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ISSN 0895-9080 www.currency-news.com April 2010

| Vol 8 | No 4

Worlds Youngest Mint Opens its Doors

The Costa Rican government and the Banco Central de Costa Rica have inaugurated the new Mint of Costa Rica, the first in this country since 1949 and the only one in Central America. The opening ceremony was attended by a number of dignitaries, including Jos Eduardo Sibaja, Vice Minister of Economy, Urs Brnnimann from the Swiss embassy, Roy Gonzlez, manager of the central bank and Monsignor Francisco Ulloa, Bishop of Cartago. The history of coinage in Costa Rica dates back to 1828, when the first mint opened following the countrys independence from Spain. Coins first the

CONTENTS
Worlds Youngest Mint Opens Its Doors India Lays Foundations for New Mill 1 1

Comment: Death by a Thousand Cuts 2 Securency Releases and Acts on Report into Foreign Agents 3 US Unveils New $100 Note Company and Market Round-Up Growth for Oberthur 2010 Excellence in Currency Awards People in the News European Commission Clarifies Legal Status of the Euro Note and Coin News UK Report Reveals Cash in Decline Banknote Processing the Next Chapter from G&D 3 4 5

The Swiss and Costa Rican chairmen, Daniel Sheffer and Jos Antonio Guil, holding the future of the Mint in their hands

Costa Rican Peso and, after 1896, the Costa Rican Coln - were minted for the next 100 years, although production suffered from a constant shortage of raw
Continued on page 12

India Lays Foundations for New Mill

Indias plans to become self-sufficient in paper production came a step closer recently with a ceremony to lay the foundation stone for a new banknote paper mill at Mysore, which is also home to one of the countrys four printworks. The mill will be a joint venture between the countrys two banknote producers, government-owned Security Printing and Minting Corporation of India (SPMCI) and Bharatiya Reserve Bank Note Mudran, a subsidiary of the Reserve Bank of India (RBI). The new mill will take around three years to build, at a cost of around Rs 15 billion (US$336m). The foundation stone was laid by the RBI governor, D Subbarao, who took the opportunity to provide an update on plans for a polymer note for the country. 1 billion Rs 10 notes will be issued soon on polymer, he said, initially in five cities (Jaipur, Bhubaneswar, Mysore, Shimla and Kochi) which have been chosen for their climactic diversity. A cost-benefit calculation will be made following this pilot, to determine whether the country should embark on polymer on a longterm basis. He also stated that producing our own paper is decidedly cheaper, and a check against counterfeiting. Indias demand for banknote paper 18,000 tonnes per year is huge in international terms, and on the supply side there are just 3-4 large producers. This situation exposes us to vulnerabilities of a suppliers market in terms of price, quantity and timelines, something that we should avoid or minimise. The juxtaposition of the foundation
Continued on page 7

5 5

6 6

RELIEF Security Screens a New Dimension to Intaglio 9 Banknote of the Month: Chile Mixes and Matches for its New Series Five Years Ago Conference Diary

10 11 11

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Comment
April 2010

| Vol 8 | No 4

Death by a Thousand Cuts

Currency News | Page 2

The recent report by the Payments Council the body tactless cards could become usable for lower value transacresponsible for setting the strategy for payments in the UK tions in many retailers and, given that 75% of cash transac- should be a wake-up call to us all in the currency industry. tions in the UK are below 10, the long term potential for Although the report covers the UK only, it is a trend that is such cards is considerable - and with it the threat to cash. We can see that cash is up against some very strong comtypical of payment systems in many countries around the world. In summary, it documents a decline in the use of cash mercial interests financial institutions and, increasingly, in the last decade and forecasts a further decline, detailing mobile communications companies, all promoting alternachanges that have been taking place gradually, but steadily. tives to cash. So what is our industry doing in return? Is this a case of death by a thousand cuts? And, if so, is Indeed, what can our industry do in return? The answer appears to be precious little in a concerted matter at least. there anything we can do about it? Central banks, who are supposed to be transaction-type The key statistics show that between 1999 and 2009 the number of transactions in cash declined from 73% to 59% neutral, but know full well the value of cash for seigniorage, and by 2018 the number is predicted to have fallen to 45%. have made major efforts to ensure their banknotes are During the same period, debit card spending increased by secure from counterfeiting and so remain attractive for the 306% and is forecast to increase by a further 86% by 2018, public to use. Suppliers have developed new security features and when one in four of all transactions will be by debit card, durable substrates to reduce countercompared with one in 20 in 1999. We are becoming desensitised to the feiting and banknote costs. The ATM But the debit card is not the only has had a major impact on the industry threat to cash there are others, wellconstant refrain that cash is expensive, in making cash readily available. established, such as credit/charge cards, insecure, unsafe and out of date Developers of processing and cash mancheques, direct debits and credits and the growth of internet shopping, which virtually precludes agement solutions are improving the availability of good the use of cash. We need not worry about cheques their use quality and timely cash, whilst driving down the costs of ciris declining rapidly. Nor about credit and charge cards, culation and distribution. which have mainly displaced cheques as the medium for Defending our Turf high value transactions. But in place of those, there are new However, the point is (and it is a point we have made threats that are no longer just on the horizon namely pre- several times before), there is no one body representing and paid cards, mobile payments and contactless transactions. promoting cash. Any promotion is incidental and not directConvenient and Cost-Effective ed against the competition. We hear daily via the media why The prepaid card market is still in its infancy. There are we should have this card or that financial product. And we two types open-loop for face-to-face or online retailers are becoming desensitised to the constant refrain that cash and closed loop, linked to a single or limited number of is expensive, insecure, unsafe and out of date. What we retailers. The latter in particular are being adopted by dont hear is why we should use cash in preference to the transport systems around the world because they are con- alternatives. And that is because it is our industry that venient for the public and apparently cost-effective for the should be making this case, and it isnt. transport authorities. If we dont defend our turf, no one else will. The central Mobile payments where a mobile device plays an inte- banks have a lot to lose but their hands are tied by neutralgral role in a financial transaction - are also in their infancy ity, so it falls to the commercial companies on all sides of the but some of these transactions are direct substitutes for currency industry to get together, discuss what can be done, cash. This form of payment is having the most impact in develop an action plan and put it into place. developing countries, where people without access to bankThe forthcoming Currency Conference offers the ideal ing services are able to make payments by mobile phone opportunity for debate on this issue and to (hopefully) agree (see CN Vol 8, No 3). Even though it is still early days for a way forward to promote our product. We cannot work on this type of transaction, its upgrade is already conceived the assumption that the wider public knows that Cash is contactless functionality. Given the ubiquity of mobile King. phones, the potential of these for payments both large and At the same time, we should probably be coming up with small is frighteningly obvious. a new mantra. There arent that many kings, or queens for Some banks are making significant progress with con- that matter, around anymore, and those that remain are by tactless cards - by the end of 2009 in the UK, there were 7.8 and large symbolic throwbacks to a bygone age. Do we want million contactless debit and credit cards issued and 22,500 cash going the same way? A new message is required. And a new consensus and terminals capable of accepting contactless transactions. One in six cardholders in the UK will have a contactless card by campaign by the industry to get this message out. the end of 2010. The Payments Council believes that conReproducing Currency News is an illegal infringement of Currency Publications Ltd's copyright. Currency Publications Ltd 2010

