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Polymer banknotes: On the other side

Polymer notes will save the Bank of England billions, but at what cost to ATM operators and others in the cash-handling industry?

January 29, 2014

Within the ATM industry, polymer banknotes have long been the subject of controversy and concern — starting with the huge cost of retrofitting an entire cash-handling system to accept them.

The Bank of England recently announced that it will change its banknotes from paper to plastic. This prompted us to take a look at the pros and cons of polymer from the point of view of two British payments professionals who will soon be making way for the new money.

Following is an open letter to the Bank of England from Brendan Doyle, CEO of U.K.-based Cash Management Solutions, who takes issue with the costs a change to polymer will impose on the cash provisioning sector.

A separate commentary discusses the benefits to the public — including cost savings.

An open letter to the Bank of England:

I am writing to put some questions to you about the process the Bank of England has followed regarding the introduction of polymer notes and to tell you that I would like to see an independent review of this decision.

I had understood that the bank would engage all stakeholders in the process and that a key element of the decision-making process was to be an analysis of the costs of the changeover to the private sector.

I was, therefore, very surprised to see that a decision was announced within days of the Christmas holiday with no reference to the cost-benefit analysis having been completed. Indeed, no mention was made of any of the concerns I raised during the consultation process.

Given the position we are now in, I have asked that the matter be raised with HM Treasury as I believe that an independent review of the decision is necessary.

My concerns are as follows:

1. As the Bank of England stands to gain financially from the changeover, the consultation process should have been conducted independently with a remit to undertake a cost benefit analysis for the whole economy.

2. Given that we are still not aware of the costs of introduction, I am concerned that the consultation may not have been thorough and transparent.

3. As it is, the decision may involve a significant transfer of costs from the public sector to the private sector.

4. That this decision may be consistent with a number of decisions by the Bank of England, over a long period of time, that have increased barriers to entry in the cash processing industry, resulting in higher long-term costs for consumers and businesses.

5. That a number of businesses, especially smaller ones, associated with cash provision, may suffer disproportionately from this decision.

6. Conversely, a number of businesses, especially larger ones, may gain financial and commercial benefits from this decision at the expense of smaller rivals.

It would be good to understand the bank's position on the above points, as I would like to know whether or not they have been considered and the importance given to each in the process.

Brendan Doyle

CEO, Cash Management Solutions

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