Myth: Cash is "low technology"

By Currency Research

Currency Research estimates that each year billions of dollars are invested in banknote and coin advanced technologies to keep them secure from counterfeiting, as well as to improve overall efficiencies and safety in the cash cycle.

Banknotes, with a worldwide confidence rate of well over 99.999% (based on counterfeiting statistics worldwide), are the most secure documents in the world. By comparison, Visa’s confidence rate is 99.96% based on a fraud to percentage of cardholder expenditure ratio of .038%. 86 The technology developed
for banknotes has been used to help secure cards, passports, pharmaceuticals, packaging, and most other products susceptible to counterfeiting. These technologies include:

• Nanotechnology and RFID, innovative anti-crime technologies that ensure the continued safe and efficient use of cash as a preferred means of payment at the point of sale and throughout the cash product life cycle;


• Automation equipment to authenticate and process banknotes that now operates at speeds in excess of 2000 banknotes per minute and can fully reconcile mixed-denomination deposits in a single pass;


• Forecasting and tracking tools employed by cash management companies to efficiently ensure both the pick-up and delivery of cash in large and small geographical areas, as well as the transition from large armored vehicles to small “soft skinned,” or lightly armored, vehicles with advancements in anti-theft containerization and other deterrents; and,


• Point–of-sale terminals that can now securely count and store cash and allow credit to be given instantly by the bank to the retailer, as well as flexible pick-up times by cash management companies.

As the following articles and statements show, the currency industry is at the forefront of technology, including ongoing advancements in cash handling, crime prevention, printing, ink production, and banknote life span, to give but a few examples.

In March 2014, Eric Cheng of the Federal Reserve Bank of San Francisco’s Cash Product Office (CPO), outlined some of the trends and new technologies in US retail cash automation that are streamlining cash handling functions:

TRENDS IN RETAIL CASH AUTOMATION: A MARKET OVERVIEW OF RETAIL CASH HANDLING TECHNOLOGIES
The benefits of cash automation include reduced costs, increased speed of transactions, increased accessibility to cash (e.g., ATMs) and improved security and control of cash balances.

Until recently, cash handling has been largely a manual and labor-intensive process. However, this has begun to change with a host of new devices that automate certain back office cash handling functions, such as till preparation and end of day counting and balancing, as well as front-line tasks like cash dispensing.

Because cash usage remains strong, merchants, banks, and armored carriers are exploring ways to take advantage of new technologies to automate their cash handling functions.

FUTURE OF CASH AUTOMATION

Cash dispensers, smart-safes, and recyclers have provided banks, armored carriers, and merchants with new opportunities to automate and improve the process for handling cash. Dispensers and recyclers have helped banks and credit unions reshape their branches towards a sale and service business model, rather than a transactions processing model. Smart-safes and recyclers have helped merchants mitigate risks for handling cash transactions and helped to increase the productivity of their operations. ⁸⁷

Oberthur Cash Protection describes new developments in banknote staining that minimize the anticipated returns of criminal activity, while increasing the chances of capture and prosecution:

Intelligent Banknote Neutralization System (IBNS) technology uses one of crime prevention techniques which consist in removing the anticipated reward of the theft.

Criminals seek to maximize their reward while minimizing the potential cost of the crime. IBNS remove the anticipated reward of the crime (stolen cash has no value) and increase the risk of being caught (stained cash, as well as stained skin and cloth can link the criminal to the crime scene). ⁸⁸

According to their website, Glory Global Solutions, the cash management experts, offer comprehensive solutions for cash management issues relating to: Total Cash Management; Workforce Optimization; Increasing Profitability; Teller Automation; BackOffice Optimization; Security; and more. ⁸⁹

While Loomis, another cash management company, promises efficient cash flow:

The specialist at creating efficient cash flow

Loomis has an illustrious heritage and a long history of managing cash. We offer comprehensive solutions for cash handling primarily to banks and retailers. As the Specialist at creating efficient cash flow, we know better than anyone else where, when and how much cash is needed in society. ⁹⁰

Similarly, Brink’s offers security-related services to optimize cash management and flow:

Brink’s utilizes leading edge technology to provide enhanced security solutions that support evolving logistics requirements. Our goal is to set the global standard for excellence in secure logistics and value chain risk management through our commitment to innovation, quality, and investment in people. ⁹¹

Throughout the cash distribution cycle – from central bank to commercial bank to cash management company to retailer to consumer – technology is employed to make cash safer and more efficient. On the banknotes and coins themselves, innovation is key.

More than any other document in the world, the technology in a banknote must change to keep up with the latest in anti-counterfeiting trends. New technology is constantly being developed in the fight to keep banknotes secure and trusted. The reputation of the central bank, and the country itself, is at stake and must be protected by this ongoing research and development.