Company News
April 2010

| Vol 8 | No 4

Currency News

| Page 3

Securency Releases and Acts on Report into Foreign Agents

One of two reports into the allegations by The Age newspaper in Melbourne of improper payments of commissions to, and use of, foreign agents by Securency has now been released. Following these allegations, Dr Bob Rankin, Chairman of the Board of Securency and Assistant Governor of its part-owner, the Reserve Bank of Australia, asked the Australian Federal Police to investigate. KMPG was also commissioned to undertake an independent evaluation of the policies and procedures in place governing the use of agents and the companys compliance with these directives (see CN Vol 7, No 6). Securency has now published the latter report. The report found that the company did seek to have adequate policies and procedures in place for dealing with the risk associated with the use of agents, and consistently sought legal advice, but that management did not fully implement these policies in all respects. In relation to the appointment of agents, KPMG concluded that the advice from the companys legal advisors was in some cases not fully followed by management and there was a lack of documentation to show compliance with the companys agent appointment procedures. It also concluded that management did not fully implement the advice received from its legal advisors in monitoring its agent activities and compliance with the terms of its agency agreements. KPMG further stated that management did not have a formal process to respond to concerns or allegations relating to the activities of its agents. As a result, the concerns raised by a former employee in 2007 about the risk of bribery and corruption were addressed in a manner which lacked transparency. Specifically, management did not bring these allegations to the attention of the Board. KPMG also determined that from 2003 to 2009 the company made payments to former and current agents to the value of A$47.5m while Securencys total revenue subject to the payment of commission was A$361.4m. It noted that, again, management did not follow in all respects advice from the companys legal advisors with respect to recording payments and applying higher levels of due diligence when making payments into agents bank accounts in jurisdictions outside their country of residence. Based on its findings, KPMG has made 12 recommendations to the Securency Board, which it has agreed to implement in full. Securency also announced that managing director Myles Curtis and company secretary John Ellery, who had stood aside from their positions in November 2009 (see CN Vol 7, No 11) have both left the company. Securency has initiated a global search for a new chief executive, which it says could take several months. In the meantime, Mike Thomas has been appointed interim Chief Operating Officer while Bob Rankin continues in the role of Acting Chief Executive. The investigation by the Australian Federal Police continues in Australia, meanwhile, and in foreign countries in conjunction with local police.

US Unveils New $100 Note

The design of the long-awaited new $100 bill has been launched at a ceremony in the Department of Treasury Cash Room, attended by officials from the Treasury, the Federal Reserve and the US Secret Service. According to the Bureau of Engraving and Printing, the unveiling of the $100 note is the first step in a global multi-government agency public education program to educate those who use the $100 note about its changes before it begins circulating. The new note is the latest, and last, in the current series and, while it retains the traditional look of US currency, it is the most colourful yet, with two striking new features. One is the 3.5mm wide blue Motion windowed security thread, which sits to the right of the portrait of Benjamin Franklin, and in which images of bells interchange with the denomination numeral when the note is tilted. for this taking precedence. The delay also allowed more time for the development and trialling of the new $100 features. Production of each note now costs 11.8 cents, compared with 8 cents for the notes it supersedes. The $100 note has been used increasingly in both US and around the world during the credit crunch as a convenient and reliable store of wealth. There are approximately 6.5 billion of the old design $100 notes in circulation and it is estimated that two thirds of these are in use outside the country. As per US Treasury policy, they will remain legal tender indefinitely. The need to educate users around the world is possibly a reason behind the fact that the note will not go into circulation until February 2011. Even so, ten months is an unusually long period of time between the unveiling of a new design and its introduction.

The other is the Bell in the Inkwell, an image printed in OVI so that the bell changes from copper to green when the note is tilted, giving it the effect of appearing and disappearing within the copper inkwell. OVI has also been used for the numerals, which are printed prominently on the front and reverse of the note. The new $100 was originally due to be issued in 2008. However, more immediate problems with counterfeit $5 notes (which were being bleached and overprinted with images from the higher denominations, typically the $100) led to the new design

Reproducing Currency News is an illegal infringement of Currency Publications Ltd's copyright. Currency Publications Ltd 2010

Company & Market Round-Up

April 2010

| Vol 8 | No 4
1.5 billion in 2009, down by 15.32% from the previous year. EBITDA at 128m was up 13.2% Of the five divisions within Arjowiggins, only Banknote and Security Papers saw sales increase, by 3.5% to 291m. EBITDA for the division was up 6.6% to 48m. Late last year Sequana abandoned plans to sell off the security paper business, which it had previously stated was non-strategic, announcing instead that it offered excellent long-term visibility and would help bolster the groups financial structure.

