Hitting the right note: the vital role of R&D

Validating a banknote

Welcome to Spotlight, Alfred Kraxenberger. Let’s start with a very basic question. How does the person on the street validate a banknote?

At its core, there are three steps to the validation of a banknote when it is presented to you. 

First, you look the person giving you the note in the eye. If you trust them, then you typically accept the note. The second step is haptics: the feel of a banknote is vital. This is achieved by special technologies like a raised print, the distinct feel of the cotton substrate, and so on. Finally, and only after those first two steps have been crossed, comes the validation of features.

What is the significance of banknotes in a changing payment environment?

Banknotes remain central to a nation’s well-being, in good times and in times of uncertainty. Cash fosters stability. For the cash cycle to work, everyone must believe that the notes in their wallets mean something, that they will be accepted for goods and services. They also embody a nation’s soul, in some ways. A citizen should feel pride in their nation when using them. For a visitor, they’re possibly the first bit of a country they’ll encounter, and very probably it’s what will be left in their wallets when they leave. Central banks and their partners spend a lot of time designing their currencies!

What are the basic requirements of a banknote?

Consider what we do in the banknote solutions industry. Our production runs are in the billions. But all those units must adhere to certain parameters.

1. They must all look exactly the same. Otherwise, the population loses confidence in the currency.
2. They must be secure, with features that can’t be reproduced by forgers. A counterfeiter must not be able to fake a single note with whatever technology they are using.
3. They must look good. They represent a nation and its history, after all.
4. They must be simple to use. If a feature needs to be explained, then it is badly designed.

The importance of simplicity

Simplicity is important?

It is essential. All that thought and planning, the process and the production: at the end of it, when the user is handed the note, they need to just look at it and say, “That’s genuine.” Without a second thought.

In my time in this field, that requirement has been a constant. The security feature needs to be practically impregnable, but it has to be very, very easy to use. This is where technology kicks in: as with any other aspect of modern life, it must be highly sophisticated, but with an easy and convenient customer experience.

Confidence suffers, otherwise?

Yes. And confidence in a currency is the basis of a functional cash cycle. However, gaining and keeping that confidence takes a lot of effort and innovation. Staying ahead of bad actors like counterfeiters is a full-time job, and that’s where organizations like G+D enter the picture.

Counterfeiting evolves

How does the banknote printing industry react to technological shifts?

It is G+D’s goal to always be a step ahead in new technologies that offer both overt and covert security features for banknotes. But this is an ongoing process, and it requires commitment to a culture of innovation. We didn’t acquire our expertise by accident! We’ve been doing this for more than 170 years. 

Let’s look at the evolution of banknote technology. The very first banknote was a piece of paper with a watermark, with something written on it. Nobody could write, so that was rare enough! Then people learned to write. So, the focus turned to printing technologies. Nobody could print. When that became more common, well, nobody could fine print! Printing technology was the point of difference. 

But technology evolves, as we all know. Now we are talking about the combination of cotton-based security paper and foil elements, because the material mix should also be hard to achieve. Take the case of foil elements with holograms on them. These were state-of-the art 15 to 20 years ago. But a counterfeiter can now buy a dot matrix printer for €3,000 that can produce a hologram. If you’re really interested, you can buy reams of holograms on the dark web! Holograms also have another issue: they refract light through the spectrum, losing brightness in the process. However, banknotes need to be validated in low-light situations as well, by people who may not have perfect vision. Accessibility is something we’re all very aware of these days.

Holograms are still applied, but the technology has continued to develop. The industry has adapted, as it always does. Staying ahead of bad actors is vital. When it comes to security threads, among the latest developments are micromirrors combined with nanostructures. These are tiny. Up to 4 million micromirrors can fit on your thumbnail, plus 1,000 nanostructures per mirror. These can be aligned precisely so that light is reflected exactly as we want it, creating an image which is visible in low light as well. This can be either a 3-D portrait, or an effect that prods the user to solve a puzzle. 

A puzzle? Can you explore that further? 

There is a lot of psychological research and insight that goes into the design of a banknote. We know the first thing a person looks at in a banknote is typically a portrait. We’re human; if we see another human, we look at them. This is hardwired into us. 

The second step is to draw the person’s eye towards the security feature. The viewer follows the gaze of the portrait. That’s where we’ll put the security feature. And you need to verify the security feature almost instantly.

