Trends and Tendencies in Banknote Production

Pro memoriae

Trends and Tendencies in Banknote Production

Prior to the 20th century, bonds and banknotes were manufactured in a spirit of artisan, handcrafted fabrication in a more or less semi-industrial process which, in turn, yielded a wide variety of finished products on an equally wide variety of substrates in accordance with the traditions, cultures, habits and technical capabilities of geo-political zones or individual countries. That multitude of individual solutions to the task of creating a means of payment did not actually foster the use of banknotes as an additional payment instrument in competition with precious metals and coins. The Industrial Revolution and the growth of international trade triggered the need for a certain degree of standardization of the banknote as a mutually recognizable and acknowledgeable, universal proof of value. After World War II, it was the multi-color intaglio process based on previous inventions by Orloff and Serge Beaune, promoted by Gualtiero Giori and cast in functioning machines by Koenig & Bauer that led to more standardized, wide-spread and modern banknotes, as we know them today. Giori's KoeBau set of machines revolutionized the manufacture of banknotes by achieving a hitherto unknown economy of scale through the simultaneous printing of three or more colors from engraved steel plates in a modified rotary gravure process. But, compared to the old flat-bed copper/steel plate printing machines that allowed for almost any artistic freedom of design and size of a banknote, the new process came with some limitations. This applied to the banknote formats possible, the ink to be used and the way of engraving and plate making. Due to an extremely intelligent marketing, sales and patent regime, Giori succeeded to establish his intaglio process as the industry's standard, hardly troubled by any major competitor. Only from the 1990ies, the Japanese corporation Komori succeeded in installing some few machines for international customers. Central Banks, however, soon found themselves exposed to new challenges. The rule of economy conquered central banks. Governments, although appreciating a smooth and hitch-free fuelling of their economies with cash, exercised pressure on their central banks to reduce the cost of cash at all stages from manufacturing, counting and sorting to the disposal of withdrawn notes. The intaglio ink layer thickness decreased gradually, with the current issue of the European Central Bank being a master example of that philosophy. Circulation endurance became an issue, and Australia experimented on the plastic banknote. The arrival of new, cheap and simple scanning and reproduction technologies constituted another challenge. Old, classical security features in banknotes and the immaculate execution of artistic designs lost their importance. Instead, the security of a banknote shifted into the paper with more sophisticated watermarks and security threads, and new anti-copying or optically variable security features became standard in banknote design. The Australian plastic substrate gained ground (and lost it again) in some countries. But the marketing strategy of the Australians shelved the focus of discussion even more towards endurance and economy aspects. As contended as the Australian product may be, it made the banknote printing industry more competitive and forced the established banknote paper manufacturers "to do something" about the subject of longevity and endurance of circulating notes.

Today, the banknote printing industry has become more competitive and transparent than ever before in its history. The once so monolithic and secretive industry is in a permanent exchange and discussion fuelled by www. and a number of publications, conventions and meeting places unseen and unthinkable before. New players have entered the industry enhancing competition or even offering completely new solutions. Never before in its history has the banknote printing industry availed of a greater number of suppliers offering a greater variety of substrates, ink, machinery, security features and advice than today. The majority of central banks are operating in the conflict between economy and security of their banknotes. In this tension field, use of experience and methods of analysing the optimum cash management have been refined, and central banks have developed scientific means to optimize security and cost of the cash instruments issued by them. Technical specifications, security features, purchasing policies and all other aspects of the production have been thoroughly optimized for each individual denomination against their effect on economy and security. As a result, a more pronounced specialization and differentiation of individual denominations has been observed recently in terms of security features and manufacturing cost. Based on these developments and on recent trends and tendencies, we have tried to draw some conclusions and dare to raise the following theses: 1. The necessity to consider economical aspects in design, manufacture and circulation of cash instruments will persist at a level not below the present. 2. Differences between denominations in terms of security/technical and economical requirements will become more and more pronounced under the conflict of security vs. economy. This trend will culminate in a kind of low-denomination-banknote, which will replace what are maybe the highest coin denomination and some low to medium banknote denominations today. 3. In most countries, the new segment of the low-denomination-banknote will represent the bulk of banknote production. 4. The clock cannot be turned back: A once established competitive and transparent environment cannot be reversed any more, but will develop into an even more pluralistic and competitive one. 5. This will result in the availability of a growing variety of machines, materials, security features, and processes that will enable banknote printers to optimize production according to denomination-specific requirements. The printing and finishing equipment presently marketed by KBA Giori are standard equipment for the manufacture of banknotes, as we have known them for the past 50 years, with emphasis on a high quality in the execution of intaglio printing. The low-denomination-banknote, however, will require a printing equipment that has an emphasis on the economy of the initial investment as well as the economy of operational cost for the printing of adequately designed, secured and executed banknotes in very high volumes. For this segment, we regard web-fed presses an interesting alternative. In the field of multi-color form printing by different printing processes, the web-fed press offers speed, output and flexibility unmatched by any sheet-fed process. The possibility to re-arrange a machine configuration for a certain job structure, to combine dry offset, wet offset, screen, flexo, foil application etc. into one inline pass of a web press, carries the potential of a high production output per time unit and a

