How do ATM’s in general work is a great question to ask? Well banks at times prefer not to manage their ATM’s as it involves a lot of overhead such as transportation of cash, maintenance of ATM machines, rent and most importantly security.
In order to avoid this over head a lot of banks outsource this task. The companies who overtake this responsibility , make their revenue based on every transaction made. Say for every non cash transaction from the ATM managed by them they get x$ and for every cash transaction they get y$ where y>x .
So why do we need to predict cash ?? well these companies rent a place, put their ATM’s at that place keep a service engineer to maintain that machine and pump enough security, but where they need to be careful is interest cost. What interest cost? lets say for today’s date I decided to keep 100$ in my ATM, I would borrow this money from a bank, to whom I would pay interest every day for the cash that is not withdrawn by the customer’s.
The obvious solution for this is to load ATM’s with the smallest amount of money possible, however this leads to two problems, First is loss of revenue from a potential customer, and second one is brand loss, and brand loss is very bad.
That means we do not want to load to much money to avoid paying interest cost on idle money, and neither do we want to put to less in order to avoid loss of revenue and brand loss. In order to find this perfect balance we need to create a forecasting model on how much money to load in the ATM’s, in order to make the business profitable.
One underlying constraint is transportation. We cannot transport and load money in ATM’s on a daily basis to avoid transportation costs, that is why transportation will happen only once in two to three days.