Global Banknote Market Report: 2013 Edition - Koncept Analytics

7/27/2019 Global Banknote Market Report: 2013 Edition - Koncept Analytics

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Global Banknote Market Report

-----------------------------------------------------2013

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Executive Summary

Banknote is a promissory note, issued by a bank, which is payable to the bearer on demand. It is also known as a bill or a note.According to the existing records, the paper money was first used way back in 7th Century in China. However, the first fully printedbanknote appeared in 1853. The banknotes are issued by the Central Bank of the respective countries. In addition to this, the CentralBank is also responsible for the destruction of the unfit banknotes for circulation. Traditionally, cotton paper was used inmanufacturing of the banknotes. However, due to high destruction rate of cotton banknotes, polyester substrates are now used inmanufacturing of banknotes called polymer banknotes. The banknote issuing authorities are focused to provide high standards ofquality and security, apart from ensuring adequate public confidence in the currency. The global banknote issuance is on a continualrise and the same is expected to grow further in the future.

In todays business arena, the growth of trade and commerce across all geographic nations can be attributed to the introduction ofbanknote. In the international market, the US dollar and Euro have a great significance. In recent past, a constant rise in thecirculation of the banknotes has been encountered in major economies across the globe. Thus, a constant pressure is built on thebanknote manufacturing agencies to maximize their production of banknotes.

A positive or a negative influence can be observed on the supply of money due to a number of macro and micro factors. Macrofactors include GDP, demography, and inflation; whereas the micro factors are user friendliness and safety, etc. One of the emergingtrends in the global banknote industry is the focus of the banknotes issuing authorities and other agencies involved in themanufacturing and circulation of banknotes, on technological innovations. However, over the past years, this industry is suffering froman increased rate of counterfeit currencies.

With the ability to manufacture high quality banknotes, ability to develop advance security features and with a constant focus onresearch and development; the banknote industry encounters an intense competitive environment. Apart from various small players,the major players of this industry include De La Rue plc, Giesecke & Devrient (G&D) Group, Oberthur, Crane Currency, and FortressPaper Ltd.

This report provides an analysis of the global banknote industry. It discusses major challenges faced by the industry along with majormarket tends and industry developments. The report also includes the competitive structure of the industry, regional analysis andprofiles of major players with a discussion of their key business strategies.

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Banknote is a promissory note, made by a bank, which is payable to the bearer on demand. It is alsoknown as a bill or a note.

There has been a steady increase in the issuance of the banknote worldwide; however, this growth may vary significantly betweendifferent countries. The global issuance of banknotes increased by . reaching . billion in 2012, as compared to . billion in theprevious year. For commercial providers of the banknote and their components, similar growth patterns are expected.

For the first quarter of fiscal 2013, the Currency Composition of Official Foreign Exchange Reserves (COFER) estimates that the

share of the US dollars value in official foreign exchange reserves is . Euros share in the reserve is .. followed by Pound Sterlingand Japanese Yen, with share of each during the cited period. Swiss Franc contributed about among others.

According to the statistics, there has been a gradual decline in the US dollars value share of foreign exchange reserves from . in2006 to . in 2012. It is noteworthy that the share of euro has remained almost consistent during the mentioned period. The mix offoreign exchange reserves held by the banks, governments, or financial institutions of various nations has evolved over a period of timewith a steady shift being observed from dollar denominated assets to assets denominsated in other currencies. However, in the opinionof the industry experts, it is likely that the US dollar will continue to remain the primary reserve currency over a long term.

Note: Market attractiveness is inverse of penetration. Low penetration means high attractiveness and vice-versa

Billion

Global Banknote Issuance (2009-2012)

US Dollar Euro Pound Sterling Japanese Yen

Currency Composition of Official Foreign Exchange Reserves (Q113)


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Printing of a banknote involves various different printing processes, such as Intaglio and Lithography andfor or each type of banknote specific printing inks are modeled..

In the fiscal 2012, US$100 had the maximum share of in theannual US currency production, immediately followed by US$1 witha share of . However, US$2 contributed a negligible share of .in the cited period.

