Cotton banknotes stay ahead of plastic counterparts in cash circulation

Promoted as more modern, safer and, would you believe it, more eco-friendly, plastic banknotes have been trying to take over the currency market. So far, a few countries have jumped the fence and ordered their currency batches in the plastic version, with mixed reception from the public. It seems that traditional banknotes, made of cotton, hold a few arguments in their favor which will not be so easy to debunk.

Newer hardly means better

Not all innovation is relevant, necessary, or useful. Indeed, the few companies who sell polymer banknotes are not lying when they claim that their plastic banknotes are more modern: cotton-paper banknotes have been around for centuries, whereas the first plastic banknotes were distributed in Australia in 1992. Most banknotes have used, until now, a specific type of paper, based on cotton, has served for all banknotes, regardless of which currency. Since those times, a few other countries have timidly transferred to plastic banknotes, either partially or totally. But the users of said currency, the respective populations, have only very timidly adhered to the concept, for many reasons. Some of them are developed below, but one of the most unvoiced yet potent reasons may simply be the attachment to the national symbol and have to do with disrupting deep-seated habits. Of all the adults who were suddenly handed plastic banknotes, many may have felt the twinge of nostalgia, remembering their first pocket money, sorry that the physical feeling was on the way out. Or is it? BBC Rema Rahman covered the tepid reception of plastic banknotes in the UK, in 2011, and the many factors behind it. She writes “Another factor could the conservatism of central bankers. “Central banks are very conservative institutions,” Stane Straus says. People making the decision to convert to polymer – partially or fully – are taking a personal risk. Many central banks are simply waiting until others convert and then they will follow.” Therefore, until now, plastic banknotes haven’t really taken off.

Environmental issues are disrupting the deployment plan

Part of the problem comes from unfortunate timing. In an age when environmental awareness has taken the front stage, replacing traditional cotton-based banknotes with plastic equivalents can be seen as off-beat. Initially, the plastic banknotes were heralded as environmental evolutions, based on the fact that they resist wear and tear better than their paper ancestors – which is true but somewhat beside the point. A banknote is not only made of paper or plastic: it has numerous security features printed onto it, with extremely specific ink – more on that below. And while the plastic banknote may indeed last longer than paper, the ink features on it will not. It was initially hoped, in the engineering, that the higher carbon emissions linked to producing plastic instead of paper would be offset by the fact that the notes would simply last longer, thus spreading the carbon footprint over a longer period. A 2013 memo from the Bank of England hopefully wrote: “Polymer banknotes last at least 2.5 times longer than paper banknotes and this is the main factor leading to their stronger environmental performance. This is mainly due to the reduced environmental burdens associated with raw material production and processing of new banknotes to replace unfit ones. “

But, this environmental balance has still to be proven, and plastic banknotes may emit more carbon upon production and yet not improve life cycles. And, the eco-problems don’t end there. Once the banknote has reached the end of its life cycle – and is collected by banks to be withdrawn and replaced – it once again performs poorly. Paper is extremely easy to recycle, but plastic banknotes have yet to find a second purpose. 

Technical issues getting in the way

To the push-back from users, must be added the increased technical difficulty linked to printing on plastic. Paper is a very printing-friendly base material, and paper printing can be considered a mature technology. Printing on plastic, however, proves far trickier, due mostly to decreased absorption, especially if extremely specific inks are involved. When printing on regular paper, many different types of ink can be used. Security features printed onto banknotes, however, comply with very strict standards and will naturally prefer a printer-friendly base material. Plastic simply doesn’t absorb ink, as well as cotton paper, does. For this reason, while the plastic sheet may indeed outlast its paper cousin, the security features printed on it may not. This will cause the plastic banknote to be retired earlier than initially planned for, making the initial over cost no longer acceptable or relevant. Indeed, the ECB reviewed the case and dropped the idea of plastic euros, as reported by Cristina Matamoros: “The ECB told Euronews that after studying the matter, they decided to stick to paper banknotes for security and cost aspects. “It was decided that cotton paper is the best material for euro banknotes,” an ECB spokesperson said in an email to Euronews.” As polymer banknotes are not completely dead yet, we may yet see new central banks turn to this novelty. Nigeria has been said to consider opting for plastic banknotes to stimulate its economy and help it recover from coronavirus. If it does, it will stumble upon yet another technical problem. Temperatures in Nigeria often exceed 100 degrees, and plastic banknotes don’t fare well in this type of climate.

The plastic banknote still has a long way to go in proving its relevance to central banks, giving less of a hard time to producers or winning the hearts and minds of consumers. It’s not dead, per se, as several countries still use it for part of their currency, but the least that can be said is that it hasn’t taken off as well as it could. Therefore, if you’re a collector, this may be the time to grab and store a few Australian dollars or Dominican pesos – as the next batches may come back to good old paper.