The ECB recently launched a consultation process for the design of the future euro banknotes, in order to prepare for the printing of billions of new banknotes that will circulate in the Eurozone and well beyond. This event is a major industrial and technical challenge, and just the second time the euro has been redesigned since its launch. With this in mind, we talk to Eric Boissonnas, CEO of KBBS, about what technically makes a banknote, over and above its design.
The decision to print money is taken at State-level. What is the life cycle of a banknote, and on what basis is the decision taken to print new ones?
The decision to print new banknotes is taken when the current banknote series needs to be renewed, following a change of design or simply due to the need to reinforce their security. Apart from these “technical” considerations, the number of banknotes printed each year depends on the demand for the banknotes, which is growing at an annual rate of 2 to 3% worldwide, despite certain disparities; while the number of banknotes is falling slightly in advanced economies, it is rising sharply in some fast-growing emerging countries, where up to 95% of commercial transactions can be carried out in cash. However, there are exceptions; in the United States, a country that has a high level of innovation in terms of payments, almost 20% of households are underbanked. They do not have access to all banking services and are therefore dependent on cash.
How do banknotes work their way into the hands of consumers, and what is their life-span?
Once printed, banknotes go through a cash cycle which can last from several months to several years, during which they may change hands several hundred times per year, and even countries. Banknotes are printed at the request of a central bank, who then distributes them to commercial banks. These commercial organisations are entrusted with the responsibility to make banknotes available to citizens via range of mechanisms such as bank branches or cash dispensers. Banknotes are then used by the public for payment in a variety of contexts. Finally, the banknotes are collected from retailers and securely transported to sorting centres for fitness and authenticity validation. Banknotes that are deemed fit for recirculation are returned to commercial banks for reissuing and unfit banknotes are either destroyed on site or returned to the Central Bank for destruction.
This is the standard process in industrialised countries. In countries with less dense commercial banking networks, the process is more decentralised and, paradoxically, often extremely local in naturel. For example, it can draw on the telecommunications networks and mobile money transfer applications, with the shops themselves handling the distribution and circulation of cash, as demonstrated by the success of M-Pesa on the African continent. These short distribution channels also have the benefit of reducing the environmental footprint of transporting cash, making cash transactions more sustainable than digital payment that rely on connectivity and data centres to process transactions.
Banknotes reflect the identity and culture of a nation. How do the players in the sector adapt to these specific features and changes?
From a technical point of view, the graphical or aesthetic content of a banknote has no impact on the printing infrastructure, even if there are layout constraints that must be taken into account between the design elements and security features. The latter are essential for enabling authentication by people or automated cash acceptance technologies, such as those found in certain retail stores. But overall, we can print any design with our equipment. Imagination is the only limit. We should also remember that banknotes play a role in terms of conveying the “brand image” related to the history and identity of a nation, as in Latin America, for example, where personalities linked to the wars of independence are often represented on the notes. In fact, Latin American enjoys an incredibly rich heritage in terms of portraying cultural and historical symbolism via the visual narrative found in their banknotes.
Banknote design work is carried out upstream, either by the central bank, specialist printers or independent companies. KBBS also has acknowledged expertise in this area, with teams dedicated to supporting our customers, including during the design phases; we provide a comprehensive end-to-end service, from design conceptualization and development, training and maintenance right through to to the management of the machines at the end of their lives.
People instinctively understand that banknotes are not just a product like any other, because confidence is such a critical factor for the long-term viability of cash. What is this confidence built on?
Above all, this confidence is based on the certainty that the banknote is a reliable medium of exchange exchange (legal tender), whose value is guaranteed by a central bank and a Government, or a group of States. This confidence is also based upon trust; an acknowledgement by the public that the banknote is genuine. Creating such high levels of public confidence and trust is the result of decades of innovation aimed at combatting the counterfeiting of banknotes, in which we play a leading role. The printing quality delivered by our equipment represents a major challenge for counterfeiters. Despite the availability of high resolution digital printing technologies on the open market, criminal fraternities are technically incapable of replicating the visible, and invisible, printed charateristics present on banknotes printed on our machines. This exceptional level of quality is the absolute hallmark of banknote printing and is only acheivable when using dedicated banknote printing equipment. Commercial printing technology cannot reach these levels of precison and excellence. Today, only few people have had a fake banknote in their hands or suffered any prejudice due to a counterfeit note. ECB statistics show that only 13 fake banknotes were seized per million notes in circulation in 2021 and 2022.
