Does the Future Belong to Plastic Cash?
Mark Robertshaw is walking around a printing plant in Wigton, England, about 10 miles from the Scottish border, with a wad of cash. He lays out a Mexican 50, a Canadian 20, an Australian 5, and a fiver from the U.K. Unlike euros or U.S. dollars, these notes have a slight sheen and the feel of wax paper. That’s because they entered the 10-story plant as popcorn-size kernels of plastic.
Robertshaw is the chief executive officer of Innovia, the world’s leading maker of plastic money. If that sounds like faint praise—such bills account for only 3 percent of the world’s money—there’s plenty of reason to believe Innovia will become a bigger force in the $1.3 billion bank note industry. The £5 note makes the U.K. the latest of about 30 countries to start shifting toward plastic cash, a more durable and secure alternative to the cotton in your Andrew Jacksons. Of the 50 billion-plus plastic notes now in circulation, Innovia made more than 99 percent. “There is a received wisdom out there that cash is disappearing,” Robertshaw says. “Statistics don’t support that.”
The number of bank notes in circulation grows by about 3 percent a year. Making the bills is a lot more technical than it was under the Tang or Song dynasties more than a millennium ago, or in the 13th century, when explorer Marco Polo first brought Asia’s cotton money back to Europe. (Before that, currencies tended toward metals, shells, and salt.) Materials have to resist rips and stains, as well as incorporate ever-more-complex security measures to discourage forgers.
“There’s a lot of science behind bank notes that people probably don’t appreciate is there,” says Victoria Cleland, the chief cashier at the Bank of England. Before awarding Innovia the contract for the U.K.’s plastic pounds, her team spent more than five years studying potential materials for the new notes, examining whether, for example, holograms verifying a bill’s authenticity could be easily incorporated into a particular polymer. The U.K. put the first of 440 million plastic £5 notes into circulation in September; it will introduce a £10 bill in June made by Innovia. The company is bidding on the contract for the £20 note to follow.
Innovia has come a long way from its start making cellophane in the 1930s and a midcentury expansion into cigarette packaging and shampoo bottle labels, which the company still makes. It added bank notes to its portfolio in the 1980s, when Australia’s central bank was looking for bills that could better withstand the heat Down Under. Now they account for about one-third of the company’s £380 million ($468 million) in annual revenue, Robertshaw says.
Plastic bills cost a few cents each to make, about twice the cost of paper, but they last five times as long, according to Robertshaw. “They can go through your washing machine,” he says. “You can dip them in your wine.” YouTube videos show the new £5 notes being used as a needle to play a vinyl record; others have shown that fire will melt them. “We don’t claim they are indestructible,” Robertshaw says.
On the 10th floor of the sweltering Wigton factory, Innovia’s team starts the assembly process by melting small beads of plastic in a 482F furnace. By blowing in air, the machinery creates a bubble large enough to fit a couple of people inside, stretching out the plastic into a thin film. Rollers then smooth and stretch the material to 65 times its original length. Holograms and other security features are printed onto the plastic along with special inks, and the plastic is cut into 60-bill sheets. Innovia then sends the sheets to bank note maker De La Rue, which adds the bills’ designs (the Queen, Winston Churchill).
Innovia’s plastic carries a unique chemical signature, so a keychain-size scanner used by retailers and banks can identify if a bill is real. While no hard currency is fake-proof, the goal is to make forgery tough enough to be unappealing, says De La Rue designer Steve Pond. Canada’s government says since it moved to plastic money, it’s seen counterfeiting drop from 400 bills per million to 1 per million.
Cleland says the Bank of England chose Innovia after trying to counterfeit the bills. “It was much more difficult in terms of the raw material needed, the printing machinery you would need, and the time that it took,” she says. Since the U.K. introduced the bill, several central banks have reached out to her to learn more about the production process.
The priority should be eliminating some cash entirely, says Kenneth Rogoff, former chief economist for the World Bank. In a new book, The Curse of Cash, Rogoff argues that central banks should remove large-denomination bills from the system: They’re mainly used for crime and tax avoidance. “A significant share of the demand for cash comes from the underground economy and is almost completely because of its anonymity,” he says.
Rogoff predicts that future cash registers will include scanners that log purchases with plastic bills, blending elements of digital and physical currencies. Robertshaw says the technology exists to track their travel. That’s the kind of technology that may help combat crime, but it would surely unsettle privacy advocates.
The Bank of England is among those studying ways to introduce a government-backed digital currency, like a bitcoin issued by the central bank. For now, Cleland says, “it’s a long way off. Polymer is in the street much earlier.”
The bottom line: The U.K. has joined the ranks of countries with plastic currency—good news for Innovia, which controls 99 percent of the market.
(Updated to correct De La Rue designer's name in seventh paragraph.)