Currency News | Page 4

est step toward a unified Gulf currency and greater economic integration. Bahrain Central Bank Governor, Muhammed Rasheed Al-Maraj, was chosen as deputy chairman. The monetary council will lay the foundations for a regional central bank and prepare the launch of the single currency. But Al-Jasser said people should not have high expectations, explaining that the councils first task is to establish the GCC Central Bank. Our priority will be to draw up the legal and organizational framework for the Central Bank and this will be done in coordination with the central banks or monetary agencies of the member countries he said on his appointment. Preparations for the issuance of banknotes and coins for the single currency would be developed by the GCC bank. No timeframe for the introduction of the single currency has been given, but Al-Jasser stated that it would happen soon.

Garda Completes Refinancing

Garda World Security Corporation has announced that it has successfully refinanced its existing debt with a combination of new bank loans and long term unsecured financing. As a result, it expects to save approximately C$15 million in financing expenses during the first 12 months of the current year. . The new capital structure consists of a three-year term loan of C$340m and the issuance of 9.75% senior unsecured notes of US$250m and C$75m, due 2017. Net proceeds will be used to repay all bank facilities and to terminate interest rate swap agreements. Of all the suppliers in the cash industry, Garda was hit hardest by the credit crunch of 2008, having borrowed extensively to finance a series of acquisitions over the preceding year that propelled it to the one of the leading suppliers of security services and cash logistics in the world. But refinancing costs hit it hard and, by the end of 2008, over 90% had been wiped off its value (half of this in one day alone). It has subsequently made a remarkable recovery, and is one of the best performers in Currency News periodic Industry Watch of listed companies.

Expansion for Hueck Folien

Hueck Folien, a European-based supplier of security features for currency and other high security documents, has opened a new sales office in Hong Kong to service the rapidly-growing Asian market. It has already supplied features for Asian currencies for several years but says that it was a logical step to launch a local sales subsidiary to respond to customers more quickly. The main focus of its sales activities will be the export of high tech solutions for banknotes, value documents and passports. Heading up the office is Regional Sales Director Ueli Tschupp-Lambert, who is a German-speaking European but who grew up in Asia since 1971 and successfully managed various security projects in the region before joining Hueck Folien at the start of the year.

Perum Peruri Branches Out

State-owned Indonesian security printer PT Perum Peruri has received loans of Rp 626 billion ($68.2m) to help finance an expansion of its production capacity as it seeks to reach new markets for banknotes, securities papers and passports. The company is also planning to acquire the paper company PN Kertas Padalarang, and to form an internet-security certification joint venture by the end of the year. According to Peruri president director Junino Jahja, the companys capacity last year was 6.6 billion banknotes, while this year demand is projected at 7.2 billion. Some of the investment will go on building the required additional capacity for a further 700 million notes. To expand the business we are also planning to acquire a paper company to provide raw material for bank notes and securities, he said. Indonesia currently imports all its banknote paper. In addition to meeting domestic demand, Peruri is setting its sights on becoming a regional player in the market Singapore and Malaysia both being cited as potential customers. The company has recently secured contracts to print 100 million notes for Nepal and mint 32 million coins for Mauritania.

Arjowiggins Parent Back in Profit

Sequana, the holding company of banknote and security papermaker Arjowiggins, has announced net profits of 20 million for the calendar year 2009, compared with a loss of 400m the previous year, despite a reduction in sales of 15.6% to 4.08 billion. According to the Group, this was due to cost reductions, productivity gains and the divestment of non-strategic loss-making companies. Sequana has moved from a holding to an operations company, with Arjowiggins now one of its two major business units. This produces not only banknote and security paper but technical and communications grades of paper as well. It had sales of

New Head at Gulf Monetary Council

The Governor of the Saudi Arabian Monetary Agency (SAMA), Muhammed Al-Jasser, has been unanimously elected as the first chairman of the GCC Monetary Council. The council will serve as the precursor to a regional central bank in the lat-

Reproducing Currency News is an illegal infringement of Currency Publications Ltd's copyright. Currency Publications Ltd 2010

In the News
April 2010

| Vol 8 | No 4

Currency News

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Growth for Oberthur

Oberthur Technologies has shown a small increase in revenue for the year in its recently announced results. Sales of 904.6m were up 2.5% over 2008. EBITDA was up 12.8% to 132.m. Current operating income grew by nearly 6% to 92.2m. Net income was 49.2m, a 34.3% increase on 2008s figure. Oberthurs Card Systems business accounted for 695.1m of sales (nearly 77% of the total). Fiduciary printing, including banknotes, generated sales of 108.2m (12%) The Identity business accounted for 85m in sales (9.4%) and the cash protection business 16.4m (1.8%). According to the company, in a difficult macro-economic context, 2009 was a year in which it consolidated its activities. This global performance is noteworthy and confirms the ability of our activities to resist to the effects of the business cycles, commented CEO Thomas Savare. It is predicting further growth in 2010 despite reduced visibility, particularly in its Identity business. Oberthur also announced that its holding company, Franois-Charles Oberthur Fiduciaire (FCOF), has strengthened its equity with the capital investment of an 8% stockholding by SOFINA, an investment holding company listed on the Brussels Stock Exchange. SOFINA will be appointing two members to the Boards of FCOF and Oberthur Technologies.