The value of the banknotes in circulation in the European Unionhas increased manifold in the past. In 2012, the value of eurobanknotes in circulation placated down to US$.... billion (EUR...billion), compared to US$.... billion (EUR. billion) in 2011.However, the same marked a slight increase of in terms of localcurrency.

As of August 2013, approximately of the total banknotes issuedby the Eurosystem were EUR50 banknotes. EUR20 contributing ahealthy share of . immediately followed the EUR50 banknotesduring the aforementioned period. On the other hand, EUR500 and

EUR200, combined, had a negligible share of . as of August2013..

Euro Banknote Issuance by Volume Denomination-wise (August 2013)Circulation of Euro Banknotes by Value (2008-August 2013)

)

Annual US Currency Note Production by Volume Denomination-wise (2012)

US$B

illion

US$100 US$1 US$20 US$5

US$10 US$50 US$2

EUR20 EUR10 EUR5 EUR100 EUR500 & EUR200


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The major centers reining the banknote distribution include the Agency Operations Centers (AOCs).

Contributing a share of approximately GBP20 banknotes weremost widely issued during the fiscal 2013, followed by animpressive share of . made by GBP10 banknotes. However,GBP50 and GBP5 constituted almost same share of about . and11.6%, respectively, during the aforementioned period.

GBP10 note accounted for the largest share of about out of thetotal banknotes destructed in the fiscal 2013. GBP50, GBP20 andGBP5 had a share of approximately .., .., and .%respectively, during the cited period.

The Note Printing Australia Limited (NPA) produced nearly ..million banknotes in fiscal 2012, down by approximately .. or.million banknotes compared to fiscal 2011. However, the rate ofdecline in fiscal 2012 was significantly lower compared to the fall of. noted in fiscal 2010

GBP10 GBP50 GBP20 GBP5

Issuance of UK Banknotes by Volume Denomination-wise (2012/13)

Destruction of Banknote by Volume Denomination-wise (2012/13)

GBP10 GBP20 GBP5

Million

Australian Banknote Production Volume (2000-2012)


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Government, central banks, and other major financial institutions of various nations are responsible formanaging the currency reserves..

The value of Canadian banknotes in circulation has been showinga consistent growth since 2010. At the end of December 2012, thetotal value of banknotes in circulation . million (CAD$.... million),representing a marginal increase of .., compared to US$.....million (CAD.. million) banknotes in circulation during the

corresponding time period a year ago.

A steady growth in the demand of the Swiss banknotes has beenobserved in the past decade. Depicting an increase of ., thedemand for the Swiss banknote rose to . million banknotes in2012, compared to .. million banknotes in 2011.

Contributing maximum share of .., CHF100 banknotes wereobserved to be most extensively circulated, in 2012. FollowingCHF100 banknotes, CHF20 and CHF10 banknotes constituted animpressive share of . and ., respectively, during the cited

period

Swiss Banknotes in Circulation by Volume Denomination-wise (2012)Number of Swiss Banknotes in Circulation (2001-2012)

Canadian Banknotes in Circulation by Value (2010-2012)

M

illion

Million

CAD US$

CHF100 CHF20 CHF10 CHF50

CHF200 CHF1000 CHF500


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A number of technical advancements have been made in the banknote industry inthe recent past. Some of the major innovations include the following..

The dynamics of global banknote industry is governed by an important trend, namely, the global paper demand and capacity. The demandin the paper industry increased by reaching . billion notes equivalent in 2012, compared to . billion notes equivalent in 2011. Thecapacity of the paper industry was . billion in 2012. This recorded a marginal increase of about ., compared to ,,,, billion in the previousyear. However, the increase in the capacity of the paper industry was less than the increase in the demand; but still the capacity of thisindustry continues to be higher than the demand since 2010

Usage of applied features, such as special foils elements and stripes, has proved to be one of the important growth drivers in the globalbanknote industry. Inclusion of these features augmented the security aspect of banknotes against counterfeiting. In 2011/12, almost ,,,,billion banknotes included the above mentioned technologies. This is forecasted to grow at a CAGR of approximately ,,,, to reach ,,,, billionbanknotes by 2017/18.