Above and beyond the aspects that make banknotes forgery-proof, cash is intuitively simple to use and easily accessible, and it is accepted virtually everywhere. Using cash also guarantees privacy; a banknote cannot be hacked and it does not collect your personal data, unlike your smartphone.
How many banknotes are produced worldwide, and how much does it cost to make them?
It is estimated that around 160 billion banknotes are printed around the world every year. A typical country consumes around twenty banknotes a year per inhabitant. For example, meeting the needs of the Eurozone required the printing of around 6 billion banknotes in 2022, bearing in mind that a printing line produces at least 500 million banknotes a year.
The cost depends on the security specifications required by the client central bank and the number of notes printed each year; printing 1,000 notes costs an average of €50 around the world. But some banknotes, such as the Swiss Franc, are more expensive to produce. However, the unit cost at the end of the production chain should not be the only assessment criterion. Often, a higher cost means a more sophisticated banknote, with a longer life-span. For example, KBBS prints security features with very precise tolerances, which enable the banknotes to be authenticated several hundred times, at lower cost, while reducing the need for secure transport and the associated environmental impact. They are ‘hidden’ additional costs, which are often higher than the production costs themselves.
What is the precise cost of managing banknotes (supply, distribution, etc.)?
Commercial banks have certain costs linked to their duty to make cash available: the maintenance and provision of ATM networks, fund transfers, storage, protection and handling of cash, etc. All these essential stages in the circulation of cash require specific infrastructures and organisation; in a developing country, the cost of circulating banknotes is around 70 times higher than the cost of producing them. However, this ratio rises to 200 times the production cost in highly developed countries, where the life cycle is far more complex. Hence the importance of producing banknotes that are as durable as possible, while complying with cash cycle requirements.
What are the objectives and technical challenges involved in producing banknotes?
To maintain public confidence in a currency, we need to stay ahead of counterfeiters from a technological point of view. By devoting 15% of our revenues to innovation, we help to neutralise the counterfeiters’ “business model”. If a fake note costs more to manufacture than its face value or nominal value, there is no point in counterfeiting it. At the same time, the increasingly widespread use of advanced publice features and automated banknote processing interfaces means that counterfeit notes are detected much earlier than before.
It should be noted that printing banknotes is nothing like conventional printing; we are one of the few companies that design and manufacture printing equipment exclusively for the legal-tender production sector. All the consumables involved in this process and the supply chain itself is banknote-specific and highly sceure. The sale of all these ‘ingredients’ that go into making a banknote is closely monitored. As part of the S-Print initiative, Interpol maintains a database of industrial intaglio printing machines, a process reserved for security printing.
Technically speaking, the offset presses we design and distribute are capable of developing a printing precision to the micron, while printing all the colours in a single pass, with simultaneous front and reverse side printing. Our machines are industrially produced to the highest standards of efficiency and quality. The supply and spare parts chain is also scrupulously controlled, with continuous traceability between us and the certified end user. Today, our machines are used in the production of the vast majority of the world’s banknotes.
How have you organised yourselves to cope with such stringent industrial requirements, in a niche sector where production runs are limited?
Our highly technical professions must avoid two potential pitfalls, namely over-engineering – where engineers are overly creative and come up with products that far exceed the real needs of customers and the real operational requirements of the business – and “craftsmanship”, where there is a risk of undermining the industrial consistency of notes in circulation. Banknotes must be produced in large volumes to meet demand and have exactly the same characteristics throughout a series lasting between 7 and 10 years.
Drawing on feedback from some of our customers, and driven by our Group’s CEO, who comes from the automotive industry, we have reorganised our Austrian factory over the last few years, in order to take our assembly lines to the cutting edge of the most advanced industrial processes, with systematic quality control at every stage. This has enabled us to further improve productivity, thanks to the simultaneous development of our training centre, which has unrivalled expertise and is open to our customers from all over the world.
Over the last 70 years, these specific industrial skills, and the emphasis we place on innovation have enabled us to provide our customers with the most efficient printing platform on the market, in terms of print quality, productivity and reliability. This means our customers benefit from optimised production costs, such as savings on consumables and very low machine down time, and above all, unrivalled quality and security in terms of the finished product. KBBS is also the sole owner of certain printing or application technologies that have become essential for modern banknotes. It is also very important for our customers to be able to manage increases in printing volumes, notably in order to meet the growing demand in many countries, or to prepare for the launch of a new series, without compromising quality.