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Polymer banknotes--a viable alternative to paper banknotes.

Introduction

Bank notes are made of dense 80 to 90 grams per square meter of 100% cotton paper (also known as ragged paper) which is superior in strength and durability in comparison to wood pulp based papers. The cotton paper is sometimes mixed with linen, abaca, or other textile fibres to make it more resilient, resistance to wear and tear. Early Chinese banknotes were printed on paper made of mulberry bark and this fibre is used in Japanese banknote paper today. Most banknotes are made using the mould made process in which a watermark and thread (security component) is incorporated during the paper forming process. It is however often rather complex in construction comprising fluorescent, magnetic, metallic and micro print elements. One version of this technology is also known as windowed thread which makes it counterfeit resistance. Few new features of this technology includes Cornerstone, Platinum and Optiks.

With constant threats of reducing the impact of counterfeiting techniques / technologies, such as color photocopiers and scanners, countries have started thinking of a better material for printing notes. Cost Rica, Haiti, and Isle of Man issued polymer bank notes in 1983. These bank notes were printed by the American Bank note Company and were developed by DuPoint. During the same period CSIRO and Note Printing Australia, a subsidiary of the Reserve Bank of Australia, began work in 1980s to develop processes and technology for polymer bank notes. In the process many security features had been incorporated in polymer bank notes. Some of these are (i) transparent window (ii) optically variable devices (iii) shadow images (iv) embossed printing (v) use of metallic, metameric or metachromic inks etc.

According to Menzies (2004) Australia, New Zealand and Romania have all fully adopted polymer (plastic) banknotes, and another 18 countries have issued at least one polymer note. As per other statistics, today, 33 countries have issued polymer plastic notes. It include four countries those have issued hybrid polymer banknotes. To name these 33 countries are Australia, Bangladesh, Brazil, Brunei, Chile, China/Peoples Republic, China/Taiwan, Guatemala, Hong Kong, Indonesia, North Ireland, Kuwait, Malaysia, Mexico, Nepal, New Zealand, Nigeria, Papua New Guinea, Romania, Singapore, Solomon Islands, Sri Lanka, Thailand, Vietnam, Western Samoa, Kazakhstan, Northern Ireland, Bulgaria, Fiji, Malta, and Zambia.

The article presents an analysis of pros and cons of polymer banknotes with respect to enhanced security, reduction in the cost of production, increased self life of banknotes, ease of use through various automated processes etc. In addition, article analyzes the factors which are holding its reach to biggest economies of the world. The analysis is mainly based on secondary data available from Internet and other printed secondary sources.

What is a polymer banknote and a hybrid polymer banknote?

Polymer Banknotes

The polymer banknotes are made from the polymer biaxially-oriented polypropylene (BOPP). The printed security features such as intaglio, offset and letterpress printing, latent images, micro-printing, and intricate background patterns of paper can be applied to polymer banknote also. Polymer banknotes can have different colours on the obverse and reverse sides and can incorporate a watermark (an optically variable 'shadow image') in the polymer substrate. Shadow images can be created by the application of Optically Variable Ink (OVI), enhancing its fidelity and colour shift characteristics. Magnetic, fluorescent, phosphorescent, microprinted, and clear text security threads can also be embedded in the polymer banknote. Like paper, the polymer can also be embossed and windowed. The transparent wiondow where optically variable device (OVD), is located is a key security feature of the polymer banknotes.

Hybrid Polymer Banknote

A hybrid polymer banknote is essentially a paper note with a polymer band. They are printed on a paper substrate with a polymer patch. A polymer patch/band is applied vertically over the entire height of the paper note, thus creating a clear window. The polymer patch measures 74 mm (the height of the note) x 16 mm and its thickness is 25 microns generally. Bulgaria issued the world's first hybrid polymer in 2005 with a 20 Leva note. Kazakhstan was the second country to issue a hybrid note in 2006 with a 10,000 Tenge hybrid polymer banknote. Fiji is the third country to issue hybrid polymer banknotes in 2007 with Fiji $100 denomination. Latvia is the fourth country in the world to issue a hybrid bank note of 100 Latu denominations.

