central banks going forward in the future years. We have also had some significant wins for our ECM software in both the central bank and commercial markets.

Q: Have you seen any slowdown in investment in cash processing or has the pandemic accelerated requirements?

A: There is no doubt that COVID has delayed a lot of decisions by our customers. That is due not only to uncertainty the impact of COVID will have on cash usage, but also the very fact that people have been working from home and it is more difficult to gain consensus and make decisions.

But since early 2021, we have seen a significant increase in activity, so our feeling is that the market is bouncing back. We are waiting to see whether this is a rebound or a long-term trend. Whichever it is, we are certainly enjoying the improvement.

Q: What steps, if any, are you taking to make your products and the cash cycle more sustainable?

A: This is obviously an area of interest for the market and ourselves. To this end we have established an environmental committee within the business to bring this to the top of the agenda. Our short-term focus is on reducing utility and water usage in our factories, reusing and recycling our products, and engineering changes into our products to reduce power usage.

Q: How is the market reacting to the dominance of your major rival when it comes to large sorters and single note examination equipment?

A: It is clear that we have a strong competitor, but my overall feeling is the market is looking for choice and a different value proposition. I believe CPS is that choice, in particular in high speed sorters and single note inspection. Our overall proposition is one of customer ownership and control, where we provide the customer with the tools and capabilities to manage their own operations, data and performance, with CPS being there to facilitate and support, not to control.

If you look at us as a company, we have a great pedigree with long term partnerships with many central banks, commercial banks and CITs around the world, but we have historically not built on that as well as we could. That is why I’m talking about our total solutions; we have this fantastic opportunity to grow the business and I expect us to do that over the coming years.

Q: Where do you see CPS in five years’ time, and ten?

A: I see CPS as being a data driven solution provider for our customers, with capabilities and technology that stretch beyond the cash sector. I’d like to see our company grow over the next few years at least 50% in size. That’s an ambitious target, but I think our software is going to help us significantly, and it’s a target worth going for.

I believe there’s an element of looking beyond the cash sector too. There are multiple other industries that could benefit from the technology we provide - the sensor development, document transportation, software development, software analytics, and fleet management systems.

I think there’s two sides to it, doing better at what we do currently, but also looking at those adjacent markets where we can leverage some of our technology and our capabilities to maybe look at growing elsewhere.