2010 Excellence in Currency Awards

The International Association of Currency Affairs (IACA) has announced the shortlisted nominations for the 2010 Excellence in Currency Awards. The awards, which are sponsored by Currency News, are being made for the best new banknote, coin, currency feature, public education program and central bank website, as well as a Lifetime Achievement Award. This year there were insufficient nominations for best new product or innovation, so those submitted will be held over to 2011. The shortlisted nominations have been voted on by IACA members, and the winners will be announced at the Gala Dinner of the Currency Conference, which takes place in Buenos Aires next month. The shortlist is as follows: Best New Banknote or Series: Clydesdale Banks New Series Central Bank of Turkey New Series Central Bank of Armenia 100, 000 Dram Best New Coin or Series: Vancouver 2010 Olympic Quarters Reserve Bank of Fijis New Coin Series Central Bank of Turkey New Series Best New Currency Feature: Arjowiggins Security Pixel Watermark De La Rue Depth Image Giesecke & Devrient - Varifeye Magic Best Public Education Program: Clydesdale Bank National Bank of Denmark Central Bank of Turkey Best Currency Website: European Central Bank Central Bank of Chile Monetary Authority of Singapore Candidates for the Lifetime Achievement Award are nominated by the industry and the winner is decided by IACAs Board of Director. Previous winners in this category are Tom Ferguson, former Director of the Bureau of Engraving and Printing, and Antti Heinonen, former Director of Banknotes at the European Central Bank.
graphic windowed thread for banknotes and wide web high speed embossing of security foils. Dr Yuvraj Khatiwada has been appointed Governor of Nepal Rastra Bank, replacing Bijaya Nath Bhattarai who has retired. Patrice Rullier, Director of Oberthur Cash Protection, has been elected Chairman of EURICPA (European Intelligent Cash Protection Association) which represents the leading European manufacturers of intelligent solutions for secure cash transportation and storage. Charles Jung Sr, executive vice president of Nautilus Hyosung, has been named president and CEO of Nautilus Hyosung America Inc.

People in the News

The head of the National Bank of Poland Slawomir Skrzypek, was one of 96 people killed when the Polish Presidents plane crashed in Russia on April 10. An economist and former Deputy Mayor of Warsaw, he was appointed President of the Bank in January 2007. Following his death, Piotr Wiesiolek, a deputy governor, has temporarily assumed the governorship. Adolf Kuhl, former technical director of Orell Fssli, has died. He became an intaglio printer at an early age, and his hands-on experience of intaglio and knowledge of banknote printing was an instrumental factor in the decision by the Swiss National Bank in 1976 to have all Swiss notes printed by the company. He also helped played a key role in the development of the Kinegram. He retired as Technical Director aged 62, and spent a further six years as advisor to the SNB. One of the pioneers of holography, Hamish Shearer, has died. Until recently Director of Special Projects for hologram manufacturer OpSec, he helped put holography on the map when the company he created Applied Holographics (subsequently renamed OpSec after acquiring the latter in 1999) was listed on the London Stock Exchange in 1983. Under his technical leadership, the company achieved many firsts, including dot matrix holograms, holo-

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Payment News
April 2010

| Vol 8 | No 4

Currency News | Page 6

Legal Status of the Euro

The legal tender status of euro banknotes is laid down by Article 128 of the Treaty on the Functioning of the European Union. Despite this, due to some uncertainty at euro level with regards to the scope of legal tender and the consequences thereof, the European Commission has published a draft Recommendation, based on a report prepared by a working group comprising representatives from Ministries of Finance and National Central Banks of the euro area. The Commission will assess its implementation in three years and examine whether regulatory measures are needed. First and foremost it has defined Legal Tender which states that, where a payment obligation exists, the legal tender of euro banknotes and coins should imply mandatory acceptance, acceptance at full face value and power to discharge form payment obligations (by tendering euro banknotes and coins). In retail transactions, it states that the acceptance of euro banknotes and coins as a means of payment should be the rule and a refusal should be possible only if grounded on the good faith principle, eg. the retailer having no change available. It further states that high denomination banknotes should be accepted as a means of payment in retail transactions with refusal only possible on the same principle, eg. in this case if the face value of the banknote tendered is disproportionate to the amount owed. The refusal of cash payments cannot be permanent, which would be contrary to the Recommendation and to the very concept of legal tender. By this definition, a sign in a shop saying 200 and 500 banknotes are not accepted is clear evidence of the permanent nature of the refusal. Also, retailers cannot impose surcharges on the use of euro banknotes and coins. The Recommendation also deals with the issue of banknotes stained by Intelligent Banknote Neutralisation Systems (IBNS), stating Even if banknotes stained with security ink are legal tender, member states should communicate actively towards stakeholders (banks, retailers, general public) that they must be brought back to national central banks as it is likely that they are the product of a theft. It does not, however, make clear whether the stakeholder will be reimbursed - a crucial point. But it does indicate that communications on stained euro banknotes should be enhanced. Destruction and mutilation is also prescribed. Member states should neither prohibit nor penalise the total destruction of small quantities of euro banknotes or coins by individuals, but they should prohibit unauthorised destruction of large quantities. Finally, with regard to coins, the Recommendation indicates that the decision to destroy fit euro circulation coins should not belong to any national authority in isolation. Further, new rounding regimes should not be adopted by member states, and where rounding to the nearest 5 cents is in place, 1 and 2 euro cent coins must remain legal tender.

Note and Coin News

The Bermuda Monetary Authority has been awarded the International Bank Note Society (IBNS) 2010 Banknote of the Year Award for its $2 note, issued as part of a new series in 2009. According to the members of the IBNS Board, who chose the winning note from a list of nine, the factors that made it stand out include an appealing and well-blended combination of colours, an attractive presentation of images and an interesting array of security features, despite its low value. The note was produced by De La Rue and is its third winner in as many years. Last year, the Samoan 20 Tala note won the award, while the year before it was the Bank of Scotlands new 50. The Swedish central bank Sveriges Riksbank is working on designs for a new
banknote and coins series, the issue of which will start with a new 50 Krona note in 2013, with the other denominations introduced over the course of the following two years. Plans are also underway to issue a 2 Krona coin and introduce a new 200 Krona note. The replacement of the 20 Krona note with a coin is also under consideration. respectively, cost 30 cents to produce. The Loonie comprises a bronze plated nickel alloy. The Toonie is made from a pure nickel ring surrounding a copper alloy centre. In future, the main composition of both will be steel, and they will be made using Royal Canadian Mints multi-ply plating technology which has been used for the lower denomination coins since 2000. The new $1 and $2 coins will go into circulation in 2011.