Positive side of polymer banknotes

Security

The major security features of bank notes (paper or polymer) are (i) WM (Watermark) (ii) ST(Security Thread) (iii) IP (Intaglio Printing) (iv) PMD(Perfect Matching Drawing) (v) HOL (Holograms) / Kinegrams (vi) HI (Hidden Images) (vii) UV (Ultraviolet Rays--Observation under ultra Violet Rays) (viii) IR (Infra Red) glowing used by Russian Rubble and Euro (ix) MI (Micro-Inscriptions) (x) CCI (Color Changing Ink) (xi) Clear Window (xii) Non-Transparent Window (xiii) Shadow Image (xiv) Micro-Printing (xv) See Through Element (xvi) Raised Printing (xvii) Watermark Portrait (xviii) Security Thread (xix) Security Fiber (xx) Lateral Images (xxi) Braille feature (xxii) STRAP (xxiii) Crisp Sound (xxiv) Background Decoration (xxv) Gradient Coloring (xxvi) Kipp Effect or Latent Images (xxvii) Signatures (xxviii) Metallographics (xxix) Hair (xxx) Protection Ornaments, (xxxi) Marks for the blind (xxxii) Novel numbering (Jorge and Miguel (2007)). It has been reported repeatedly that polymer banknotes are difficult to counterfeit in comparison to paper notes (Gration (2008)). Australia saw the number of fake banknotes down by 63%, while New Zealand scored a 96% fall after introducing polymer banknotes. The statement of issuing authorities of polymer banknotes in different countries and researchers with respect to better security features of polymer banknotes are listed in very brief in table 1.

Cost of Production

The actual data as reported in the literature with respect to cost of production of polymer bank notes is compiled in Table 2. (It can be seen from the data that cost of production of polymer banknotes is much less than the paper bank notes). The issue and functional cost of the banknote in circulation in New Zealand has been present in Fig. 1 & Fig. 2 respectively.

[FIGURE 1 OMITTED]

[FIGURE 2 OMITTED]

Quality & Other Features

The statements with respect to quality and other features of polymer bank notes are listed in Table 3. One can easily infer from these statements that polymer bank notes have some advantages over paper bank notes.

Negative side of polymer banknotes

There are reports from many countries wherein negative side of the polymer banknotes is reported. Few of negative statements are listed in the following:

General: The uptake of polymer banknotes has been comparatively slow with an estimated 1.5% of the Worlds banknotes now using this material. The major problems are (i) print durability (ii) bulky nature of creased polymer banknotes (iii) Counting machines have difficulty in processing notes rapidly (iv) the ink on the face of the banknotes being lost when two banknotes rubbed against each other (v) many polymer bills just after one or two years of circulation were faded or suffered the deformity of the major patterns while this never happened to cotton paper notes.

Specific: Experiences of some specific countries are listed in the following:

Thailand: Thailand has reverted to paper after testing polymer notes in circulation

Zambia: The Zambian banknotes suffered from problems like easily rubbed off serial numbers and premature fading. Another set of problems include (i) removal of unfit polymer notes, (ii) mutilation (Zambia: Mulomba, M. (2007).

Vietnam: Many polymer bills just after one or two years of circulation were faded or suffered the deformity of the major patterns while this never happened to cotton paper notes (Thanh Nien's News (2006)).

Mexico: They get dirty slowly and last longer in circulation until tearing is seen. They are particularly vulnerable to staples and sharp cutting objects. Handling the notes may sometimes be more complicated: They can be sticky when come into contact with some liquid other than water. Folds in these banknotes tend to be permanent, which can be an inconvenience (Bancodemaxico (2005).

Polymer Banknotes and India

During 2002 Reserve Bank of India (RBI) in its communication said that there is no immediate plan to issue polymer banknotes in the country (Prasad (2002) and Bureau (2002)). After five years, it is reported again in media that Reserve Bank of India plans to start a pilot project to print currency notes made of polymer instead of paper. RBI is planning to experiment with a million 10 Rupee notes each based on plastic bank note technology. The new currency is expected to come into circulation shortly in India (Sidhartha (2007)).