Now, we know humans are attracted to things that glitter. So we make the security feature shiny. And it should be recognizable. We can place a circle “hovering” over a rectangle; an optical illusion, if you will. The human urge is to fit the two together, to solve the puzzle. So, you tilt the note, and it resolves.

You solve the puzzle?

Exactly. The user doesn’t have to be told to do this. It is completely natural. And it is simple to use.

Sustainable and innovative 

Sustainability in banknotes is a growing part of what you do. Can you amplify that?

We see that the request and need for sustainability throughout the currency cycle has increased over the last years. Of course, security is always first.

Our approach to sustainability is that we simply get on with it. In five to 10 years the customer doesn’t have to take the decision whether to do it sustainably or not. If they’re working with us, they’ll be doing it sustainably anyway. Our green product line is something we take very seriously in our R&D.

We are working with bio cotton that is sustainably sourced. We’re talking about recycled foil, and mineral-oil-free printing – initiatives like that. The aim is to reduce the carbon footprint of our products by consuming less resources and enhancing the bio-based carbon content of the substrate. At the same time, we are working on getting our production process down to net zero emissions. We’re already using only green electric energy in our production. And we’re working to reduce our dependence on non-renewable energy, like fossil fuels, as well. 

Louisenthal prides itself on its culture. How do you make that happen?

Well, it’s all about people working collaboratively. It is never just one person inventing a feature!

We’re lucky here in the Tegernsee region. Through my door, I see nanostructure physicists from Cambridge in the United Kingdom, polymeric chemists from the Rhine delta here in Germany, Big Data analysts from Silicon Valley, the best paper makers in Europe.

It’s a very interdisciplinary approach. And that is combined with production, where our local people, including apprentices that we trained, work together with all those international experts.

That’s the magic behind the banknote in your hand. When we have new people, they love that interaction. One of our most recent employees in the R&D department is an Italian doctor in nanophysics. He doesn’t speak German. But he sits in his lab and he tells me, “I like it here, because I’m doing hardcore research. I do my structures and go to my electron microscope, and then I go next door to this guy who is an engineer who brings that technology to a machine.”

The machinists in our substrate and security feature production are locals, many of whom began their journeys right here as apprentices. They talk to that Italian nanostructure physicist about how best to produce a viable product. To my mind, that’s amazing.

Louisenthal is famed as an innovation hub. How do you keep it ticking?

We create 40 new patents per 1,000 employees every year. As of today we hold 1,878 individual patents. That comes from bringing together the best experts worldwide and tasking them with creating a unique product. 

Of course, we also have to protect our expertise. The patents help with that. We have a patent board that meets regularly, up to the highest management levels. But it’s about the passion, not just for banknotes, relevant to millions of people in the world, but for creating something new together.

We’re very rooted in this place, in Louisenthal. We have people whose families have been working here for four generations. It’s a very familial place and environment. That helps, in my opinion.

Does all that innovation ever pay off in an unexpected way?

Of course! We have a technology stack that is geared towards creating a highly secure and state-of-the art banknote. However, small bits of that stack, specific technologies that we have optimized for our needs, can be carved out to provide solutions even to other industries and contexts.

This is where our second production and technology site, in Königstein, Saxony, comes into play. Here we also have a dedicated team, composed of chemists, paper engineers, and production experts, all with interesting ideas and providing world class solutions.

As an example of this innovation, we have the cotton substrate, to which we add fluorescent fibers. You can embed a thread, a metallic device fixed into the layers of the cotton substrate. This is needed for creating a banknote. But what if you replace those fluorescent fibers with carbon fibers? And what if you replace the optical security thread with a copper thread? Now you have a device filled with fibers that are conductive. Applying a voltage heats that device. We have a partner that produces a ceiling laminate. With the device we’re talking about added to that laminate, you can heat a room.

We have other examples where we thought, we have a solution, is there another problem we could be solving? Our approach is to put people together from different backgrounds with different faculties and let them think freely. And we give them state-of-the-art facilities and resources.

I always tell my R&D people, 80% of your work should be what you’re expected to do; 15% of your work should raise some eyebrows; and 5% of your work, people should be asking, “What the hell are you doing? What’s the point?” 

That’s when creativity kicks in.