The lifespan of money

Statistics show that over the last five years the number of banknotes in circulation rose from 5–7% each year. Globally, there are now over 576 billion banknotes in circulation,¹ with an average lifespan ranging from under 12 months to several years. About 150 billion banknotes are printed every year to replace the worn notes taken out of circulation.

Today, banknotes are high-tech products with many security features distributed over well-defined security levels. Before a banknote enters circulation, it passes through numerous production steps and security tests. After the production of the banknote substrate and the integration of security elements into the paper, printing and inspection take place, followed by cutting and packing of the finished notes.

The lifespan of a banknote can be determined by laboratory tests. A circulation algorithm developed by G+D Currency Technology simulates the wear and tear on banknotes in circulation. The test reveals the impact of environmental influences on banknote “fitness.” This means, for example, that in subtropical climates there are different demands on banknote material and resilience than in cooler climates.

All these factors that influence the length of time that a banknote can stay in circulation are considered by central banks when they establish specifications for the design and production of new banknotes.

External and internal qualities

A banknote must meet various quality criteria to continue circulating. On the whole, the higher its value, the longer it can stay in circulation. While visual and tactile features play a role for the public, aspects of banknote automation also count, as these are required by banknote processing systems to assess and process notes.

In contrast to coins, paper money reacts strongly to external influences. Friction, moisture, and contact with liquids or chemicals put a strain on banknotes in the same way as extreme climatic conditions. However, in an increasingly automated business world, it is mainly machines that place demands on banknote quality.

While the public ensures the authenticity of their money by means of optically variable, tactile, and interactive features, automatic banknote verification remains essential to detect counterfeits quickly and securely, and remove them from circulation. Hidden features based on magnets or UV light, which can only be checked by specific sensors, ensure clear differentiation between authentic and counterfeit banknotes. To enable reliable checking, a particular signal intensity is required from these machine-readable features for the banknotes to remain in circulation.

Simulated circulation looks to the future

G+D Currency Technology has developed a test to simulate circulation so that central banks know when they need to exchange old banknotes with new ones. Using this process, G+D Currency Technology can quickly simulate the wear and tear that would arise over many years of use by humans and machines.

Felix Ehrtmann, Product Manager, Banknote Printing Division, G+D, explains the simulation:

Mr. Ehrtmann, can you give us more details about the testing process?

The banknotes are subjected to extreme conditions and undergo very thorough testing. This means that they age at an accelerated pace. After six hours of testing, the banknote shows the same amount of stress as if it had been in circulation for two years under high strain.

Can you explain the advantages of an accelerated circulation simulation for banknotes as opposed to a field trial?

This intensive testing enables us to preview a banknote’s behavior in circulation. So central banks know whether their future banknotes will meet their expectations and actually achieve the intended service lifetime. Individual, wear-resistant variants can be objectively compared using this type of test. Field trials with banknotes are a highly sensitive issue, as they involve public participation and are therefore much more complex to conduct and control. It takes several years until the final results are obtained in such an experiment.

Meeting the demand for banknotes requires reliable, cost-efficient advance planning to allow sufficient time between order and delivery. Quantity requirements for actual circulation and strategic stock levels are determined based on average “banknote consumption.” Especially for new currencies or banknote series, the quality of the notes and their sustainability in circulation can be tested beforehand, using our simulation.

What does the banknote look like after the test and what can you deduce from this?

During the simulation, the banknote is soiled, crumpled, scratched, and so on. It undergoes typical everyday situations – like being dropped into dirt or soil, or stuffed into a pocket – and this is then evident from its appearance. The tests can be adapted according to the substrate used in the banknote and adjusted to the requirements of the central bank.

How do you assess whether a banknote is fit or unfit?

Each central bank independently sets the relevant quality standards for its banknotes, and is therefore ultimately responsible for deciding when its money must be exchanged or renewed. The degree of automation of a cash cycle is also a decisive factor here. The more frequently banknotes are counted automatically in a cash center and further processed, the more rapidly damaged notes can be taken out of circulation.

Published: 10/05/2020