The further developments in both the Securency and De La Rue investigations, plus the postponement of the new series US $100 bill on top of other recent banknote delays, bring the currency industry into sharp focus and worst of all, into the public arena.

In unprecedented developments in the continuing Securency investigation, joint raids by crime agencies in the UK, Spain, Australia and Malaysia took place in the first week of October.  At least eight people were arrested but later released on bail.

In the UK, the fact that the raids involved 80 officers of the Serious Fraud Office (SFO) and other agencies made the story highly newsworthy, especially as the UK’s own banknote printer, De La Rue, had also recently made headline news, again for all the wrong reasons. In this case the board of De La Rue announced the probable falsification of banknote paper quality certificates by ‘a number of De La Rue employees’ and called in the SFO to investigate.

Finally this month, the news that the US Federal Reserve has delayed the launch of the new design $100 came as a major surprise. The Fed revealed on October 1 that production problems involving ‘sporadic creasing’ of the paper during printing will mean a delay in the issue of the new revolutionary design note from the previously planned February 2011 date.

Unfortunately, this is not the first high profile banknote to run into technical problems recently. The first of the Euro series 2 banknotes, originally due for launch in January 2011, is now delayed until at least 2013. The original chosen designs for the important mid-denomination notes were found to be impossible to produce cost- effectively and the revised designs are still not announced.

And earlier this year the Swiss National Bank announced that its new series using Landqart’s new Durasafe substrate (three ply, paper-polymer-paper) and other innovative security features, would be delayed from this autumn until 2012 due to the need for more development and testing time.

While these delays are unrelated to one another, and there is no connection between the technical problems of the issuers on the one hand and the investigations at two of the major suppliers on the other, they do all nevertheless appear to be symptomatic of an industry that is pushing back the frontiers, both technically and commercially, and landing itself in trouble in the process.

This begs the question – is the banknote industry’s character changing too quickly –  from conservative to innovative – without the necessary due diligence?

Taking the three currencies first, the delays are undoubtedly due to technical innovations and banknote designs being pushed to or beyond their limits. The speed with which new designs and features are introduced, compared with even ten years ago, may be justified as a necessary response to the ingenuity of counterfeiters and the need to engage the public. But is the industry becoming too ambitious in hoping to achieve major innovations in too short a time-frame, or are the innovations simply impractical for high volume production?

Regarding the issue of commercial integrity, the investigations into Securency and De La Rue are still in progress, and so any comments at this stage are pure speculation. But they nevertheless raise important questions.

Could it be the case, for example, that the drive to demonstrate commercial success to investors is resulting in short-cuts being taken, whether in quality control procedures or in the routes to market?

Could it also be, regarding quality, that the demands by customers for higher specification products and shorter lead-times are becoming increasingly unrealistic and unachievable? And if so, shouldn’t the blame fall on the suppliers who fail (separately or jointly) to negotiate realistic and achievable standards.

In all cases, there is no substitute for proper R&D, testing and meaningful specifications – even if this impacts on the speed with which new designs can be introduced or products supplied. For the commercial sector, meanwhile, traditional routes to market such as the use of middle-men need to be questioned and strict standards set and maintained.

The integrity of the banknote industry is at stake; if central banks and the wider public lose confidence in their banknotes and suppliers, cashless payments will undoubtedly gain further momentum.