Ensuring a successful currency changeover

The introduction of new banknotes rarely involves a complete currency changeover; usually, existing banknote series or individual denominations are exchanged. What criteria do central banks take into account when introducing new banknotes?

There are a few. For example, if there is counterfeit money in circulation, there must be an upgrade of security elements, as the security of banknotes is a top priority. Another important aspect is the revision of the banknote design. After all, a banknote is a country’s business card. Contemporary design and the aesthetics of the respective cultural group therefore play a very important role here. For this reason, central banks challenge their current banknote series every six to eight years to determine whether it is still state of the art and whether certain elements could be upgraded or certain denominations exchanged.

What other reasons are there to introduce new banknotes?

Political developments are an important reason. Think, for example, of young countries like Eritrea or South Sudan. Here, new identity cards and a new currency had to be provided at short notice for the entire population. Inflation can also be an important reason to introduce higher denominations or even exchange a complete series. On the one hand, central banks are interested in a stable local currency and a positive exchange rate, but on the other hand they must react promptly to relevant trends in order to meet the payment behavior of the population – a very demanding and important task.

How do central banks inform the public about new banknotes?

Dialogue with the public is becoming increasingly important because public interest has increased, and central banks are now much more in the public eye. Banknotes’ design is often discussed in the media, and their motifs are being questioned more critically. It is therefore important to provide information early on and interact with the public in advance. In addition to the press content, TV commercials, and websites, social media in particular has become a more important channel for entering into dialogue with the public and providing background information. Apps using new technology such as augmented reality (AR) have also established themselves as a communication channel for central banks. A particularly good example is Malawi, where the Reserve Bank of Malawi issued a new 2,000-kwacha note in 2016. An AR-enabled app uses the camera to create an experience when explaining the features of the note and telling the story of how the new banknote was created, thus also providing the population with valuable historical knowledge. We now offer our customers the creation of such AR apps as a standard service.

What other advantages can apps offer in this context?

Once the security elements have been upgraded, central banks can easily inform commercial banks and the general public via the AR app about which features will now be included on the new banknotes. The bottom line is that if the public accepts new banknotes, then the central bank’s concept, and implementation thereof, has been a success. This strengthens people’s sense of loyalty – not only to the local currency, but also to their country.

How long does the changeover process normally take, from the tender of a project to the first issue of new banknotes?

It usually takes 18 to 24 months from the initial idea to the issue of the notes. But the reality is often different – for example, a new series may have to be launched in three to six months. This was the case, for example, in an African country in the 1990s, after a civil war, when the country needed new banknotes at short notice and the central bank had just four months to introduce them. Another country required a currency reform at the beginning of 2013 with six new denominations, which was also completed very quickly. G+D had just six months to produce the new banknote series, from the initial design concept to the delivery of the banknotes by air freight between Christmas and New Year 2012/13.

What are the distinct challenges when things have to happen so quickly?

It goes without saying that such time-critical projects require maximum concentration during implementation and that there is a certain amount of tension among those involved. Imagine being unable to sufficiently examine motifs or visual elements, which for various reasons are no longer appropriate, due to time restrictions – a real horror scenario for any central banker. In the end, all central banks have the same goal – to create confidence in their own currency among the population!

Published: 13/08/2020