The Wider Community Benefits Of Polymer Notes John Colditz and John Taylor Note Issue Department Paper presented at the International Currency Conference April 1998

Many of you I know will have attended previous 'Currency Conferences', and so:

• you will know that polymer notes are more secure;
• you will know that polymer notes are more durable;
• you will know that polymer notes stay much cleaner;
• you will know that worn out polymer notes are easily recycled; and
• you will know that polymer notes are more cost effective for the issuing authority.

However, the benefits of polymer notes go beyond those just listed, which, while they ultimately benefit the community, would be viewed in the first instance as benefits that accrue to the central bank or note issuer. What you may not know so well is the subject of our presentation today which is intended to draw your attention to benefits that accrue directly to the community. Specifically, I want to talk about improvements in machine processing which result from a switch from paper to polymer substrate, and the flow-on benefits to the wider community.

Polymer note technology is no longer an experiment. Polymer notes have been in circulation in Australia for almost 6 years, and the technology is now well and truly proven. Prior to our first polymer notes being released, there was significant liaison with manufacturers of note processing and note accepting equipment and contact continued with extensive pre-release testing programs before the issue of each denomination of the new note series. As time passed, it appeared that the ease with which each note was introduced increased and even before the last note was introduced we were getting consistent feedback that, in most instances, polymer notes were processing better in most machines than their paper counterparts.

We have recently confirmed these positive results through direct contact with many major market participants. Manufacturers and users of automatic teller machines (ATMs), note counting equipment and note validators were contacted about their experiences with polymer notes. We had established already from our own experience that high speed note sorters operated more efficiently when processing polymer as compared to paper notes.

Some of the broad processing benefits of polymer relative to paper notes revealed by this work include:

the characteristics of polymer notes result in a significantly higher proportion of notes in circulation being suitable for efficient machine processing;

• the characteristics of polymer notes result in less dirt and grime being attracted to polymer notes and subsequently deposited on belt paths and less ink being abraded from the note itself and deposited on belt paths and sensors;
• polymer notes feed, count and process more easily in ATMs;
• current ATM models require no adjustments to process polymer notes;
• machine jams and stoppages have declined and, for many, service call-outs and maintenance requirements have fallen;
• for many, productivity has risen and costs have fallen.

Further details will be presented at the Conference.

I am reminded of comments made by Keith Richbell of the Abbey National Bank in the UK, in 1996, when he presented a paper to this conference entitled "Restructuring Cash Processing in the UK". Keith foreshadowed changes to cash processing in the UK, which would involve commercial banks dealing with cash shortages and surplus notes between themselves without recourse to the Bank of England. The implication was that notes would circulate for longer, and that this would occur at a time when there was a growing need for larger volumes of ATM fit notes (for which banks could charge a higher price). Mr Richbell was calling for a more durable note which would efficiently process through ATMs and note sorting equipment throughout its life.

The Good News Story

Part of the "Good News Story" is that with polymer notes we have just such a note. Our research confirms that Australia's polymer notes by their nature, and with their increased durability, process more efficiently through a variety of machines bringing productivity gains, reduced costs and, as a result, benefits to the community which go way beyond the achievement of the Reserve Bank's direct 'note issuer' objectives.

Polymer notes are not going to go away and cannot continue to be ignored. We welcome most heartily New Zealand as the newest member of our club of happy note issuers enjoying the enormous benefits of polymer note technology.