Concluding Remarks

Polymer banknote technology is being adopted in more than 33 countries across the world. There are many positive sides of the technology and it has provided solution to certain extends for counterfeiting threats. It has increased self life for the banknotes and other additional features as can be seen from the statistics presented in section 3. Still it is not popular technology for largest economies of the world. The reason could be investment from the scratch, faith in existing technology and product, risk of venturing in the new technology, acceptability of the paper banknotes among the all users etc. Additional reasons could be as reported in the domain experts from time to time (i) paper brings integral substrate security (ii) paper does not need to be treated to get good print quality (iii) paper does not need to be over coated (iv) paper is designed for machine handling (v) paper is the public's choice (vi) genuine banknote paper cannot legally be obtained by criminals (vii) paper is environmentally friendly (viii) paper specification can be tailored to an individual countries needs easily (ix) paper supply is competitive (x) paper has a past, a present and a future.

On the other hand, polymer bank note has certainly provided two very important directions to the banknote printing industry including paper banknote printing industry that is (i) there is a way to increase life of currency notes, (ii) hybrid banknotes which incorporate positive features related to security in paper banknotes. Further, expansion of polymer banknote technology will depends on solving technological problems faced by some of the user countries.

References

Adesida, S. (2007), "Towards Cleaner Naira Notes", Daily Sun, Thursday, January,18,http://www.sunnewsonline.com/webpages/ featuresmoney/2007/jan/18/money-18-01-2007004.htm.

Azom.com (2004), "Zambia Will Not Withdraw Polymer Banknotes from Circulation", http://www.azom.com/news.asp?newsID=1389

Badar, R. (2005), "Polymer Banknotes Brunei Experience", Regional Polymer Banknote Symposium, Hanoi, Vietnam, 15-16th December. http://www.securency.com.au /e/pdf/2005_%20Polymer%20Banknotes%20%20Brun ei%20experience%20%20Mrs%20Rokiah%20%20Bad ar.pdf http://www.securency.com.au /e/pdf/2005_%20Polymer%20Banknotes%20%20Brun ei%20experience%20%20Mrs%20Rokiah%20%20Bad ar.pdf Banco Central do Brasil (2003), "Polymer Banknote: Two years of Brazilian Experience" www.polymernotes.org/other_country/BRA_experienc e2.pdf

Bancodemaxico (2005), "Polymer banknote manufacturing", http://www.banxico.org.mx/ sitioingles/billetesymonedas/didactico/notesManufactF eaturesHistory/polymerNotesManufacturing.html

Bureau (2002), "Polymer notes not now", RBI, The Hindu Business Line, Internet Edition, Wednesday, October 9, http://www.thehindubusinessline.com/bline/2002/10/09 /stories/ 2002100902101000.htm

Coventry, L. (2001), "Cost-Effectiveness of Polymer Currency Notes--Australia's Experience", Paper presented at the XV Pacific Rim Banknote Printers' Conference, Thailand-November 2001.

Conventry, L. (2001), "Life of polymer currency notesA study", Paper Presented at the XV Pacific Rim, Banknote Printers' Conference, Thailand-November 2001.

Gration, R.G. (2008), "A paradigm shift in banknote security. Security features in Polymer Banknotes", http://www.noteprinting.com/report_001.html

Jorge Eduardo Galan Camacho and Miguel Sarmiento Paipilla (2007), "Banknote Printing at Modern Central banking; Trends, Costs, and Efficiency", http://www.banrep.gov.co/docum/ftp/borra476.pdf

Lang, B. and John Barry (2000), "Polymer Banknotes", Reserve Bank of New Zealand: Bulletin, Vol. 62 (2), pp. 44-46.

Lang, B. (2002), "Polymer Banknotes--the New Zealand experience", RESERVE BANK OF NEW ZEALAND: Bulletin, Vol. 65 (1), pp. 53-57.

Lang, B. (2004), "Polymer banknotes in New Zealand" "the five year report", Reserve Bank of New Zealand.