The Bank of Ghana is introducing a new 2 Cedi next month in response to the need for an intermediary note between the 1 and 5 Cedis. The decision came after a review of the cash cycle, conducted by the Bank in 2009 following the redenomination of the currency in 2007. This indicated that pressure on the 1 Cedi was resulting in notes circulating, and wearing out, too fast. In addition to switching to polymer for its banknotes, Canada is also changing the composition of the metals in its high denomination coins, with plans to save C$15m in the process. The $1 and $2 coins, known as the Loonie and Toonie

The Central Bank of Swaziland has announced that it will begin upgrading its entire note series this summer, starting with the 100 Lilangeni note, then continuing with the other denominations the 10, 20, 50, and 200 Emalangenis at the rate of one every six months. According to the Bank, the upgrade is due to the fact that the existing portrait of His Majesty King Mswati III is outdated, while banknote durability and security technology has advanced significantly since the issuing of the current series of notes in 1999.

Reproducing Currency News is an illegal infringement of Currency Publications Ltd's copyright. Currency Publications Ltd 2010

Payment News
April 2010

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Currency News

| Page 7

UK Report Reveals Cash in Decline

A new report from the Payments Council (The Way We Pay 2010) shows that a payments revolution occurred in the Noughties in the UK, which looks set to continue over the next decade. The past ten years not only saw the rise of internet banking and shopping, but also the replacement of cheque and cash transaction with cards, particularly debit cards. Cash Wages Drop According to the report, a decade ago one in eight workers still got paid cash-in-hand. By 2009 it was just one in 20, and by 2019 will be one in 50. A much bigger switch from cash has taken place in state benefit payments: ten years ago, 87% of benefits and pensions were paid in cash; today, 79% are paid directly into bank accounts. Although cash still looks popular accounting for six in every ten transactions almost 80% were for less than 10. In five years time, the report predicts, cash transactions will represent less than half the total for the first time. Furthermore, the value of cash used has risen only 7% in the last ten years, while overall consumer spending has doubled. If there had not been the move to other payments such as cards, banknotes worth an extra 102 billion would have been required each year to meet the UKs spending needs today, compared to ten years ago, which India Lays Foundations...cont ceremony for a new paper mill with the announcement about plans for polymer seems a little incongruous. By the time the polymer trials have been completed and the results analysed, which should take 2-3 years for a statistically-sound result, the refurbishment of the mill at Hoshangabad (owned by SPMCI) will be well on its way or complete, adding 4,000 tonnes. The capacity at the Mysore mill will be at least 6,500 tonnes or double that if two machines are installed. This new paper capacity will not leave much room for polymer. Furthermore, the additional capacity coming on stream from commercial suppliers Louisenthal and Landqart, not to Wages paid in cash

1999
1 in 8 73% 6% 90%

2009
59% 2% 40%

Transactions using cash Cash spending in pubs Debit card spending Faster Payments Personal transactions using cheques

1 in 20 264bn

2018
45% 25%

1 in 50

65bn N/A

294m

836m**

0.8%*

490bn

* This figure was reached prior to the decision, in late 2009, to phase out cheques ** Faster Payments is a service set up in 2008 to speed up internet and phone payments

equates to 2,050 more for each adult per year. Payments in pubs and clubs were used to demonstrate this point. In 1999, nine out of ten pints of beer were bought with cash. Now only 40% of pub spending involves cash, with chip & PIN, primarily on debit cards, accounting for more than half of all spending. Cash is not the only payments system to suffer - cheque usage has been falling since 1990 and just 0.8% of retail transactions are now made by cheques (in any case, the Payments Council has set 2018 as the target for cheques to be phased out altogether). Payment Workhorse Cards, meanwhile, have flourished. Not credit cards, usage of which has fallen in real terms from 2005, but debit cards, which have become the payment workhorse. Spending with such cards has increased fourfold in ten years they will be used six billion times this mention Perum Peruris plans to expand into banknote paper and reports that Goznak, too, may be adding substantial new capacity, all indicate that the current under-capacity in the market is likely to be reversed in the coming years. If so, the resulting buyers market will reduce any potential exposure to long lead times and will inevitably bring down prices, making the decision to outsource paper logical, on financial grounds at least. In the meantime, one of the above companies, Louisenthal, has announced that its Hybrid substrate has qualified for the polymer trial, following extensive testing by the RBI. The PreQualification Tender Notice, issued ear-

year. Increasingly debit cards have taken over both higher value credit card payments, and lower value cash payments. By 2018, one in four of all transactions will be on a debit card, up from just one in 20 ten years ago. The report noted that this could prove a conservative forecast as the contactless revolution gathers pace. Chip & PIN was thought to be a major factor in the growth in debit card use through speeding up transactions - small items can be bought with a card now there are no fiddly bits of paper and time-consuming signatures. It was noted that contactless payment for small purchases has the potential to drive debit card usage even higher - with 18 billion cash transactions less than 15, there is a huge opportunity to replace billions of these with a quick swipe past a card reader.

lier this month, specified single or multilayered substrates with at least one layer of plastic material, as opposed to polymer alone. Hybrid is a combination of a protective polyester film around a cotton fibre core which maintains the recognised touch and feel of a banknote, and, says the company, combines the public acceptance and security of paper with the durability of polymer. According to Louisenthal, this acceptance represents a significant milestone and now, for the first time, offers central banks around the world an alternative to the existing 100% polymer substrate produced by Securency.

