The end is nigh for banknotes? The data disagrees.

The conventional wisdom is that the end of cash is near. A recent Forbes online article [1] is the latest example of selecting facts to support a view shared by many. Yes, electronic payments are grabbing a larger piece of the payment pie, and yes money can be dirty, but the most important data to assess the future of cash is to look at what is happening to the number of notes being issued each year. The data shows: the number of banknotes in circulation continues to maintain a steady growth pace of 4-5% annually. Growth rates vary between countries, but one is hard pressed to identify regions where the growth is flat or negative.

There are several reasons for the ongoing support and growth of cash. Some of these are:

  • Many enjoy the convenience and anonymity of cash
  • It is a failsafe option in times of emergency
  • For the unbanked, cash is the only payment option available
  • We have an emotional attachment to currency

At some point, we will see electronic payments (credit cards, debit cards, electronic transfers, cryptocurrencies) dwarf cash, but that point in time is decades away.

Recently, I attended the annual Currency Conference, which was held over the course of a week in Kuala Lumpur. Over 500 delegates including Central Bank currency management teams and industry suppliers gathered to discuss an array of topics covering banknote design, new authentication technologies, best practices to maintain the security and fitness of notes in circulation, and future trends, such as the growth of digital currencies, that could impact the use of cash.

With the understanding that cash will continue to grow over the foreseeable future and remain a critical payment option, Central Banks continue to invest in an array of advanced technologies to protect these payment instruments. This proactive approach to authentication is necessary as the counterfeiters are often highly talented and motivated to find new ways to deceiving the public and institutions.

The barriers to entry for establishing a large-scale counterfeiting operation continue to shrink. High performance desktop scanners, image editing software, and digital printers have made it easier and less costly to create effective counterfeit banknotes. Today’s counterfeiters complement these capabilities with holographic and optically variable elements to create fake notes that deceive the public and retailers. In addition, the use of the Dark Net has served to increase the distribution capabilities of counterfeiters by identifying buyers while maintaining anonymity.

As the counterfeiters advance their techniques, the list of targeted notes is growing. When access to a large and expensive print operation was a pre-requisite for counterfeiting, higher value notes were primary targets for the counterfeiters to achieve the maximum illicit gains. Today’s lower cost of entry has brought on an opportunistic counterfeiting approach that targets lower value, transactional notes of the local currency. Numerous news stories in the last year have highlighted this as more daily-use denominations are identified as counterfeit by central banks in major economies around the world.[2]

For as long as there have been banknotes, there have been those attempting to counterfeit them. As a result, the issuers of banknotes inherently understand proper approaches to securing their notes, such as:

  • Relying on advanced technologies, which are not generally available for use outside of banknote security
  • Anticipating future counterfeiting trends and establishing security road maps to thwart the future efforts
  • Upgrading banknote security designs and security features every 7-10 years
  • Investing in public education campaigns to raise awareness regarding the features for public use to help detect counterfeit banknotes

Because of the high degree of trust between the Central Banks and those that print, protect, and process their banknotes, it is a very small group of companies which are recognized as approved suppliers. Less than 20 companies provide over 90% of the related banknote materials, sensors, and services required by the Central Banks. This is a very different picture than the broader security industry, which focuses on brand protection and lower tier security documents.

Authentix in Currency

Authentix is honored to be counted among the distinguished organizations that help Central Banks protect their banknotes. Authentix covert, Central Bank level machine readable features are protecting 10s of billions of banknotes in circulation. In addition, over 550 high speed sensors developed and produced by Authentix are used on Central Bank sorting machines to confirm the authenticity and quality of deposited banknotes. Authentix fights illicit trade in many industries such as oil and gas, pharmaceuticals, agricultural chemicals, and spirits, but the protection and quality assurance of banknotes requires the most advanced technologies that we can bring to bear.

[1] https://www.forbes.com/sites/larrymyler/2017/05/11/no-wallet-no-problem-cash-is-no-longer-king/#60950102383a
[2] https://www.theguardian.com/world/2015/dec/03/uganda-deport-american-counterfeit-money-operation

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