Maria Carlsen and Johanne Dinesen Riishoj (2004), "Counterfeit Banknotes", http://www.nationalbanken.dk/C1256BE9004F6416/si de/Monetary_Review_2004_3_Quarter/$file/kap04.html

Menzies, Gordon (2004), "Money to burn, or to melt"? A cost-benefit analysis of Australian polymer banknotes, North American Journal of Economics and Finance December, 15 (3), pp. 355.

Mansor, Lokman (2000), "Money comes, money goes, polymer stays", Business Times. July 7, pp. 03.

Mulomba, M. (2007), "Bank of Zambia Experience with Polymer Bank Notes", http://www.securency.com.au/e/pdf/2007_Bank%20of %20Zambia%20Experience%20with%20Polymer%20 Banknotes_Morris%20Mulomba.pdf.

Prasad, A. (2002), "No plan to introduce polymer/plastic notes: RBI", Press Release, 20022003/370, http://www.rbi.org.in/currency/press/rbi0370-2002.html

Sidhartha, TNN (2007), "Government plans to try out real plastic money", 30th June, 2007, http://timesofindia.indiatimes.com/ Govt_plans_to_try_out_real_plastic_money/articleshow/2162698.cms

Sayeda, Khanam (2000), "Not Paper, Now Polymer Banknote", Daily Manavzamin, http://www.noteprinting.com/f/BDESH-2.pdf.

Thanh Nien's News (2006), "Errors on Vietnam's polymer banknotes 'common': State Bank", 11 October, http://www.thanhniennews.com/features/?catid=10&ne wsid=21024.

VietNam Net Bridge (2006), 2% of counterfeit money is polymer note: SBV, http://english.vietnamnet.vn/biz/2006/08/603687/

N.P. Singh, Management Development Institute, Mehrauli Road, Gurgaon--12201, India, E-mail: knpsingh@mdi.ac.in, singh.netrapal@yahoo.co.in
Table 1: Statements of Security Issues of Polymer Banknotes

S.N. Statements Source & Country

1 "Polymer banknotes are more difficult Australia: The New
 to counterfeit because you cannot Paradigm In
 photocopy or scan a clear window, and Currency, IPCA
 toners don't contain white inks. New Bulletin,
 security features such as the International
 Diffractive Optical Element (DOE[TM]) Polymer Currency
 are extremely difficult to Association,
 counterfeit". October, 2004

2 "Difficult, time consuming and costly Malaysia: (Bank
 to counterfeit" Malaysian RM 5 bank Negara
 note has six security features that is Malaysia--Central
 a clear window, non-transparent Bank of Malaysia)
 window, shadow image, micro-printing,
 see through element, and raised
 printing.

3 The data given in Fig 2 is an evidence New Zealand:
 for increased security in polymer ((Lang and Barry
 banknotes. In comparison to 2000 (2000), Lang
 counterfeited notes per million has (2002), Lang
 reduced to nil in the subsequent (2004)).
 years.

4 There is a reduction in counterfeiting Australia:
 notes in Australia after introduction (Conventry
 of polymer notes. It can be seen from (2001)).
 the data of Fig.1 that counterfeits
 passed per million notes in
 circulation is reduced after 1995/96
 considerably.

5 "Increased security: Safer against Brunei: (Badar
 counterfeiting. The polymer substrate (2005).
 allows the use of security features
 such as: clear window, see-through
 registration of a flower".

6 "Plastic bills last longer and are Nigeria: (Adesida
 more difficult to counterfeit than (2007)).
 paper bills. Check for authenticity
 and fitness are reduced in comparison
 to paper notes."

7 "The polymer notes were designed to Kelly's Computer
 help deter counterfeiting; they offer Shop & Coins
 more security features that regular
 paper can offer."

8 "It is printed on synthetic material, Chile : August,
 has two clear windows which are 2004, News Item.
 difficult to copy, as well as other
 security measures, such as external
 and internal micro--printing and a
 "Shadow" image which can only be seen
 against the light and which will
 replace the current watermark".

9 "Polymer notes also enable new Financial Advisor
 security features unavailable on paper
 banknotes, such as transparent
 windows, and diffraction grating".

