World Banknote Paper: A Review of Cotton, Polymer and Multi-Layer Substrates and their Manufacturers

This report is the first of its kind to offer a comprehensive analysis of the world banknote paper industry for investors, issuing authorities and public policy institutes. It focuses primarily on the private sector.

Report Scope:

Throughout this report, banknote paper is referred to by its technical term “substrate”. In the next pages, the global substrate business is analysed by profiling the key manufacturers and documenting how they compete in the market. This report also looks into recent high-profile media reports that have targeted two key players, De La Rue and Securency, and it examines the impact these events have had on the world banknote industry.

Next, the research will focus on the banknote product itself, clearing up the confusion surrounding the range of substrates and classifying these according to their respective functions. The report discusses the performance of each substrate based on the core requirements of durability and security, using publicly available information.

Finally, the report concludes by considering the importance of innovation as a means of securing future growth for the companies operating in the substrate space.

Market Overview:

The report's research has found that the banknote substrate industry is a viable long-term business. The arrival of new players in the last 20 years has had little impact on the big 3 papermakers, Giesecke + Devrient, De La Rue and ArjoWiggins, who remain at the forefront of the industry as a result of investments in acquisition, capacity, R & D and the launch of innovative products. Based on the considerable material available publicly, the report finds that their strong position is enhanced through active marketing, participation in global forums, and a world-wide presence in the world banknote market through networks of subsidiaries and technical assistance programs.

The report estimates that out of 165 000 tons produced annually by both private and public sector banknote mills, the banknote paper business sells 79 000 tons on the commercial market, with an estimated value of USD 1.3 billion. Additional revenues of around USD 500m are generated from the sale of related banknote products and services, such as other security features, technologies and projects. The “big 3” occupy a 57% market share of global sales by tonnage.

Product Overview:

The report notes that a confusing mix of products typify the banknote substrate industry. To clear this up, the report analyzed and classified banknote substrates into five groups: standard, durable and extra-durable cotton, polymer and multi-layer substrates.

Within these groups, the market for durable cotton substrates has shown the strongest growth, having taken a 9.4% market share since its launch 10 years ago. The polymer substrate's market share has peaked lower than 5% since it first appeared in 1988, and continues to see its position limited by standard and durable cotton substrates with more secure integrated features. New “Multi-Layer” substrates are likely to further erode polymer's share, as well as that of standard cotton paper.

Keywords : Banknote, substrate, cotton banknotes, polymer banknotes, banknote durability, currency study, banknote study, currency report, banknote report SHOW LESS READ MORE >

1. Abstract

2. Key Findings

3. Introduction

4. Background: The banknote substrate and its function
4.1 History of the banknote substrate
4.2 Function of the banknote substrate
4.2.1 Protection against counterfeiting
4.2.2 Durability
4.2.3 Conclusions

5. Manufacturers Profiles and Performance of Key Players
5.1 Private and semi-private sector companies
5.1.1 De La Rue PLC
5.1.2 Giesecke & Devrient GMBH
5.1.3 ArjoWiggins Security SAS
5.1.4 Securency International PTY Limited
5.1.5 Landqart
5.1.6 Crane Currency

5.2 Other private / semi-private companies
5.2.1 Cartiere Miliani Fabriano SpA
5.2.2 Radece Papir
5.2.3 Pura Barutama

5.3 Public sector manufacturers
5.3.1 China Banknote Printing and Minting Corporation (CBPMC)
5.3.2 Korean Minting and Security Printing Corporation (Komsco)
5.3.3 Banque de France
5.3.4 Fabrica Nacional de Moneda y Timbre
5.3.5 Goznak

5.4 Section conclusions

6. The Market: Competition and Distortions
6.1 The global substrate market
6.2 Market share of different substrates
6.3 Market distortions
6.4 Section conclusions

7. Industry Scandals
7.1 De La Rue scandal
7.2 Securency scandal
7.3 Section conclusions

8. The Product: Classification and Performance Review
8.1 Traditional cotton substrates
8.2 Durable cotton substrates
8.3 Extra-durable mixed fibre substrates
8.4 Polymer substrates
8.5 “Multi Layer” substrates
8.6 Performance review and manufacturer's claims
8.6.1 Distribution of substrates
8.6.2 Counterfeiting
8.7 Section Conclusions
8.7.1 Durability
8.7.2 Security

