Harvard Case - Cashing Out: The Future of Cash in Israel
"Cashing Out: The Future of Cash in Israel" Harvard business case study is written by Mark Fagan, Benjamin Gilles. It deals with the challenges in the field of Strategy. The case study is 12 page(s) long and it was first published on : Jan 29, 2018
At Fern Fort University, we recommend that the Bank of Israel (BoI) adopt a multi-pronged strategy to manage the future of cash in Israel. This strategy should focus on leveraging technology and innovation to enhance the efficiency and security of cash transactions while simultaneously promoting the adoption of digital payment methods. This approach will ensure a smooth transition to a more digital economy while maintaining access to cash for those who prefer or require it.
2. Background
This case study focuses on the Bank of Israel (BoI) and its role in navigating the future of cash in Israel. The case highlights the declining use of cash in favor of digital payment methods, driven by factors like technological advancements, convenience, and security concerns. This trend presents both opportunities and challenges for the BoI, as it seeks to maintain a stable and efficient financial system while adapting to the evolving needs of its citizens.
The main protagonists are the BoI, represented by its governor, Amir Yaron, and the various stakeholders involved in the Israeli financial ecosystem, including banks, businesses, and individuals.
3. Analysis of the Case Study
To analyze the case, we utilize the following frameworks:
Porter's Five Forces: This framework helps assess the competitive landscape of the cash management industry in Israel.
- Threat of New Entrants: The entry barriers in the digital payment space are relatively low, leading to increased competition from fintech companies and international players.
- Bargaining Power of Buyers: Consumers have increasing bargaining power due to the availability of diverse payment options and the ability to switch easily between providers.
- Bargaining Power of Suppliers: The bargaining power of suppliers, such as technology providers, is moderate, as the BoI can leverage its regulatory power to negotiate favorable terms.
- Threat of Substitutes: Digital payment methods pose a significant threat to traditional cash transactions, offering greater convenience and security.
- Competitive Rivalry: Competition among banks and financial institutions is intense, further driving the adoption of digital payment solutions.
Ansoff Matrix: This framework helps analyze growth strategies for the BoI.
- Market Penetration: The BoI can focus on increasing the adoption of existing cash management services within the current market.
- Market Development: The BoI can explore new markets for its cash management services, such as targeting specific demographics or expanding into new geographical areas.
- Product Development: The BoI can develop innovative solutions to enhance the efficiency and security of cash transactions, such as introducing new technologies or partnering with fintech companies.
- Diversification: The BoI can explore new business models and services beyond traditional cash management, such as providing financial education or offering digital financial services.
BCG Matrix: This framework helps prioritize the BoI's resources based on market share and market growth.
- Stars: The BoI should focus on investing in and growing its digital payment initiatives, which are expected to have high market share and growth potential.
- Cash Cows: The BoI should leverage its existing cash management infrastructure and services to generate revenue and support other initiatives.
- Question Marks: The BoI should carefully assess the potential of emerging technologies and business models in the cash management space.
- Dogs: The BoI should consider divesting or phasing out services with low market share and growth potential.
4. Recommendations
The BoI should implement the following recommendations to manage the future of cash in Israel:
- Promote Digital Payment Adoption:
- Incentivize: Offer incentives to businesses and individuals to adopt digital payment methods, such as cashback programs, discounts, or tax benefits.
- Education: Launch public awareness campaigns to educate consumers about the benefits and security of digital payments.
- Infrastructure: Invest in developing a robust and secure digital payment infrastructure, including mobile payment platforms, online banking services, and point-of-sale terminals.
- Enhance Cash Management Efficiency:
- Technology Integration: Leverage technology and analytics to streamline cash management processes, such as automated cash counting, deposit verification, and fraud detection.
- Strategic Alliances: Partner with fintech companies and technology providers to develop innovative solutions for cash management, such as mobile cash deposit services or automated teller machines with enhanced security features.
- Supply Chain Optimization: Optimize the supply chain for cash management, ensuring efficient distribution and collection of banknotes, and reducing costs associated with transportation and storage.
