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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 printed banknote appeared in 1853. The banknotes are issued by the Central Bank of the respective countries. In addition to this, the Central Bank is also responsible for the destruction of the unfit banknotes for circulation. Traditionally, cotton paper was used in manufacturing of the banknotes. However, due to high destruction rate of cotton banknotes, polyester substrates are now used in manufacturing of banknotes called polymer banknotes. The banknote issuing authorities are focused to provide high standards of quality and security, apart from ensuring adequate public confidence in the currency. The global banknote issuance is on a continual rise 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 of banknote. In the international market, the US dollar and Euro have a great significance. In recent past, a constant rise in the circulation of the banknotes has been encountered in major economies across the globe. Thus, a constant pressure is built on the banknote 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. Macro factors include GDP, demography, and inflation; whereas the micro factors are user friendliness and safety, etc. One of the emerging trends in the global banknote industry is the focus of the banknotes issuing authorities and other agencies involved in the manufacturing and circulation of banknotes, on technological innovations. However, over the past years, this industry is suffering from an increased rate of counterfeit currencies. With the ability to manufacture high quality banknotes, ability to develop advance security features and with a constant focus on research 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 Fortress Paper Ltd. This report provides an analysis of the global banknote industry. It discusses major challenges faced by the industry along with major market tends and industry developments. The report also includes the competitive structure of the industry, regional analysis and profiles of major players with a discussion of their key business strategies.

Banknote is a promissory note, made by a bank, which is payable to the bearer on demand. It is also known as a bill or a note.
Global Banknote Issuance (2009-2012) Currency Composition of Official Foreign Exchange Reserves (Q113)

Billion

US Dollar

Euro

Pound Sterling

Japanese Yen

There has been a steady increase in the issuance of the banknote worldwide; however, this growth may vary significantly between different countries. The global issuance of banknotes increased by . reaching . billion in 2012, as compared to . billion in the previous 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 Sterling and 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 . in 2006 to . in 2012. It is noteworthy that the share of euro has remained almost consistent during the mentioned period. The mix of foreign exchange reserves held by the banks, governments, or financial institutions of various nations has evolved over a period of time with a steady shift being observed from dollar denominated assets to assets denominsated in other currencies. However, in the opinion of 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

Printing of a banknote involves various different printing processes, such as Intaglio and Lithography and for or each type of banknote specific printing inks are modeled..
Annual US Currency Note Production by Volume Denomination-wise (2012) In the fiscal 2012, US$100 had the maximum share of in the annual US currency production, immediately followed by US$1 with a share of . However, US$2 contributed a negligible share of . in the cited period.

The value of the banknotes in circulation in the European Union has increased manifold in the past. In 2012, the value of euro banknotes 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 local currency.
As of August 2013, approximately of the total banknotes issued by the Eurosystem were EUR50 banknotes. EUR20 contributing a healthy share of . immediately followed the EUR50 banknotes during the aforementioned period. On the other hand, EUR500 and EUR200, combined, had a negligible share of . as of August 2013.. Euro Banknote Issuance by Volume Denomination-wise (August 2013)

US$100 US$10

US$1 US$50

US$20 US$2

US$5

Circulation of Euro Banknotes by Value (2008-August 2013) )

US$ Billion

EUR20

EUR10

EUR5

EUR100

EUR500 & EUR200

The major centers reining the banknote distribution include the Agency Operations Centers (AOCs).
Issuance of UK Banknotes by Volume Denomination-wise (2012/13) Contributing a share of approximately GBP20 banknotes were most widely issued during the fiscal 2013, followed by an impressive share of . made by GBP10 banknotes. However, GBP50 and GBP5 constituted almost same share of about . and 11.6%, respectively, during the aforementioned period. GBP10 note accounted for the largest share of about out of the total banknotes destructed in the fiscal 2013. GBP50, GBP20 and GBP5 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 of decline in fiscal 2012 was significantly lower compared to the fall of . noted in fiscal 2010

GBP10

GBP20

GBP5

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

Australian Banknote Production Volume (2000-2012)