Reproducing Currency News is an illegal infringement of Currency Publications Ltd's copyright. Currency Publications Ltd 2010

Technology News
April 2010

| Vol 8 | No 4

Currency News | Page 8

Banknote Processing the Next Chapter from G&D

In June last year Giesecke & Devrient launched the BPS M7, the first in what it termed the next generation of banknote processing systems, with the promise of a successive introduction of new compact, medium and high speed sorters to come, along with new software and sensor technology supporting these and its other cash processing and management solutions. Two new innovations in this roll-out will be launched at the Currency Conference in Buenos Aires next month, and two later in the year. Currency News took the opportunity, ahead of the first launches, to find out what is in store from Ralf Wintergerst, Head of the G&Ds Banknote Processing Division, and how the next chapter in the companys product development strategy is unfolding. The BPS M7 is a modular medium-sized sorting system that processes up to 120,000 notes per hour and was designed as the successor to the BPS 1000, but with new sensors, feed and transport systems, operator interfaces and software features. At the time, the company claimed that the BPS M7 would deliver 25% improvements in productivity and, according to Wintergerst, one year on this has proved to be the case. And while it is too early to assess whether the system can deliver on reducing the overall cost of ownership through, for example, lower parts consumption and remote servicing, the new currency adaptation tools that make up part of this calculation are working extremely well, with the changes to the sensors required each time a new note, series or counterfeit feature is introduced running smoothly and taking a fraction of the time they did before. Common Principles The new system has also proved very stable with few of the teething problems normally associated with the launch of a completely new product. It has sold well so far in all its target markets central banks, commercial banks and CIT companies and this, said Wintergest, augurs well for the roll-out of other systems in the new range. All are based on the same principles and architecture, and use the same software and sensor technology, as the BPS M7. The next in line will be the BPS C4 the successor to the desktop system BPS 200 later this year. Three other launches will take place in the meantime, two of them at the Currency Conference. One is a new line of banknote destruction systems, which will be covered more fully in the next issue. The other is a relaunch of the companys sensor suite, which lies at the heart of its processing systems, conforms to all current authentication and fitness frameworks and is designed to deliver consistent performance in terms of denomination identification, authenticity and condition across the cash cycle. New Sensors The suite comprises three groups of sensors NotaMaster, NotaScan and CashRay. The first is intended for sorting systems used in printworks for quality inspection purposes and to ensure that all notes put into circulation will be identical and ready for a fully-automated cash cycle, thereby avoiding any problems with false rejects downstream. NotaMaster can also be used for ultimate authenticity detection in the cash centres of central banks. The second, NotaScan, is designed for sorting systems used by central and commercial banks and cash centres to process notes in circulation. There are three options with the NotaScan family. These include NotaScan Image, which scans the full face of each note on both sides and optically identifies and evaluates features, fitness and serial numbers. Then there is the NotaScan Profile thickness detector (formerly known as DIS 2). This measures the profile of each note, identifying the presences of taped or torn notes, which are by definition unfit and, in the case of the former, quite possibly counterfeit, and gauges the grammage of the substrate. And finally is NotaScan Ink a new sensor for security inks that verifies the special characteristics of these and the signals they emit from within specific boundaries within the notes. The third group, CashRay, is a compact, multifunctional family of sensors designed for easy integration in compact note sorting systems, and for use as an OEM component for customers who produce their own specific banknote automation equipment. Machine Intuition Collectively, according to Wintergerst, these sensors are designed to make identification of fit, unfit and suspect notes as intuitive and as close to the human experience as possible. Machines can sometimes be dumb, he said. But people arent. The new sensors are the closest thing there is to human detection. One of the consequences of the breadth and scope of the new sensor suite is the computer processing capacity required, with the data from each note scanned equivalent to the contents of a DVD. According to the company, the decision to rebuild the whole family of note sorting systems from the ground up was in large part to accommodate the additional sensor capacity, so that virtually all the physical and optical properties of each note can be scanned and analysed without any loss of processing speed. New Cash Solution The other product launch is a new software suite for the companys cash management solution CompassCM. The current software offering covers cash processing and vault management processes. The next generation software will be built on a platform-based and modular architecture which will focus on three major customer demands - flexible process configuration, support of existing IT standards and easy set-up with configurable reports. Wintergest cited the key advantages as cost-effective roll-outs by using industry standard software and reporting tools, less integration risk and reduced IT maintenance costs. He also addressed the advantage of applying standard interfaces to legacy technology in helping to develop, test and operate the software. More information about the new banknote destruction system and sensor suite will be available at the Currency Conference. The launch of the new cash management software is scheduled for the second half of the year, followed by the launch of the new BPS C4.

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Technology News
April 2010

| Vol 8 | No 4

Currency News

| Page 9

RELIEF Security Screens a New Dimension to Intaglio

Swiss banknote specialist Orell Fssli Security Printing has developed a new approach to creating intaglio security screens, which it unveiled at the Banknote 2009 conference in Washington last December. According to the company, the new approach which is software-driven and offers a seemingly three-dimensional rendition of images opens up new opportunities with regard to security, design and appearance of the banknotes. The portraits and other features printed in intaglio on banknotes are traditionally created with fine lines or cells (the basis of the latter being small squares of equal size containing one or more design elements that, when put together, make up the image). The production of life-like representations is achieved by altering or modulating the thickness of the lines and the distance between them or, in the case of the cell screens, the thickness of the design elements themselves. It is this modulation that creates the appearance of dark and light, as well as depth. According to the company, however, this technique poses limitations with regard to plasticity in particular, but also to security. Outstanding Rendering To overcome these limitations, Orell Fssli Security Printing has adapted the process of generating cell screens with software that has been specifically developed to deliver outstanding rendering capabilities. This software enables the shape of the cells to be modulated optimising these shapes to attain the best possible display of the portrait or image. And in modulating the shapes, these can be fitted precisely to the object from which the image is being created. This object is scanned from the original, and a polygonal mesh produced. A grey scale image is then produced from this and the cell screens applied to the image. The modulation

Apart from the thickness of the design element contained in the cell, RELIEF security screens also use the shape of the cell to create an almost 3D appearance of the objects, thus providing better plasticity, new design possibilities, and high security. The use of different design elements in RELIEF security screens result in very different appearance of the same object.

of the cells themselves, and not just the design element contained in them, creates a new dimension in the form of spatial depth. The result, says the company, is a better plasticity, which give the objects a near 3D appearance that is distinct from images generated from conventional screen techniques, together with a much wider range of design opportunities and improved security. In terms of design, the graphic elements contained in each cell of RELIEF security screens can be created at the designers discretion, with virtually no limits. These can include, for example, geometrical patterns, landmarks, animals or logos, resulting in a substantially different appearance to the overall design. As a result, banknote issuers can develop various design options and compare the different appearance of each before selecting those most appropriate to be incorporated into the banknote. Enhanced security, meanwhile, comes from the precise application of

the cells to the object again, resulting in an effect that cannot be created conventionally. Compatible Software The special software is compatible with the software platforms that are currently used by the security printing industry for the generation of intaglio images. RELIEF security screens are engraved in the same way as other security screens on the intaglio plate, and hence no additional printing equipment is required. The technology is available to other security printers through the licencing of the software. Commenting on the development, the companys deputy director Beat Attinger said: At Orell Fussli Security Printing Ltd, we felt that traditional security screens comprising lines and cells had some limitations with regard to design possibilities and - to a certain extent - security (with line screens being easy to counterfeit), and wanted to develop a better solution. We believe that RELIEF security screen is the right answer.

