New Report Examines Coin Disruption

The U.S. Coin Task Force reports on the reasons why the disruption in coin circulation is still happening and what the future of coin looks like.

April 13, 2022

Coins Emptying from a Jar

CHICAGO—The U.S. Coin Task Force released a paper examining the reasons behind the disruption in coin circulation, its impacts and what the coin industry has done to address the situation. The goal of the paper is to generate awareness and support, as well as serve as the baseline for further study and action. NACS is a member of the U.S. Coin Task Force.

The coin circulation issue developed early on in the pandemic when many businesses and bank lobbies were closed, most Americans were home and those who were paying for goods were using less and less cash.

As a result, retailers across the country saw a drastic drop in the coin orders they were able to get filled at their banks, presenting significant challenges in making change for cash-paying customers. This has had a disparate effect on businesses, like convenience stores, that serve Americans who rely on cash to pay for goods and services, especially on low-dollar transactions.

“This pandemic is quite unique when compared to other previous [coin] disruptions, and as a result, operational challenges caused by COVID-19 are hard to diagnose. Many factors leading to the slowdown of coin circulation were easily observable and explainable,” writes the task force in the report. “However, given the anonymous nature of cash transactions, the proportional contributions of each factor to the problem are difficult to measure with any degree of certainty. Consequently, while the circulation slowdown has persisted now for more than a year and half, it is still unclear what factors weigh most heavily.”

The coin task force suggests three causes for coin circulation disruption. The first is a significant drop in coin deposits. Businesses, the public and coin aggregators are depositing half the amount of coins now than before the pandemic was declared in March 2020. Normal circulating coin patterns rely on a roughly 75% return rate of deposited coin to Federal Reserve inventories.

The second reason is COVID-19’s impact on coin production. The U.S. Mint dropped its coin production by as much as 35% during social distancing protocols and other operational changes. New coin production returned to pre-pandemic levels around June 2020 when the U.S. Mint introduced mandatory overtime to increase new coin output. However, even maximum U.S. Mint production cannot make up for the drop in deposits, said the task force.

An increase in coin orders from financial institutions is also a reason for the coin disruption. Coin orders dropped at the beginning of the pandemic, and then increased to pre-pandemic levels by mid-2020. Although financial institutions were ordering more coins, they were still depositing less coins than before the pandemic. Many financial institutions began to place large coin orders with the Federal Reserve in locations where they previously met demand with customer deposits.

“The increased order volume and lack of deposits created a gap of as much as 3.5 billion coins per month between coin demand and available supply, quickly depleting Federal Reserve and U.S. Mint contingency inventories,” writes the task force. “For every 10 coins paid out into circulation, the Reserve Banks were getting only about 4 coins back in deposits as opposed to 7-8 coins prior to the pandemic.”

The coin task force wants to be clear that the coin disruption is not a coin shortage and is not an issue that can be rectified by producing more coin.

“Economic and behavioral changes resulting from the COVID-19 pandemic as well as shifting business and consumer payment preferences and decisions, suggest most of these coins are sitting dormant inside America’s 128 million households,” writes the task force.

Last year, NACS surveyed a sample of its members and found that 80% of convenience stores said that dealing with the coin issue was diverting organization resources. Specifically, the problem requires additional time and resources from the workforce to provide change and search for coins from other vendors. The inability to make change is leading to customer frustration, and 76% of respondents reported that store staff had been adversely impacted.

“As the coin industry starts to emerge from the pandemic, the big questions now are which behavioral changes will stick and how the coin supply chain should accommodate the new normal,” writes the task force.

The report goes into further detail on the reasons behind the shortage, how it is affecting businesses,  consumer behavior regarding coin usage, as well as next steps on the issue.