9. The Future: Industry Innovations
9.1 Propensity to innovate: four key players
9.2 Production of patents
9.3 Profitability and innovation
9.4 Section conclusions

10. Conclusions

Annexes
Annex 1 - Summary of substrate classifications
Annex 2 – Detailed information of patent innovation
Annex 3 – Sources, bibliography and selected readings
Annex 4 – Glossary of key terms

List Of Figures & Tables
Figure 1 – De La Rue: Banknote and banknote paper (volumes 2006 – 2010(est))
Figure 2 – De La Rue: Share price (2008 – March 2011)
Figure 3 – Sequana: Share price (2009 – March 2011)
Figure 4 – Securency Group Structure (2011)
Figure 5 – Candover dividends (1996 – 2009)
Figure 6 – Fortress: Share Price (2008 – March 2011)
Figure 7 – Global banknote production volume, relative (2010)
Figure 8 – Cash Transactions, selected countries (2008)
Figure 9 – Commercial substrate market share, by product (2011)
Figure 10 – Volume of Durable Paper versus Polymer (tons) (2007)
Figure 11 – Levels of counterfeiting, selected countries (2004 – 2008)
Figure 12 – New Zealand counterfeits detected: Paper vs Polymer (1997 – 2006)
Figure 13 - Distribution of denominations on polymer notes (2010)
Figure 14 – Average patent production (2001 – 2009)
Figure 15 – EBIT vs number of patents (2005 – 2009)
Table 1 – Average lifespan of US bills
Table 2 – De La Rue Financial performance (2001 – 2009)
Table 3 – Giesecke & Devrient financial performance (2001 – 2009)
Table 4 – Sequana financial performance (2001 – 2010)
Table 5 – Securency International Pte Ltd financial performance (2001 – 2009)
Table 6 – Counterfeit banknotes in Australia (2009 – 2010)

Competitive Landscape:

The report's research on competitive practices shows significant distortions. This is most apparent in the case of Securency, a company part-owned by the Australian central bank. The company has made use of Australian government research funding, loans, trade and central banking. It is also feasible that the company has access to diplomatic connections to promote their monopoly polymer substrate, and could have bypassed standard tendering processes to which private competitors are bound.

The report also finds that media attention has been focused on two of the key players: UK's De La Rue (whose share price has tumbled on news of quality problems in its paper mills), and Securency (who is the subject of an international police investigation for alleged corruption by its network of agents).

The publisher hypothesizes that this last event will have an impact on the future of polymer substrate, whereas a combination of the company being for sale, lack of innovative features and competitive threats from innovative multi-layer products could further hold back polymer adoption by the market.

Product Performance:

The report compares the performance of the different substrates (based on their manufacturer's claims), and found that those that expounded greater durability generally complied to advertised claims, particularly the durable cotton substrates as well as polymer which performs very well as a long-life product. When comparing the claims of greater security, research found that the polymer substrate has not fully proven its case, despite the priority given to this function by its manufacturer.

Innovations:

Finally, in a comprehensive analysis of innovation in four key industry players, two companies showed the most consistency: Germany's Giesecke & Devrient led its competitors by investing the most in R&D while generating the largest number of patents, and France's ArjoWiggins produced the most consistent results, with a steady stream of innovations correlated to its financial performance. De La Rue's investment in R&D has significantly dropped, while Securency was unable to translate its increase in R&D funding into new patentable features for its polymer substrate.

- De La Rue PLC
- Giesecke & Devrient GMBH
- ArjoWiggins Security SAS
- Securency International PTY Limited
- Landqart
- Crane Currency
- Cartiere Miliani Fabriano SpA
- Radece Papir
- Pura Barutama
- China Banknote Printing and Minting Corporation (CBPMC)
- Korean Minting and Security Printing Corporation (Komsco)
- Banque de France
- Fabrica Nacional de Moneda y Timbre
- Goznak
- Bank of Canada
- Reserve Bank of India
- Dupont Company
- Royal Enschedé
- Bundesdrückerei
- Orell Fuessli
- Canadian Banknote Company
- Note Printing Australia

Products Mentioned:

- Diamone
- Platinum
- Synthec
- Diamone Composite
- Duranote
- Guardian
- Durasafe
- Hybrid
- Optiks
- Varifeye
- Long Life
- Tyvek