In order to protect the banknotes against counterfeiting, security threads are an integral part in the manufacturing of the banknotes.Inclusion of thread is considered to be one of the most reliable features as it cannot be manufactured without special equipments. Thegrowth of the global banknote industry, to a great extent, can be attributed to the increased use of advance thread technology.Approximately ,,,, billion banknotes use the premium thread feature, which is forecasted to reach ,,,,, billion banknotes with a CAGR ofaround ,,,,, by 2017/18.


NotesEquivalentBilli

on

Demand Capacity

Global Paper Demand and Capacity (2009-2012)

BillionNotes

Banknotes with Foils and Stripes Features


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Banknote industry is characterized by the fierce competition, thus creating apersistence pricing pressure in the global market..

In order to establish a strong foothold in the market, the firms across the globe commit themselves to continuous improvement andaugmentation in product formulation in performance. Heavy investment in research and development has become a crucial element interms of defining the rivalry among the industry players. Apart from other factors, innovative security features, price, extendedcirculation fitness are the primary elixirs responsible for providing a tailwind to the market competition.

Competition is being intensified on account of the movement of government-owned players in the printing market. Compared to the

existing global leaders, the government-owned players have the advantage of facing lesser commercial constrains. Moreover, themarket dynamics can be significantly altered by the vertical expansion of the suppliers to the banknote manufacturing players.

De La Rue, with approximately market share in 2012, is the leading company in the global banknote print market. The other twoleading companies of the global banknote print market are Giesecke & Devrient (G&D) and Oberthur, with market share of about .and .., respectively, during the aforementioned period.

In 2012, the leading company of the global banknote substrate market is Arjo with . market share. G&D and De La Rue follow it withmarket shares of. and .,, respectively, during the cited period. The other key companies of this industry are Crane, Fabriano, andSecurency, among others


De La Rue G&D Oberthur Others

Global Banknote Print Market Share - By Companies (2012)

Arjo G&D De La Rue Crane

Fabriano Securency Others

Global Banknote Substrate Market Share - By Companies (2012)


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Table of Contents

1. Banknote Industry

1.1 Overview1.2 Banknote Lifecycle

1.2.1 Banknote Manufacturing Process

1.2.2 Banknote Printing, Packaging and WasteManagement1.2.3 Banknote Distribution Logistics Model

2. Banknote Industry Structure

2.1 Global Banknote Market-Share of Major Currencies- Global Banknote Issuance-Production Segmentation

2.2 Regional Analysis

2.2.1 The US-Production by Volume-Breakdown by Denomination

2.2.2 The European Union

-Circulation by Value-Circulation by Volume-Issuance by Volume-Breakdown by Denomination

2.2.3 The UK-Circulation by Value-Issuance by Value-Issuance by Volume

List of Charts & Tables

List of Charts

Banknote LifecycleBanknote Printing ProcessBanknote Distribution ModelCurrency Composition of Official Foreign Exchange Reserves MajorCurrencies (2006-2012)

Currency Composition of Official Foreign Exchange Reserves (Q113)Global Banknote Issuance (2009-2012)Global Banknote Production by SegmentAnnual US Currency Notes Production (1980-2012)Percentage Share in Annual US Currency Note Production by VolumeDenomination-wise (2012)Circulation of Euro Banknotes by Volume (2008-August 2013)Circulation of Euro Banknotes by Value (2008-August 2013)Number of Low Denomination Euro Banknotes in Circulation (2008-August2013)Number of High Denomination Euro Banknotes in Circulation (2008-August2013)Percentage Share of Euro Banknote Issuance by Volume Denomination-wise (August 2013)Percentage Share in Production of Banknotes by Volume Denomination-wise (2012/13)Percentage Share in Issuance of Banknotes by Volume Denomination-wise(2012/13)Percentage Share in Destruction of Banknote by Volume Denomination-wise (2012/13)Number of Counterfeit England Banknotes by Volume (2002-2012)

Value of Counterfeits England Banknotes (2002-2012)Australian Banknote Production Volume (2000-2012)Australian Banknote on Issue by Value (2004-2013)Banknotes in Circulation in Canada - by Volume (2007-2012)Canadian Banknotes in Circulation by Value (2010-2012)Number of Counterfeit Notes Detected per Million Notes in Circulation (2003-2012)