reduction of the physical and process security arrangements in the banknote printing plant. The web process is therefore ideal for the manufacture of bulk quantities of the low-denominationbanknote segment. Consequently, we anticipate the future banknote manufacturing plant to feature a higher degree of specialization and economical optimization than today. It will consist of web-fed presses for an inline production of low-denomination-banknotes in bulk and the well known sheet-fed presses for the printing of conventional high-denomination-banknotes, as we have known them so far. The idea, to realize Rino Giori's intaglio method in form of a web printing machine, is not a new one. Long before the offset process, rotogravure was the first printing method that was conveyed to web, resulting in significant gains in terms of speed and output. In the banknote printing sector, early web intaglio developments were made in Finland by Wrtsila for Setec and Nohab for Tumba Bruk. Nohab was later taken over by the German manufacturer Miller-Johannisberg, and for a while, marketing efforts in co-operation with Tumba Bruk looked promising. After MAN Roland, a company with no interest in banknote printing machinery, took over Miller-Johannisberg, the web intaglio project was terminated. While Tumba continued to print banknotes on the web, more banknote web printing developments were carried out in England, USA/France and Italy (Trissel, SNOW, Epicos). At the time of the early developments in Scandinavia, another German printing machine manufacturer, Goebel, had already developed its own web intaglio process, however with a focus on the printing of postage stamps and tax banderols. The Goebel intaglio machine turned out to be very successful in this field, and soon, banknote and security printers approached Goebel to develop the machine further, in order to enable them to print bonds, passports or even banknotes on the web. A first installation in a North-African country was followed by deliveries to German, French and Scandinavian customers. The early web-banknote-printing installations suffered from three major disadvantages: The accumulation of waste rates through the inline manufacturing process, the inability to produce banknotes with localized watermarks and the limitation in ink layer thickness of the web-intaglio due to printing and ink drying. At that time, the banknote paper mills (except Tumba) were still unable to guarantee the register of localized watermarks over the length of a reel. Internal waste rates of banknote papermills were generally higher in the 1980ies than they are in modern mills. The cutting of the reels into sheets was a necessary step to enable the papermill to check and sort the paper according to watermark dis-localization and other deficiencies and to ensure that the printers would receive only (supposed to be) 100 % flawless paper. Drying times of intaglio ink were such that, in sheet printing operations, interleaving paper was used to "protect" the intaglio print for weeks of ink drying, before another machine pass was possible. With today's electronic control and new servo-drive technology, the problem of watermark registration during web printing has been completely solved, from both, the paper manufacturer's and the printing machine's ends. From the presently observed tendency towards plastified banknote papers or plastic-paper-compounds, we even expect a further fortification of the substrate in terms of format and climatic stability. This will further improve the paper-print-register in the web banknote printing machines.

Modern paper machines deliver an almost flawless paper with perfect watermark localization already on the reeler at the end of the paper machine. Thus, the waste that has before been carried into the web printing machine right from the papermill has been grossly reduced, and the gap in waste rates between sheet and web operations is narrowing. State-of-art intaglio inks count drying times rather in seconds instead of days or weeks 25 years ago. Therefore, the major factor limiting the layer thickness of ink in a web intaglio process does no more apply to the same extent as at that time. Continuous improvements to the mechanism of the printing unit have considerably increased the amount of ink that can be transferred in web intaglio printing today. Whilst the banknotes of the seventies and eighties usually featured a very high deposition of ink in the intaglio print, modern banknotes get by with a much flatter intaglio, and, today, the intaglio of a web-printed Danish Kroner can hardly be distinguished from the intaglio print of any other banknote done on a sheet-fed press, including even higher denomination uro notes. Technological progress and enhanced process stability at the paper maker's as well as the printer's end have eliminated many of the set-backs users of web-fed banknote printing machines have experienced, since the first of these machines were installed some 30 years ago. Recent developments that will seamlessly become future trends in banknote production make it compulsory to look into the web-printing technology again, at least for a certain segment of denominations. We are therefore convinced that the web intaglio process will gain pace in the future and become a valid alternative, especially for the cost-efficient printing of high volumes of notes. It's the economy, stupid!

30th July 2009 Walter Pohl

Security Printing KG is one of the very few trading and consultancy firms in the security printing industry which is independent from the interest of the major groups in this sector. It provides protection of documents, products and administrative processes against counterfeiting, forgery and abuse. SP co-operates with industry-wide renowned experts and selected manufacturers. The combined indepth knowledge of the industry's technology, products, processes and innovations held by SP and its network of partners enables SP to provide its clients with enhanced solutions and the latest security and authentication technologies. For the establishment of this "Pro Memoriae", we would like to thank for the contributions of Mr. Mr. Mr. Mr. Heinz Artmann, SID-Consult GmbH Klaus W. Bender: "Moneymakers", 2006 Wiley-VCH Verlag GmbH & Co KGaA, Weinheim Eckhard Braun, Falcon Industrial Service GmbH Claus Jung, eurotec Industrieberatungen

For more information, please contact Security Printing KG Carl-Orff-Str. 77 85591 Vaterstetten Germany Tel. +49-8106-379 49 34 www.sp-kg.de info@sp-kg.de