10 According to the State Bank of Vietnam Vietnam: (Thanh
 (SBV), polymer is an advanced Nien's News
 material, which allows the application (2006)), VietNam
 of many anti-counterfeit money Net Bridge (2006).
 technologies. According to another
 news "Nguyen Quoc Toan, deputy head of
 the Vault and Issuance Department
 under SBV, maintained that polymer
 notes had a higher security level than
 any other kind of bank note, and only
 0.02 of counterfeit money discovered
 now is polymer--a very low
 percentage".

11 In a survey, 61% of respondents rank Brazil: Banco
 polymer bill/bank notes as more Central do Brasil
 difficult to falsify due to plastic (2003).
 material. According to Central Bank
 Brazil, during a period of 32 months
 8099 events of falsification were
 recorded. It is 0.003% of total of 253
 million bills.

12 Zambia is first African country to Zambia: Mulomba,
 introduce polymer notes. M. (2007).
 Counterfeiting of the two polymer
 denominations was not a major problem.

13 The index of banknote counterfeiting Mexico:
 in this denomination has been reduced Bancodemaxico
 from 18 counterfeit paper banknotes (2005).
 per million notes in circulation at
 the end of 2002 to 0.6 counterfeit
 banknotes per million notes in
 circulation at the end of 2004.

Table 2: Statements with respect to Cost of Production of Polymer
Banknotes

1 "Within 10 years of the introduction Australia, Menzies
 of polymer notes, the net benefit was (2004)
 around $A 90 million ($U.S. 65
 million)".

2 "More cost-effective". It may not be Hong Kong (Yam,
 due to cost of production but due to chief executive,
 increased life of polymer bank note. Hong Kong Monetary
 Authority)

3 "Production of Notes in Australia had Australia
 declined after the introduction of (Conventry
 polymer banknotes. In the long run it (2001)).
 has resulted in the reduction of cost
 of production".

4 "Polymer notes last four times longer Brunei (Badar
 than paper notes. The greater (2005)).
 durability more than offsets the high
 cost of production".

5 "Enhanced durability has resulted in Nigeria (Adesida
 a big reduction in the number of (2007)).
 notes required and therefore,
 resulted in note printing costs. It
 also means less waste, compared with
 paper notes".

6 "Increased durability, both the Chile: With
 Central Bank and the financial system respect to new
 will save on printing and processing 2000 Peso note
 costs".

7 It is evident from the data presented New Zealand (Lang
 in Fig 4 and Fig 5 that overall cost and Barry (2000),
 of polymer bank notes is reducing on Lang (2002), Lang
 continuous basis due to durability of (2004)),
 polymer banknotes.

8 "In terms of cost, the K2 polymer Papua New Guinea
 note is slightly dearer than the K2 (Statement of Bank
 paper note because of the type of of Papua New
 materials used to produce the note. Guinea Governor L.
 However, from the Central Bank's Wilson Kamit)
 point of view, the frequency of
 ordering new K2 notes has reduced
 markedly in the last 7 years. This
 has generated significant savings
 whilst providing a note with greater
 utility. It is more secure than paper
 note".

9 "The polymer denominations cost twice Vietnam (Thanh
 as much to print, but should last Nien's News
 four times as long". (2006))

10 "Polymer banknotes are more durable State Bank of
 than cotton-paper banknotes, which Vietnam (Thanh
 help Vietnam save issuance costs". Nien's News
 (2006)).

11 "Expectation was to save nearly US$ Zambia: Mulomba,
 3.4 million with two denominations. M. (2007).
 It s through increased durability".

12 "Due to longer life, in the case of Mexico:
 the 20-peso polymer banknote, a Bancodemaxico
 savings of 42% vis-a-vis the (2005).
 continued manufacture of the banknote
 with paper has been estimated".

