When Are New Banknote Security Features Ready for Use?

The Increasing Need for Validation and Test

Staying ahead of counterfeiters requires constant innovation in banknote security, with new features being launched every year. But it’s easy to get over-excited when seeing a new sample for the first time. For central banks, manufacturability is crucial, and it is essential to ask suppliers the fundamental question: Is this new feature ready for production and public use – or are we at risk of quality failures, delivery delays, and erosion of public trust?

There is increasing complexity and cost in upgrading and creating new banknotes with new security features, especially features used by the public. Without circulation experience, and little if any integration and design experience to draw from, central banks and banknote printers must be cautious.

“I’ve spent the entirety of my career in operations,” says Jon Ngin, Vice President Operations at Crane Currency. “Safeguarding product deliveries and quality when new features are introduced is growing in importance. As complexity increases, so do the unknown risks. If new features are not tested and validated before production, defects in quality and workmanship can become apparent only when it’s too late.”

Jon Ngin is Vice President of Operations for Crane Currency. He oversees the operations of Crane’s five secure production facilities in the United States, Sweden, and Malta. His role covers the key aspects of modern banknote production, from cutting-edge security feature production to paper production and printing.

Practical Advice on Mitigating Risk

With his vast operations and manufacturing experience, Jon Ngin knows if a feature is ready for prime time. Delays or poor-quality production can stress the entire currency program, prompting questions about how specifications were set, features selected and operational quality assured.

The stakes can be high when issuing new banknote designs and upgrading banknotes. The average age of a banknote design is 10 years – and printing represents about 50% of the cost of a banknote. A hasty choice can see immediate costs in quality and deliveries, while a researched approach can pay for itself over the life of the series.

Jon Ngin has led workshops on how to mitigate risks associated with new banknote features. When asked how central banks can know when a new feature is “good to go,” he offers practical advice.

“Don’t launch new features too quickly,” he says. “Avoid getting cornered by conducting internal and external durability and quality testing. Prioritize seeing the features in action on a house note. To reduce operational risk, ensure structured supplier quality audits and review suppliers’ performance from safety, quality, delivery, and cost standpoints.”

Holistic Approach to the Manufacturing Value Chain

Today, banknotes are no longer just ‘ink on paper’ but an assemblage of different technologies, produced by different processes. New optically variable features primarily drive changes in how banknotes look, how they are authenticated, and especially how they are made.

The biggest risk for central banks and operations comes with introducing new security features. The quality of the finished banknote depends on how the security technology fits within the entire manufacturing value chain, including design integration, paper making, and printing, often involving several suppliers.

“Supplier quality audits are therefore helpful in many ways,” says Jon Ngin. “You get a feel for the suppliers’ manufacturing core competencies, the security of their operations, their capacity, and lastly, their financial security.”

Paper in production with embedded threads

Security Thread Manufacturing and Down-Time Risk

Taking the modern security thread as an example, smooth operation of a papermill depends on these features being easily inserted into paper. Security threads should not break during insertion. The paper mills rely on security threads that can be easily formed into paper and allow for proper oscillation to avoid waviness and mis-cutting.

The print works expect strong, durable paper that is flat with all required security features in place. If security threads are too thick or stiff it can cause wavy paper, poor printing and cutting, even a shortening of banknote life in circulation.

“My advice to central banks approached with offers for new security features, especially Level 1 features, is to ask, ‘How will this new feature perform in production and in banknotes in circulation? What evidence can you show us? What work have you done?’” says Jon Ngin.

House Notes: A Win-Win Solution

This is one reason for the increasing interest in house notes, which can be very valuable for central banks wanting to mitigate risks by conducting systematic evaluation and quality testing of a new security feature.

“At Crane Currency, we have used house notes since 2003 to train our designers and operations on new features,” says Jon Ngin. “They are expensive to produce because they are actual banknotes in every way, but they are invaluable tools for mitigating risk. They allow us to update our Quality Management Systems, determine tolerances, set efficiency benchmarks, identify and close gaps in our operations, and, not least, provide central banks with actual notes for durability testing.”

Many central banks also create house notes, and Crane Currency has through the years partnered with many central banks, e.g., from countries including Mexico, Kazakhstan, Indonesia, and South Korea to assist them produce their own house notes to better evaluate security features.

The Jalisco House note. A collaboration between Banco de México, Crane Currency and CCL Secure.

Lowering Risk and Maximizing Value

Understanding the relationship between risk, cost, and value addition is crucial. As value builds within operations, the cost of a defect increases through the manufacturing steps.

If a defect is detected at the security feature level and is prevented from propagating further into the value chain, the loss may be less than 15% of the banknote’s cost. However, if a feature fails during printing, 100% of the cost might be borne by the currency program, including failure to deliver banknotes to the central bank. Worse still, is if the feature fails in circulation. In that case 100% of the cost is potentially borne by the central bank’s reputation.