Still reeling from the news that the UK retail industry is expected to cut up to 900,000 jobs in the next decade in an attempt to combat increased competition, stale profits and shrinking margins; the UK’s retailers will face another big challenge this year – polymer banknotes. The new notes, the first of which are due to be introduced in September, look set to cause a headache for retailers, banks and food service businesses alike as they scramble to ensure that their cash processing equipment is ready to deal with the new “plastic” notes.
In just under 6 month’s time, the Bank of England will begin the roll out of the first of its new polymer banknotes with the introduction of the new £5 note featuring Winston Churchill. The new banknote, made from the innovative polymer substrate will differ from its predecessor in many ways.
Not only will the new note be a different size, shape, and weight; but the texture of the £5 polymer note is so markedly different from the cotton notes, that it will likely be incompatible with a large proportion of cash processing equipment throughout the UK. This has the potential to cause both an operational and financial headache for retailers.
Research company CMS Payments intelligence, has predicted that the roll out of polymer banknotes will cost the UK around £230m. This includes the costs expected to upgrade ATMs, self-service tills, cash counters, vending machines, and a whole host of other cash processing equipment. For retailers already struggling to combat static profits and shrinking margins, the move towards Polymer only adds to their already packed agenda for 2016.
The Bank of England however insists that it is doing everything in its power to ensure that the impact of the new notes is kept to a minimum. Steering committees are already working with both banks and retailers to ensure that the transition to the new notes is as smooth as possible.
Further, businesses across the UK are encouraged to see the disruption caused by the polymer introduction as a short -term inconvenience, in exchange for a long-term benefit. The enhanced security features possible on the new polymer substrate mean that the new notes will be harder to forge. And for UK businesses that loose an average of £7m per year due to counterfeit notes, the new more secure banknotes will come as a welcome relief.
Some criticise the move by the Bank of England, arguing that a renewed focus on cash for businesses is counter-intuitive following the advances in payment technology. But Andy Mattes, Chief Executive Officer at ATM Manufacturer Diebold disagrees. He explains that the argument that cash is dead is “greatly exaggerated”. This is a sentiment that seems to besupported by a number of other sources, from the Bank of England, to Payments UK.
For consumers however, the change comes as a welcome one. The new, more durable notes are less prone to tearing or soiling, a problem that leads to around 23,000 applications for reimbursement, totalling £11m per year.
The majority of businesses will need to take steps to address the upgrades needed now, ahead of the introduction in September. This will mean a full audit of any cash handling, cash processing, or cash management equipment. What will need to be upgraded? What will need to be replaced? What impact will this have on procedures?
This review will also give businesses an opportunity to revisit and update tired and outdated cash management processes and bring in new innovative cash management technology.
Importantly though with the next note in the series (the £10 note) set to follow in 2017; businesses should ensure that any new technology or process is future-proof, and take into account not just the remainder of the polymer notes in the series, but the introduction of the new £1 coin set to be introduced next year.
Those who need further information on the new notes are encouraged to utilize the resources that the Bank of England will make available in the Summer. In the meantime, Tellermate have put together an Ebook to help retailers understand the impact of polymer banknotes on your business and the steps that need to be taken to prepare.