Table 3: Statements of Quality & Other Features of Polymer Banknotes

SN Statements Source & Country

1 "People seem to agree that the new Hong Kong (Joseph
 notes are clean and durable, do not Yam, chief
 get dirty easily and have a 'crisp' executive, Hong Kong
 feel. Because polymer notes are Monetary Authority)
 sturdier and last longer than paper
 notes, and can be recycled when they
 are no longer useable, they should
 also be kinder to the environment"

2 "In New Zealand paper notes need to New Zeeland (Lang
 be counted and verified for and Barry (2000),
 authenticity and quality by machine Lang (2002), Lang
 processing. Around 92% of these (2004)).
 notes, on average, are then re-issued
 back into circulation. With polymer
 notes, because of the likelihood of
 fewer forgeries and the enhanced
 durability qualities, the case for
 continually processing notes through
 expensive sophisticated machines is
 less compelling". It will result in
 reduction of bank branches also. The
 notes are also difficult to tear
 without the aid of a cutting tool,
 but will tear more easily than the
 paper notes if a tear is started.

3 "It is stronger and more durable than Hong Kong (Yam,
 paper banknote. It does not absorb chief executive,
 dirt or liquid. It is cleaner and Hong Kong Monetary
 more hygienic as it minimizes growth Authority)
 of bacteria."

4 Mrs. Foo-Yap Siew Hong, Assistant Singapore
 Managing Director said, "Polymer
 notes are cleaner and last longer
 than paper notes. MAS received
 favorable feedback from the public,
 banks and retailers

5 "The average life term of polymer Russia
 note is several years (unlike 8
 months of a paper note)".

6 It has the positive public reaction Australia
 to cleaner and more hygienic notes;
 environmental gains over the life
 cycle of notes; improved machine
 processing efficiencies

7 "Strong and vibrant design element. Brunei (Badar
 Maintain the quality and integrity of (2005)).
 the currency. Polymer banknote last
 four times more than paper banknotes.
 Polymer notes can be recycled
 products".

8 "Polymer notes last about four times Nigeria (Adesida
 longer than paper notes. Polymer (2007)).
 substrate is more robust and
 resistant to damage from moisture,
 dirt, oils and household chemicals".

9 "RM5 (polymer bank note) should have Malaysia, Speech of
 a significantly extended lifetime as Assistant Governor
 the RM5 polymer banknotes do not Dato' Mohamad Daud
 absorb dirt or liquids, stay clean Dol Moin (2004)
 and hygienic to handle. The
 over-coating varnish should also add
 to cleanliness, protect the printing,
 reduced ink rub- off or ink wear, and
 ink dust, under a normal condition of
 usage and handling."

10 "It is more resilient, and prevents Chile
 liquid from being absorbed and dirt
 from adhering to the note, all of
 which results in a longer useful life
 expectancy for the new note".

11 "Polymer notes were more durable and Papua New Guinea
 lasted longer. Banknotes in paper (Bank of Papua New
 form could only last for at least Guinea Governor L.
 four months from introduction to Wilson Kamit)
 public before it is withdrawn from
 circulation for destruction".

12 "The notes are claimed to be 10 times Bangla (2000),
 durable than the paper money". Sayeda, Khanam
 (2000).

13 "Polymer versions of each Australia--Conventry
 denomination last four times as long (2001)
 as the paper version of the same
 denomination, i.e. the life of each
 note is (i) D1--Paper 6 months--
 polymer 2 years, (ii) D2--Paper 1
 year--polymer 4 years, (iii) D3--
 Paper 2 years--polymer 8 years, and
 (iv) D4--Paper 4 years--polymer 16
 years. D1 is smaller denomination
 D4 is higher denomination".

14 "It has more resistance to tear. It Brazil: Banco
 is more resistance to Central do Brasil
 moist/wear/fading & durable". This (2003).
 perception has increased in 2001
 survey in comparison to 2000 survey.

15 Bank has achieved "Clean Note Policy" Zambia: Mulomba, M.
 by introducing polymer banknotes. (2007)
 Polymer notes circulation life span
 is twelve months as compared to three
 months of paper notes.

16 "Even though they last 3.5 times Mexico:
 longer than paper banknotes, Bancodemaxico (2005)
 banknotes made from polymer come back
 to the central bank much cleaner".
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Date:Apr 1, 2008
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