Rising Demand from Developing Economies, Oberthur Fiduciaire Confident in the Future of Global Banknote Market

Since the private players provide sophisticated anti-counterfeiting technologies like watermarks and security strips, most countries around the world have outsourced banknote printing to private companies. French worldwide company Oberthur Fiduciaire, which stands in the first row of global security printers, shows strong confidence in its future, especially in emerging countries.

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Analysts predict a steady growth in the demand for new bank currency notes with adequate modern security features. Smithers Pira’s data that come out of the research on security print for 2015 – ‘The Future of Global Security Printing Market to 2020’, states that the security banknote printing market is anticipated to show a steady increase of 5.9% across the study period.

While this projected growth in less than what happened in the first half of the decade, this is yet a significant growth rate and represents opportunities for a global market that was presently valued at $20.5 billion (€18.7 billion) in 2010 and is will reach $36.6 billion in 2020.

Even in the face of the ever increasing use of digitalized money, industry experts are of the view that banknotes would still remain resilient and would continue to grow by 4–5% per annum. Sounding optimistic about the future of bank notes, Thomas Savare, CEO of Oberthur Fiduciaire, explains: “we actually just completed a thorough statistical analysis in developed countries. Interestingly enough, we have found that usage of banknotes has consistently increased over the last fifteen years, between 50% and 100%. While I can’t see future, the volume of printed banknotes is growing faster than GDPs (…) Cash is still king and growing in developed economies, and even faster in emerging economies.”

That’s why the company permanently increases the production process with new features and technologies on a continuous basis. “Our sector is expected to experience sustained growth in the coming years due to structural factors. First of all, globalization goes along with a desire to reaffirm one’s country singularity. Yet, banknotes traditionally embody strong symbols and values, just as national anthems and flags do”, Thomas Savare says.

But this alone can’t explain the healthy situation of security printing industry. Despite the fact, as indicated in the market research report, that analysts forecast a slightly declining rate of growth in the industry in terms of volume, the segment is benefitting in terms of enhanced demands of durable banknotes and premium security features which is fetching higher per unit price.

Security printing is an industrial activity with very high technology content. While paper money has been around for centuries, today’s banknotes have almost nothing in common with those of yesteryear nor those which circulated several years ago,” considers Thomas Savare, that reportedly printed more than 5 million new and highly securitized bank notes for a number of central banks last year. Indeed, “there are a lot of technologies used to make the paper itself, the threads, the fibers, the printing techniques… It’s a very thorough combination of different security features. And our business is evolving constantly because we have to introduce new security features on an ongoing basis”, Savare adds.

Thomas Savare’s words were lent credence in the statement of Mark Stevenson of the International Banknote Designers Association. Despite variations in market dynamics along the banknote supply chain since 2012, banknote design activity has experienced constant growth and the trend will continue. Since design acts as the gateway for technology and substrate suppliers, many industry players, along with central banks, have targeted design as the key to both introducing new technology and getting the best value for money”, Stevenson says.

The International Banknote Designers Association also states that there would be new challenges for the banknote design market in the coming years even as there are forecasts for a strong growth in segment. According to Thomas Savare, design is a strategic point considering the future of paper money. He explains: “Requirements are very unique – from the holograms designed for banknotes to the threads specifically designed to be incorporated in the banknote paper.  The entire supply chain is dedicated to this industry and that’s a large part of the security of a banknote.

Growing demand for security aspects is notably justified by the cost of counterfeit money for states around the world. For example, a Sophic Capital Report indicates that, between 2005 and the first half of 2015, the Bank of England had to remove £81 million of fake notes from circulation. The Bank of England itself admits that around 243,000 counterfeit banknotes were taken out of circulation just last year, with a face value of £5 million. “Therefore, although it’s a relatively small subsection of the market, companies working in the area of anti-counterfeit currency have a growth market ahead of themreports Investing News website, that considers the business as “a robust niche market that’s growing rapidly in response to concerns about counterfeit fiat currency”.

Developing economies are another growth area for security printers. The Smithers Pira’s report states that Asia represented almost 50% of the global market in 2015 for security printing including banknotes. Developing economies in other parts of Africa and Latin America are also pitted to be the biggest clients for bank note producing companies.

On this matter, emerging countries represent a real opportunity for Oberthur Fiduciaire to grow, as Thomas Savare points out. The company having recently created a joint-venture out of Bulgaria for banknote production, Savare proudly declares: “We operate in both developed countries and emerging countries. It’s been like this since the beginning. We are now addressing the market from our two plants in France and Bulgaria. We have the exact same standards in terms of quality, security, knowhow and capabilities from those two plants. The clients who choose Oberthur Fiduciaire as a supplier know that they will get the exact same quality whether banknotes are printed in France or in Bulgaria.”

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