Upgraded banknotes: better security, a new design

Recent visitors arriving in South Africa were greeted with something new as soon as they changed or withdrew money: in May 2023, the South African Reserve Bank (SARB) introduced upgraded banknotes and coins into circulation. The new banknotes continued to feature the immediately recognizable image of the nation’s first democratically elected president, Nelson Mandela. However, in many other respects, the banknotes were completely refreshed.

As the accompanying booklet from SARB put it, “Our currency serves not only as a medium of exchange, but as a window into South Africa and its people, heritage, and culture.”¹ The booklet noted that a currency is perhaps second only to a nation’s flag in reflecting the pride and aspirations of that nation’s people. You could say that a banknote is a calling card a nation can use to show its development, and to show how it sees its future role.

Given this context, the introduction of a new series of banknotes is clearly a momentous occasion, one that requires planning and foresight. It isn’t just a matter of printing them and bringing them to market. Since banknotes are generally refreshed in intervals of six to eight years, nations and their central banks have time to think about what it is they want to bring to the attention of people using their banknotes. And it gives them time to prepare for the challenges to cash logistics that will inevitably follow on from such an introduction.

An upgrade vs. a demonetization

The SARB makes one thing very clear: it does not demonetize its currency, which is the withdrawal of a banknote or coin (or other means of exchange) from its use as legal tender. “All previously issued circulation banknotes and coins can be used as a means of trade together with the upgraded banknotes and coin. All circulation currency maintains its face value.”² What that means is that there is no time frame for the withdrawal of the older banknotes, no hard cutoff beyond which they will no longer be valid. This removes one huge pain point for the citizenry, for they don’t have to plan to change any cash they may have stockpiled, for whatever reason. 

New banknotes (and coins) are often upgraded to be in line with best practice internationally, both to combat counterfeiting and to stay abreast of technological developments. This is one vital reason to refresh, or even redesign, a currency: the security features that protect a currency from fraud need constant updating. A new substrate is required, for instance, or haptics that can’t be accommodated on existing notes, or even a security thread that wasn’t available earlier. The design benefits are just as real.

Adaptation is critical

Defining security features and design are very important first steps. But there are more things to keep in mind when introducing new banknotes. Let's take a deeper look into one aspect of successfully releasing a new series of banknotes: adapting existing cash processing systems and their sensors to recognize them.

Take the case of a newly redesigned note. It could have a new image, may be printed on a different substrate, and will almost certainly have new and/or different security features compared with the older series. As a general rule, a new series needs to have at least two features that differentiate it from the preceding series. If there is only one differentiating feature, there is a risk that a new note may be mistaken for a counterfeit of the older series.

Usually, one sensor will not scan all the features of the new note by itself. There are many sensors involved in identifying the different features of a banknote, each looking at a specific component. All of those sensors – UV, infrared, phosphoric, etc. – have to be updated so they can deal with the new features they will now be looking at, in addition to the features of the older banknote series, which is to be replaced. 

In a situation where new banknotes are issued, all the systems in the cycle need to be able to verify them – and to reject those that are unsuitable. Therefore, the introduction of a new series requires a software upgrade to be made on all existing machines in the cash cycle. It can also necessitate a hardware change, if the existing processing systems are not capable of identifying the newly introduced features, or are not accurate enough to precisely detect them. These updates can be challenging to implement at short notice, and moving too quickly is an issue.

The worldwide trend is toward higher levels of automation in processing banknotes within banknote processing equipment. There are hundreds, even thousands, of machines that need updating, from sorting machines in the Cash-in-Transit (CIT) facilities and other cash centers, to machines in commercial bank branches, smart safes, ATMs, vending or gaming machines, etc. 

Every machine has to be adapted. Otherwise, the newly issued banknotes are not detected correctly and will be rejected, leading to heavy interferences in the cash cycle.

Planning makes perfect

Central banks and their partners must plan the issuing of new banknotes on a detailed level, so that the implementation can take place smoothly and with minimal disruption to the cash cycle. This goes beyond just the design and printing of the banknotes, as described. Adaptation and updating of all machines within an increasingly automated cash cycle is also very important, so that new notes are recognized and accepted. Additionally, logistics partners, such as cash-in-transit companies (CITs), need to be prepared for the transport, handling, and eventual processing of the new notes. 

A rollout of a new banknote series, or a full redesign, is an opportunity for a complete refresh. It is fraught with challenges as well. However, with the huge amount of information and knowledge that already exists, many countries conduct such rollouts successfully, with careful planning and the proven use of adaptable technologies.

Published: 07/11/2023