GBP10

GBP50

GBP20

GBP5

Million

Government, central banks, and other major financial institutions of various nations are responsible for managing the currency reserves..
Canadian Banknotes in Circulation by Value (2010-2012) The value of Canadian banknotes in circulation has been showing a consistent growth since 2010. At the end of December 2012, the total 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 been observed in the past decade. Depicting an increase of ., the demand for the Swiss banknote rose to . million banknotes in 2012, compared to .. million banknotes in 2011. Contributing maximum share of .., CHF100 banknotes were observed to be most extensively circulated, in 2012. Following CHF100 banknotes, CHF20 and CHF10 banknotes constituted an impressive share of . and ., respectively, during the cited period

Million

CAD

US$

Number of Swiss Banknotes in Circulation (2001-2012)

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

Million

CHF100 CHF200

CHF20 CHF1000

CHF10 CHF500

CHF50

A number of technical advancements have been made in the banknote industry in the recent past. Some of the major innovations include the following..
Global Paper Demand and Capacity (2009-2012) Banknotes with Foils and Stripes Features

Notes Equivalent Billion

Demand

Capacity

The dynamics of global banknote industry is governed by an important trend, namely, the global paper demand and capacity. The demand in the paper industry increased by reaching . billion notes equivalent in 2012, compared to . billion notes equivalent in 2011. The capacity of the paper industry was . billion in 2012. This recorded a marginal increase of about ., compared to ,,,, billion in the previous year. However, the increase in the capacity of the paper industry was less than the increase in the demand; but still the capacity of this industry 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 global banknote 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 ,,,, billion banknotes 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. The growth 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 of around ,,,,, by 2017/18.

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

Billion Notes

Banknote industry is characterized by the fierce competition, thus creating a persistence pricing pressure in the global market..
Global Banknote Print Market Share - By Companies (2012) Global Banknote Substrate Market Share - By Companies (2012)

Arjo Fabriano
De La Rue G&D Oberthur Others

G&D Securency

De La Rue Others

Crane

In order to establish a strong foothold in the market, the firms across the globe commit themselves to continuous improvement and augmentation in product formulation in performance. Heavy investment in research and development has become a crucial element in terms of defining the rivalry among the industry players. Apart from other factors, innovative security features, price, extended circulation 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, the market 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 two leading 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 with market shares of . and .,, respectively, during the cited period. The other key companies of this industry are Crane, Fabriano, and Securency, among others

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

Table of Contents
1. Banknote Industry 1.1 Overview 1.2 Banknote Lifecycle 1.2.1 Banknote Manufacturing Process 1.2.2 Banknote Printing, Packaging and Waste Management 1.2.3 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 Lifecycle Banknote Printing Process Banknote Distribution Model Currency Composition of Official Foreign Exchange Reserves Major Currencies (2006-2012) Currency Composition of Official Foreign Exchange Reserves (Q113) Global Banknote Issuance (2009-2012) Global Banknote Production by Segment Annual US Currency Notes Production (1980-2012) Percentage Share in Annual US Currency Note Production by Volume Denomination-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-August 2013) Number of High Denomination Euro Banknotes in Circulation (2008-August 2013) Percentage Share of Euro Banknote Issuance by Volume Denominationwise (August 2013) Percentage Share in Production of Banknotes by Volume Denominationwise (2012/13) Percentage Share in Issuance of Banknotes by Volume Denomination-wise (2012/13) Percentage Share in Destruction of Banknote by Volume Denominationwise (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 (20032012)

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

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 Banknotes Number 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)

3. Market Dynamics
3.1 Industry Trends, Developments, and Growth Drivers 3.1.1 Growth in Global Paper Demand and Capacity 3.1.2. Factors Affecting Growth in Money Supply 3.1.3 Technological Innovation 3.1.4 Improved Technology 3.2 Challenges 3.2.1 Counterfeiting

List of Tables Overview of Technological Changes in Banknote Industry Annual 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)

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 Overview 5.1.3 Business Strategies -Rigorous R&D Activities -Evolving Process Improvement Plan 5.2 Geisecke & Devrient Group 5.2.1 Business Overview 5.2.2 Financial Overview 5.2.3 Business Strategies -Expansion through Acquisitions -Focus on Research & Development 5.3 Fortress Paper Ltd. 5.3.1 Business Overview 5.3.2 Financial Overview 5.3.3 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 (20112012) 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 Notes in 1998 Value of Swiss Banknotes in Circulation Denomination-Wise (2000-2012) Factors Affecting the Growth of Money Supply Factors and Their Influence on Currency in Circulation Major Players in Banknote Industry

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