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Banknote of the Month

April 2010

| Vol 8 | No 4

Currency News | Page 10

Chile Mixes and Matches for Its New Series

As announced in the September issue of Currency News, the Banco Central de Chile has begun the introduction of a new family of banknotes. The first of these, the 5,000 Peso, was put into circulation last September (see CN Vol 7, No 9) at a special ceremeony attended by the then President, Michelle Bachelet. The introduction of the second, the 10,000 Peso, was postponed by the earthquake in the country, and came out at the end of March. Chile, which has a population of around 16 million, is considered one of the most stable and prosperous countries in South America, and last year was the first country in the region to be invited to join the OECD. It was originally controlled by the Incas in the north and the Araucanos in the south. It became a Spanish colony 1540 and in 1750 was permitted to mint its own coins. It proclaimed independence from Spain in 1810, finally achieving this in 1818 after victory over a Spanish Army in the battles of Chacabuco and Maipu. The new series is the first redesign in nearly 30 years, and is being introduced to coincide with Chiles bicentennial this year. In tendering the series at the end of 2007 the Bank decided, having tested polymer on the 2,000 Peso banknote launched in December 2004, that the three low denominations - the 1,000, 2000, and 5,000, would be polymer and the two high denominations, the 10,000 and 20,000 Pesos, would be paper. Cohesive Series Irrespective of the differences between the two substrates, the Bank wanted a coordinated and cohesive series and also specified the main security features, theme, format and main colour for each denomination. The same people on the existing banknotes would be retained, but more naturalistic portraits were requested, whilst the theme for the reverse would be nature untouched by man. The design tender was won by Crane AB (designer Karin Mrck). Note Printing Australia was awarded the contract to print the polymer notes, and Crane AB the two paper notes. First Planned Combination While several countries already use both polymer and paper notes, this is believed to the one of the first with the UV on both sides, magnetic numbering, protection against colour copying and scanning and covert features. The new 5,000 Peso banknote retains the red colour of the previous note released in July 1981 and a portrait of Gabriela Mistral, the first female poet in Latin America to receive the Nobel Prize for literature. The vignette on the reverse depicts the La Campana National Park, the last refuge of the Chilean palm tree, and a Tucuquere, an owl from the Tierra del Fuego. The GSwitch, in the form of the Ant is colour coordinated to the print, the transparent window has a matching shadow image of Gabriela Mistral and there is a printed magnetic thread. The 10,000 peso, Chiles largest volume banknote, accounts for 43% of issued currency. The new banknote replaces the one issued 21 years ago in 1989. It retains the blue colour of the previous banknote and on the obverse a portrait of Arturo Prat, an heroic Chilean navy officer. On the reverse is a vignette of the National Park of Alberto de Agostino situated in the Chilean part of the Tierra del Fuego showing a glacier typical of the region and an Andean Condor in flight. The Level 1 security features on the front are a colour-a coordinated Motion thread with an Ant icon, a multi tonal watermark matching the portrait of Arturo Prat and a denominated electrotype. On the reverse OVI is used for one of the denominations values. There is a magnetic embedded thread. The other denominations, the 1,000, 2,000 and 20,000 Pesos, will be introduced one at a time over the next 18 months at six month intervals. As the first new series designed specifically to include polymer and paper substrates, this family of notes features harmonious designs and security features that enhance the national historic figures and landscapes and promote Chiles unique culture and identity as it achieves its bicentennial.

combination planned from the outset and the first designed specifically to include both substrates in the same family. The designs of the all the denominations are geometric and modern with a clear colour statement and naturalistic portraits with intense eyes. In the front centre adjacent to the portrait is a stylised flower inspired by the Chilean national flower, el Copihue. The offset patterns are inspired by old Inca designs and the security features have the same position on both paper and polymer banknotes to make examination easy for the public and machine sensors. The Ant, a Mapuche graphic that symbolises the sun and fertility, is used as an icon in both the Motion thread in the paper, and the G-Switch feature in the polymer, to maintain continuity despite the different substrates. All denominations have one side intaglio designed for good tactility and positioned to strengthen the corners and edges, tactile marks for the blind, see through register, two coloured invisible

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Conferences
April 2010

| Vol 8 | No 4

Currency News

| Page 11

African Banknote Printers

The 16th Conference of the African Association of Banknote and Security Documents Printers takes place in Fez, Morocco from May 23-27. It is being organized by the Moroccan banknote printer Dar As Sikkah, and has three main themes banknote durability, banknote quality control and e-passports. The opening address will be made by the governor of Bank Al-Mahgrib, owners of Dar As Sikkah. According to the organizers, in addition to the eight African banknote printers, it is expecting to receive the major suppliers of paper, inks and machinery to the banknote industry, as well as the main banknote printing companies in Europe and some central banks. The conference is held every one to two years, and also serves as a meeting forum for the association. Members take turns to hold the conference, with each hosting it for two consecutive years. Dar As Sikkah hosted the last conference as well, in Rabat. The hosts for the next conference will be South African Bank Note. Further information, including the agenda, can be obtained from aabsdp@bkam.ma.

