CMSpi is concerned that a decision on the introduction of polymer banknotes in the United Kingdom might be made without a suitable understanding of the costs and benefits of the change.

We would like to see a framework which analyses and assesses these before deciding whether or not the fixed costs and operational challenges associated with polymer banknotes will lead to a net increase in the cost of cash acceptance and provide risks to the cash cycle. 

We can understand why polymer banknotes are an attractive proposition for the Bank of England. Firstly, production savings of £100m over 10 years could represent a key boost to HMT at a time where all public sector costs are being heavily scrutinised. Also, the level of cash counterfeiting should fall from the high current level of around £13.5m per annum to take us in-line with our international peer group. 

Reconfiguration and replacement

However, it is widely acknowledged that widespread hardware and software reconfiguration or replacement will be required across the cash processing and ATM industries, which will leave a heavy burden of change on manufacturers, and we fear that these costs might exceed the note printing and counterfeit benefits. Additionally, many retailers – including CMSpi clients - who have on-site cash office technology solutions will experience direct cost increases as their expensive machinery will either require alteration or be rendered completely redundant. 

Overseas evidence and impact to ATMs

Evidence from Canada suggests that there are also potentially damaging implementation issues which can compromise accessibility to cash. These include the clogging up of ATMs, cash supply shortages as note cassettes cannot accept both paper and plastic notes, difficulties of counting plastic notes quickly and correctly, the redundancy of existing ink-boxes and the inability to fold notes properly.  

We fear that not enough resources are being dedicated to discovering whether there is a real saving to the wider economy. All of the above considerations are understandably very difficult to quantify and we think that the Bank of England may require an independent study to assess the impact of polymer introduction on all stakeholders, including merchants. If this is conducted early in the planning process, it will enable all parties to fully understand their liabilities and make the necessary preparations to ensure that the process is conducted as efficiently as possible. 

Transfer of cost

We also believe that unless HMT make the necessary commitments to compensate manufacturers for their cost increases, all that will really occur is a transfer of costs from the public sector to the private sector. Unless this happens, the cost increases to private sector manufacturers will be transferred indirectly to consumers via retailers in the form of higher prices. At a time where consumer confidence is still not entirely restored following an economic downturn that has lasted for over 6 years, this is not a desirable outcome.

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