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Breakdown by Denomination-Destruction by Value/Volume-Counterfeit by Value/Volume

2.2.4 Australia-Production by Volume-Issuance by Value-Breakdown by Denomination

2.2.5. Canada-Circulation by Value-Circulation by Volume-Breakdown by Denomination-Counterfeit by Value/Volume

2.2.6 New Zealand-Circulation by Value-Breakdown by Denomination-Destruction & Counterfeit Notes

2.2.7 Switzerland-Circulation by Value-Circulation by Volume-Breakdown by Denomination-Counterfeit Notes

3. Market Dynamics

3.1 Industry Trends, Developments, and Growth Drivers

3.1.1 Growth in Global Paper Demand and Capacity3.1.2. Factors Affecting Growth in Money Supply3.1.3 Technological Innovation3.1.4 Improved Technology

3.2 Challenges

3.2.1 Counterfeiting

List of Charts

Face Value of Counterfeit Bank Notes Detected in Circulation in Canada(2003-2011)Counterfeit Banknotes Detected In New Zealand (2002-2012)Number of Swiss Banknotes in Circulation (2001-2012)Number of Swiss Banknotes in Circulation Denomination-wise (2012)Percentage Share of Swiss Banknotes in Circulation by Volume

Denomination-wise (2012)Denomination-Wise Life Span of Swiss BanknotesNumber of Counterfeit Swiss Banknotes (2004-2012)Global Paper Demand and Capacity (2009-2012)Banknotes with Foils and Stripes Features (2011/12 - 2017/18F)Banknotes with Premium Threads Feature (2011/12 - 2017/18F)Global Banknote Print Market Share - By Companies (2012)Global Banknote Substrate Market Share - By Companies (2012)De La Rue Revenues by Business Segments (2013)De La Rue Revenues and Net Income (2010-2013)G&Ds Revenues by Business Segments (2012)G&Ds Revenues and Net Income (2009-2012)Fortress Papers Revenues by Business Segments (2012)Fortress Papers Revenues and Net Income (2009-2012)

List of Tables

Overview of Technological Changes in Banknote IndustryAnnual US Currency Notes Production - Denomination-Wise (1980-2012)Euro Banknotes Issued By Eurosystem by Volume (2008-August 2013)Euro Banknote Production Volume Denomination-Wise (2002- August

2013)Euro Banknote Production Value Denomination-Wise (2002-2013)Stock of Notes in Circulation in the UK - by Value (2004-2013)Production of Bank of England Banknotes - by Volume (2003-2013)Issue of Bank of England Banknotes - by Volume (2003-2013)Issue of Bank of England Banknotes - by Value (2003-2013)Destruction of Bank of England Banknotes by Volume (2003-2013)


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4. Competitive Landscape-Competitive Overview-Market Share

5. Company Profiles

5.1 De La Rue Plc

5.1.1 Business Overview

5.1.2 Financial Overview5.1.3 Business Strategies-Rigorous R&D Activities-Evolving Process Improvement Plan

5.2 Geisecke & Devrient Group

5.2.1 Business Overview5.2.2 Financial Overview5.2.3 Business Strategies-Expansion through Acquisitions-Focus on Research & Development

5.3 Fortress Paper Ltd.

5.3.1 Business Overview5.3.2 Financial Overview5.3.3 Business Strategies-Focus on Dissolving Pulp Business-Termination of Specialty Paper Division

List of Tables

Destruction of Bank of England Banknotes by Value (2003-2013)Damaged or Mutilated Bank of England Note Claims Received (2010-2012)Value of England Counterfeit Banknotes by Denomination (2002-2012)Australian Banknote on Issue - by Denomination (June 2013)Denomination-wise Circulation of Canadian Banknotes - by Value (2011-2012)Approximate Life of a Bank Note in Canada

Banknotes in Circulation in New Zealand Denomination Wise (2000-2012)Destruction of Polymer Notes from July 2011 to June 2012 and Paper Notesin 1998Value of Swiss Banknotes in Circulation Denomination-Wise (2000-2012)Factors Affecting the Growth of Money SupplyFactors and Their Influence on Currency in CirculationMajor Players in Banknote Industry


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Global Banknote Market Report: 2013 Edition - Koncept Analytics

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