On their website, Goznak, the Russian producer of innovative banknote security technologies, discusses banknote security:

Banknotes are one of the most complex products in the security printing industry. All the three levels of the range of banknote security features – public, cashier and expert – contain features which require different verification methods. The ability to produce consistently secure banknotes guarantees competitiveness on the security printing market. ⁹²

The world’s leading supplier of banknote printing systems, KBA, provides security printing and innovative banknote design services:

Security printing technology, challenges and threats are constantly evolving. To demonstrate the performance of our equipment, and our know-how in banknote design, we have produced many specimen banknotes over the years. Each one demonstrates a symbolic step forward in technology and competence. ⁹³

KBA’s “Cash Cycle” specimen, below, demonstrates the link between security in the cash cycle and the intricacies of banknote engineering: ⁹⁴



SICPA, the world’s leading security ink supplier, discusses the innovative technologies involved in the production of their security inks, as well as their authentication and traceability solutions:

CONSTANT INNOVATION IS AN ESSENTIAL FACTOR IN STAYING AHEAD OF DEVELOPMENTS IN COUNTERFEITING AND ILLICIT TRADE
Our aim is to innovate in a way that brings benefits to society as a whole.

Initially, we developed our security and authentication systems for central banks and security printers. Today, this unique body of expertise also serves governments and businesses. Our investments in research and development have produced new generations of solutions in the fields of optical security, global traceability and machine- readable functionality.

We further invest in the development and integration of new technology to deliver the most adaptable, robust and cost-effective systems for product and supply chain integrity. ⁹⁵

With the advent of polymer, hybrid, varnished, and reinforced banknotes produced by various vendors, the life span of a banknote has dramatically increased over the last decade. This longer life span has brought down the cost of production and the overall cost of cash in circulation. Central banks closely monitor the life span of banknotes in order to plan banknote production.

To the right is a sample hybrid banknote from Giesecke & Devrient. ⁹⁶

In its FAQ section, the US Federal Reserve addresses the typical life span of paper money and how denomination affects life span:

Life span varies by denomination. One factor that influences the life span of each denomination is how the denomination is used by the public. For example, $100 notes are often used as a store of value. This means that they pass between users less frequently than lower denominations that are more often used for transactions, such as $5 notes. Thus, $100 notes typically last longer than $5 notes. ⁹⁷



In 2010, the Bank of Canada announced the introduction of polymer banknotes:

Polymer notes are coming to a bank near you late in 2011. Canada’s new polymer notes will last two to three times longer than paper notes. ⁹⁸

Anti-counterfeiting and security paper specialists, Arjowiggins Security, have developed an innovative solution to prolong the lifespan of circulating banknotes: ⁹⁹

HIGH DURABILITY

Central banks are guarantors of the quality of circulating banknotes. A worn, torn or stained note can be detrimental to a country’s image. High durability has become a general trend in the world of banknotes. Arjowiggins Security offers a complete solution for Central Banks to improve the lifespan of banknotes. ¹⁰⁰

DIAMONE®

DIAMONE®is a long-lasting treatment which gives the paper better resistance to staining and accidental washing. It also improves ink adhesion.

DIAMONE® COMPOSITE

DIAMONE® COMPOSITE’s blend of synthetic fibres and cotton fibres improves the mechanical resistance of paper (to tearing and double folding), while maintaining anti- soiling properties by virtue of the DIAMONE® treatment. This extends the lifespan of banknotes.

In 2010 alone, Oberthur registered 6 new patents for banknote securities. Below are the many security features embedded into Oberthur’s recently released sample secure banknote:



The application of new technologies is not limited to banknotes; coins too have benefited from technological advances, reducing overall costs while increasing durability and security.

In March 2014, the Royal Mint released information about a prototype for a proposed £1 coin that “will be the most secure circulating coin in the world to date.” ¹⁰¹ The new coin uses multiple layers of “cutting edge technology,” with the intention of rapidly reducing the amount of counterfeit coins entering circulation.

Clearly, the technology that goes into banknotes and coins to make them the most simple, trusted, and efficient payment means in the world, as well as universally accepted, is anything but “low.” Counterfeiters and criminals rely on the latest technologies in attempting to exploit “holes” in the cash cycle. Central banks, mints, commercial banks, cash management companies, and all industry suppliers invest heavily in ensuring this does not happen. Consumer confidence in banknotes and coins is a testament to the overwhelming success achieved to date.

This article has been posted with permission from Currency Research and is excerpted from The Case for Cash Part 1: Myths Dispelled. To request a copy of the full report or to learn more about Currency Research, please click here. 

⁸⁶ http://annualreport.visaeurope.com/downloads/visa_europe_annual_report_2012.pdf
⁸⁷ http://www.frbsf.org/cash/publications/fed-notes/2014/march/retail-cash-automation-technology-trends
⁸⁸ http://www.oberthurcp.com/en/concept
⁸⁹ http://www.gloryglobalsolutions.com/
⁹⁰ http://www.loomis.com/en/About-Loomis/
⁹¹ http://www.brinks.com/corporate/overview.html
⁹² http://www.goznak.ru/en/innovations/security/
⁹³ http://www.kba-notasys.com/security-printing/equipment/
⁹⁴ http://www.kba-notasys.com/design/kba-notasys-specimen/
⁹⁵ http://www.sicpa.com/expertise-innovation/innovation
⁹⁷ http://www.federalreserve.gov/faqs/how-long-is-the-life-span-of-us-paper-money.htm
⁹⁸ http://www.bankofcanada.ca/wp-content/uploads/2011/04/11-2010-currency_journey.pdf
⁹⁹ http://www.security.arjowiggins.com/EN/fonctions/haute_durabilite.php
¹⁰⁰ http://www.oberthur-fiduciaire.com/banknotes/security-features/
¹⁰¹ http://www.royalmint.com/aboutus/news/the-new-1-pound-coin