Diary Conferences and Exhibitions

Currency Conference May 9-12, 2010 Buenos Aires, Argentina www.currencyconference.com IPEX May 18-25, 2010 Birmingham, UK www.ipex.com African Banknote Printers Conference May 23-27, 2010 Fez, Morocco aabsdp@bkam.ma European ATMs 2010 June 11-12, 2010 London, UK www.rbrlondon.co.uk ESTA Conference June 13-15, 2010 Porto, Portugal www.esta.eu 1st International Banknote Designers Conference September 5-8, 2010 Geneva, Switzerland www.banknotedesignersconference.com ICCOS Americas October 10-13, 2010 Scottsdale, AZ, USA www.iccos.net Intergraf October 13-15, 2010 Barcelona, Spain www.intergraf.org ATM Security 2010 October 14-15, 2010 London, UK www.rbrlondon.co.uk Cash Processing October 14-15, 2010 Paris, France www.efma.com

Annual ESTA Conference

ESTA (the European Security Transport Association) is holding its annual meeting June 13-15 in Porto, Portugal. Its theme is The Cash Cycle of the New Decade and this, along with upcoming EU legislation impacting on the CIT industry and security issues, will form the main debates of the conference. The welcome address will be made by Dr R. Pereira the Portuguese Minister of Internal Affairs. A number of central banks will be presenting, including those of Germany, Italy, Portugal and the Czech Republic, along with the ECB. The agenda also features presentations on the CIT industries in Sweden, Ireland, Portugal, France and Belgium. Representatives of the European Payment Council will be talking about cross-border issues from the banking industrys perspective, while the European Commissions ECFIN Directorate General and OLAF will be giving presentations on the legal status of cash (see page 6), cross border regulations, and new regulations regarding coin authentication respectively. The agenda will conclude with the latest CIT crime statistics compiled by ESTA from its members and an annual feature of the event, Full details are available at www. esta-cash.eu.

Five Years Ago

The European Payments Council outlined its strategy for promoting a reduction in both the costs and usage of cash, claiming that this amounted to 50 billion for the 15 EU member states (excluding the ten that had joined the previous year). According to the EPC, 32 billion of this was born by the banking industry it represented, 5 billion by central banks and 13 billion by retailers. The EPC was formed in 2002 to create a Single Euro Payments Area (SEPA), in which citizens can make payments across the eurozone as easily as they do in their own countries. Its objectives then, as now, include the creation of level playing field in payment systems and the elimination of practices that give cash an advantage. Its explicitly-stated objectives promoting electronic means of payments and optimising flows of existing cash payments - caused considerable concern at the ESTA conference that month. Graham Levinsohn, of ESTAs Central Banks Working Group, was quick to riposte pointing out the opportunities for driving out 10 billion costs by reengineering the inflow supply chain and also pointing out the value of seignorage estimated at 12 billion. Taking these factors into account, ESTA calculated the costs of cash at nearer 28 billion, with substantial opportunities for further reductions.

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In the News
April 2010

| Vol 8 | No 4
Worlds Youngest Mint...cont materials, and the Mint frequently had to close down production. This ended for good in 1949, the government being unwilling to make the major investment required in updating the ageing equipment. Since then, production of the Coln coins has been undertaken elsewhere, mainly in Europe. The opening of the new mint, therefore, marks a return to the countrys roots in domestic coin production. It is also the only mint in the region and the first new mint anywhere in the world for many years. The project was planned and implemented by a consortium of Swiss and Costa Rican investors, who developed a three-step investment plan, amounting to over US$10m over the next six years. The first phase has already been completed, involving a $4m investment to build the facilities, a security system and an efficient logistics network. One of the major partners and investors is Amera International, a Swiss-based supplier of coin services including blanks, coins production and recycling. For the past few years, it has been the supplier of Costa Ricas coins and its head, Daniel Sheffer, is co-chairman of the new enterprise together with his Costa Rican counterpart, Jos Antonio Guil. In addition to the minting of circulation coins (which currently comprise 5, 10,. 25, 50, 100 and 500 Colnes), Mint of Costa Rica will also supply other services, from the production of medals and tokens to coins storage. A special fea-

Currency News | Page 12 tures is the destruction of circulating coins, using demonetising machines that transform the coins into scrap metal, offering customers an environmentally-sensitive as well as costeffective solution for the removal of large amounts of circulation coins. A further service will be what the Mint terms an exemplary cash centre with a modern cash sorting and distribution system. According to the Mint, it will be guaranteeing high flexibility on delivery times, as well as tailoring its services to individual needs and special orders. Its main customer, the central bank, will be an immediate beneficiary with shorter lead times and enhanced availability. As the banks manager Roy Gonzlez commented: Every time the Central Bank needs to acquire coins, we have to wait weeks for the delivery to arrive. Having a mint in Costa Rica is a very attractive alternative, for it grants us almost immediate availability of coins and means we can respond straightaway to the markets demands. Mint of Costa Rica is based in San Jos, the Cost Rican capital an ideal geographical crossroads between North and South America. The country has a long history of stable democratic government and a fast-growing economy with the highest per capita income in the region. The Mint hopes to capitalize on these conditions in due course by exporting its production and knowledge throughout the region.

Publisher: Currency Publications Ltd (a Reconnaissance International/Currency Research company) Editor: Astrid Mitchell Board of Advisors: Charles Cardiff, Jacques van Droogenbroeck, Tom Ferguson, Eugenie Foster, Brian Lang, Bill Melbourn, Francis Ravez, Keith Richbell, Karel Schell, Raul Sierra, Dietmar Spranz. Currency News is published 12 times a year to report on regulatory, commercial and technical developments of importance to those specifying, issuing, producing, handling or processing of currency. Annual subscription rate - 878/ 1010/ $1493. Discounts for multiple subscriptions available please contact us for details. 4 Windmill Business Village, Brooklands Close, Sunbury, TW16 7DY, UK Tel: +44 (0) 1932 267232 Fax: +44 (0) 1932 780790 PO Box 684, Parker, CO 80134, USA Fax: +1 303 841 9887 Email: info@currency-news.com Website: www.currency-news.com
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Reproducing Currency News is an illegal infringement of Currency Publications Ltd's copyright. Currency Publications Ltd 2010