Datamatics Case Studies Advanced Analytics for Accurate Currency Demand Forecasting in South-East Asian Central Bank

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	Advanced Analytics for Accurate Currency Demand Forecasting in South-East Asian Central Bank Datamatics

Advanced Analytics for Accurate Currency Demand Forecasting in South-East Asian Central Bank

Datamatics

Applicable Industries	Finance & Insurance Retail
Use Cases	Demand Planning & Forecasting Inventory Management
Challenge	The largest central bank in South-East Asia was facing challenges in accurately forecasting the demand for banknotes and coins of different denominations. The rapidly changing economic landscape and extraneous shock events such as elections and demonetization were causing most of the existing algorithms to fail. The bank also needed to account for significant developments in the applications of electronic technologies in the retail payments areas. Additionally, the bank wanted to understand the numbers for replacements or retirements of banknotes and the effect of different shock events on currency demand. Read More
About Customer	The customer is the largest central bank in South-East Asia. They are responsible for a range of national level economic policies, including liquidity management, currency issuable, financial supervision, foreign currency reserves, and exchange rate policy. The bank plays a crucial role in the economic stability of the region and is constantly dealing with the challenges of a rapidly changing economic landscape, including the increasing use of electronic technologies in retail payments and extraneous shock events such as elections and demonetization. Read More
Solution	Datamatics provided a solution that did not solely rely on structural relationships between money and other nominal or real variables. They explored econometric time series based algorithmic interventions and implemented advanced analytics solutions. A user-friendly solution was developed using R and Dot Net framework, which utilized Econometric Time-Series Forecast modelling and the analysis of 10 years of data for Banknote and Coin requirement. The data was extracted from four different sources – Withdrawal, Retirement, Buffer Stock, and Currency-in-Circulation. The solution used concurrent, multiple model engagement for building precision and accuracy, and had the ability to handle shock events seamlessly and effectively. Both long and short term estimations were significantly more precise and accurate compared to other competing and erstwhile estimates. Read More Log in to view content
Contents

Applicable Industries

Finance & Insurance

Retail

Use Cases

Demand Planning & Forecasting

Inventory Management

Challenge

The largest central bank in South-East Asia was facing challenges in accurately forecasting the demand for banknotes and coins of different denominations. The rapidly changing economic landscape and extraneous shock events such as elections and demonetization were causing most of the existing algorithms to fail. The bank also needed to account for significant developments in the applications of electronic technologies in the retail payments areas. Additionally, the bank wanted to understand the numbers for replacements or retirements of banknotes and the effect of different shock events on currency demand.

About Customer

The customer is the largest central bank in South-East Asia. They are responsible for a range of national level economic policies, including liquidity management, currency issuable, financial supervision, foreign currency reserves, and exchange rate policy. The bank plays a crucial role in the economic stability of the region and is constantly dealing with the challenges of a rapidly changing economic landscape, including the increasing use of electronic technologies in retail payments and extraneous shock events such as elections and demonetization.

Solution

Datamatics provided a solution that did not solely rely on structural relationships between money and other nominal or real variables. They explored econometric time series based algorithmic interventions and implemented advanced analytics solutions. A user-friendly solution was developed using R and Dot Net framework, which utilized Econometric Time-Series Forecast modelling and the analysis of 10 years of data for Banknote and Coin requirement. The data was extracted from four different sources – Withdrawal, Retirement, Buffer Stock, and Currency-in-Circulation. The solution used concurrent, multiple model engagement for building precision and accuracy, and had the ability to handle shock events seamlessly and effectively. Both long and short term estimations were significantly more precise and accurate compared to other competing and erstwhile estimates.

Impact #1	The solution provided by Datamatics significantly improved the bank's ability to accurately forecast the demand for banknotes and coins. It also enhanced the bank's understanding of the numbers for replacements or retirements of banknotes and the effect of different shock events on currency demand. The solution's ability to handle shock events seamlessly and effectively was a major advantage. The use of concurrent, multiple model engagement for building precision and accuracy resulted in both long and short term estimations being significantly more precise and accurate compared to other competing and erstwhile estimates. The user-friendly nature of the solution also made it easier for the bank to use and interpret the data.

Impact #1

The solution provided by Datamatics significantly improved the bank's ability to accurately forecast the demand for banknotes and coins. It also enhanced the bank's understanding of the numbers for replacements or retirements of banknotes and the effect of different shock events on currency demand. The solution's ability to handle shock events seamlessly and effectively was a major advantage. The use of concurrent, multiple model engagement for building precision and accuracy resulted in both long and short term estimations being significantly more precise and accurate compared to other competing and erstwhile estimates. The user-friendly nature of the solution also made it easier for the bank to use and interpret the data.

Benefit #1	99.9% precision achieved in forecasting requirement of bank notes and coins
Benefit #2	100% accuracy in stock taking of currency notes that involved withdrawal, retirement, buffer stock, and currency-in-circulation
Benefit #3	20% reduction in the cost of printing/ minting the currency in the first year itself

Benefit #1

99.9% precision achieved in forecasting requirement of bank notes and coins

Benefit #2

100% accuracy in stock taking of currency notes that involved withdrawal, retirement, buffer stock, and currency-in-circulation

Benefit #3

20% reduction in the cost of printing/ minting the currency in the first year itself

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Overview

Advanced Analytics for Accurate Currency Demand Forecasting in South-East Asian Central Bank

Operational Impact

Quantitative Benefit