- Maintain Access to Cash:
- Branch Network: Maintain a sufficient network of bank branches, especially in rural areas, to ensure access to cash for those who prefer or require it.
- ATM Network: Expand and modernize the ATM network, offering convenient access to cash and providing features like cash withdrawal limits and account balance inquiries.
- Cash-Based Services: Continue to provide essential cash-based services, such as government payments and social welfare programs, for those who lack access to digital payment methods.
5. Basis of Recommendations
These recommendations are based on the following considerations:
- Core Competencies and Consistency with Mission: The BoI's core competency lies in maintaining a stable and efficient financial system. These recommendations align with this mission by promoting financial inclusion, enhancing the security of transactions, and fostering innovation in the financial sector.
- External Customers and Internal Clients: These recommendations consider the needs of both external customers (businesses and individuals) and internal clients (banks and other financial institutions). They aim to provide a seamless and secure experience for all stakeholders in the financial ecosystem.
- Competitors: The recommendations acknowledge the competitive pressures from fintech companies and international players. By embracing innovation and developing strategic partnerships, the BoI can remain competitive and maintain its leadership position in the Israeli financial market.
- Attractiveness ' Quantitative Measures: The recommendations are expected to result in increased efficiency, reduced costs, and enhanced security for the financial system, leading to improved profitability and value creation for the BoI and its stakeholders.
6. Conclusion
The future of cash in Israel presents both challenges and opportunities for the BoI. By embracing innovation, promoting digital payment adoption, and ensuring access to cash for those who need it, the BoI can navigate this transition effectively and maintain a stable and efficient financial system for the benefit of its citizens and the economy.
7. Discussion
Alternative approaches to managing the future of cash in Israel could include:
- Complete Transition to Digital: This approach would involve phasing out cash entirely and transitioning to a fully digital economy. However, this could lead to social exclusion for those who lack access to digital payment methods.
- Limited Cash Management: This approach would involve reducing the role of cash in the economy by limiting access to cash and encouraging the use of digital payment methods. This could lead to challenges for businesses and individuals who rely on cash transactions.
The risks associated with the recommended approach include:
- Technological Failure: The reliance on technology could lead to disruptions in service or security breaches.
- Digital Divide: The promotion of digital payments could exacerbate the digital divide, excluding those who lack access to technology or financial literacy.
- Regulatory Challenges: The BoI may face challenges in regulating the rapidly evolving digital payment landscape.
8. Next Steps
The BoI should implement the following steps to execute its strategy:
- Develop a comprehensive roadmap: This roadmap should outline the specific actions, timelines, and resources required to implement the recommendations.
- Establish a dedicated task force: This task force should be responsible for coordinating the implementation of the strategy and monitoring progress.
- Engage with stakeholders: The BoI should actively engage with banks, businesses, and individuals to gather feedback and ensure buy-in for the strategy.
- Monitor and evaluate progress: The BoI should regularly monitor and evaluate the effectiveness of its strategy, making adjustments as needed.
By taking these steps, the BoI can successfully navigate the future of cash in Israel and ensure a stable, efficient, and inclusive financial system for all.
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Case Description
It is impossible to predict the future, but this is a task policymakers are effectively expected to do when deciding how to deploy scarce resources to the benefit of future constituents. This case therefore looks at one tool in particular-scenario planning-that actors in both the public and private sector employ to, while not predicting the future, prepare for it as much as possible. The case uses Ilan Steiner, head of the Currency Department at the Israeli central bank as the protagonist; one of the biggest questions he has had to address in the last few years has been what the future of cash will look like. Some people argue that the proliferation of new technologies-such as Venmo-will make paper currency obsolete. Others point out that paper currency demand is actually increasing in many countries, despite the availability of digital payment systems. The case is divided into three sections. The first introduces Ilan Steiner and provides some background on currency use around the world. The second section introduces scenario planning and then discusses how railway executives employed scenario planning to investigate possible futures for coal demand and their impact on the railway industry. The last section is a memo 'from' Ilan that requests students to prepare their own scenario plan for the future of cash in Israel. Case number 2100.0
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