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Advanced Analytics for Accurate Currency Demand Forecasting in South-East Asian Central Bank
Applicable Industries
- Finance & Insurance
- Retail
Use Cases
- Demand Planning & Forecasting
- Inventory Management
The 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 The 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.
The 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.
Operational Impact
Quantitative Benefit
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