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How to counter 'Counterfeit'? Stop printing notes!

I have been reading the news items on the volume of counterfeit notes surfacing in India. It looks like more than half a billion dollars worth of fake rupees are circulating around the country. The banking industry must be quaking in their boots on the volume of menace they carry. It is distressing to note the thumb sucking responses and comments - terror trail, economic terrrorism, police cases.....

What is the most telling response to fake notes? Electronic money. Central Banks and regulators will be better off devoting their energies to promoting Electronic money (debit cards, credit cards, mobile payments, ACH, etc) rather than investing in technology to make currency notes more 'secure'. Till date, I don't think any country has managed to come up with a fool-proof currency note that can't be replicated.

But how does one bite the bullet here? While digital money is growing, it is still nowhere close to consumer spending on cash. In India, a considerable amount of spend occurs in cash to stay outside the tax net.

If you ask me, at least one country should take the lead and simply stop printing currency notes for mass circulation. Invest that money to strengthen the electronic payments network. Shock treatment may work well where medication hasn't so far! It may sound quite a drastic step; but may be the only way to get people to using electronic currencies.

It only takes one bold move to complete the revolution.

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Comments: (1)

A Finextra member
A Finextra member 28 August, 2008, 03:29Be the first to give this comment the thumbs up 0 likes

They would need a revolution in the payments space because doing so would devalue the currency by whatever amount the processors charged for a transaction. Not everyone would be happy with 97c or less in the dollar.

It might see the local currency ignored as citizens and merchants switch to a 'safe' cash currency like the US dollar.

Privacy issues would need to be addressed or we'd all be like the U.K. where every facet of your shopping is so closely examined that it is only a matter of time until your wife, upon forgetting to buy tampons, will get a call from the supermarket reminding her that her period is due (and immediatley notifying the babywear dept, maternity hospitals, childcare centre, pre-school, school, college and university, if she tell's them she's pregnant, or the menopause drug maker if thats the reason).

I'm surprised even the Brits put up with it, but they're obviously not the people they once were because they seem happy to cop it every way with every single item of their personal information for sale, and their biometric data coming soon.

In Australia the leading supermarket and department store chains are going into the card business purely to get that data. They think it's more valuable than the banking (thanks to the compliant Brits undermining everyone's privacy).

It probably is, in the short term. Just make sure you don't buy cigarettes for a friend in case they sell the data to your life insurance company. Where does it end?

All that info will be equally valuable to criminals, hackers and fraudsters and we would be naive to think that they aren't going to have it and there will probably be plenty of other willing black market buyers.

It's enough to make me want to go back to cash, what am I saying? I'm a cash only man after more than one holiday was ruined due to hackers (and in one case axe hackers) taking out the local Eftpos network. You get better service and better pricing anyway. The only time I use a card now is in an emergency and maybe when I',m staying at the Intercontinental. Even then I often use someone else's card (with their knowledge). It's easier, that way only one of us have to talk to some idiot in a credit card call centre sicked on to us by their best (bad) guess software which can't keep up with our jet-setting lifestyle.

I haven't bought anything on the net for at least a couple of years and that was a book from New York (Man From Snowy River 1st edition with dust jacket thank you! Very fine condition after over 100 years in a display case in a bar believe it or not) and I paid for that with the change brought home in my pocket from my last U.S. trip. I was happy to risk sending the cash. In that instance I could have sent cash 10 times and lost it nine and I still would have had a bargain.

Is it easier to spot fake currency or fake cards? Australian made currency was for a while ahead of the game but I hear that even that is being successfully counterfeited and it's expensive to make. If I remember correctly Indian currency is easier to reproduce and stays in circulation longer so the counterfeiters just need to put the freshly printed fake stuff in a washing machine with a few pairs of old sneakers and a handfull of dirt and it appears authentic. People are more suspicious of nice fresh notes unless they get them from the bank themselves.

I think it'll be quite a while before e-currency replaces cash altogether and I can even see cards losing ground to cash in the short term. In light of recent (and future) security revelations, it would appear that cash is really safer and you get more bang for your buck, something people may care a little about when the '[insert chosen prefix]-ession' hits. {Rec or depr?}.

A few billion in counterfeit currency stimulates the economy without costing the government a cent up front or effecting the value of the currency if no-one notices.

I believe there is more card fraud than counterfeiting going on now that the North Koreans are out the bulk cash printing business but a near neighbour may have taken over and India isn't exactly on their buddy list.

Perhaps considering the current state of e-security and the economy, now might not be the best time to play that e-money card.