Protect Retail Operations from Counterfeits and Currency Redesigns

10/4/2017

According to a recent report from the Federal Reserve, cash transactions still make up the single largest share (32%) of consumer transaction activity. That same report found cash to be the most-used payment instrument in six of nine merchant categories.(1) And while digital retailing is an essential part of a successful omnichannel commerce strategy, 90% of all retail sales are transacted in physical stores, where cash obviously plays an important role.(2)

These numbers reinforce the fact that cash handling remains an integral part of retail operations, and protecting businesses against the threat of counterfeit currency should remain a top priority. Regardless of whether a retailer identifies a bill as counterfeit or not, the organization that ends up with a fake is still saddled with the loss—and a potential fine. Since the majority of counterfeits are $50s and $100s, this can quickly cause harm to a store’s bottom line.

Trying to Stay One Step Ahead

The U.S. Secret Service has acknowledged that “the threat of counterfeit currency to the United States’ financial system has grown in recent years,” (3) citing advances in scanning and printing technology and other nations’ adoption of the U.S. dollar as legal tender. The U.S. Treasury has responded by implementing a currency-redesign plan aimed at making bills more challenging to replicate with the addition of complex safety features, thus reducing the costs of counterfeits to both businesses and taxpayers.

In April 2016, the Treasury announced plans to introduce new $20, $10 and $5 notes. Initial concepts are underway, and designs are scheduled to be unveiled in 2020, with protection “against counterfeiting through effective and sophisticated production” noted as a top priority.(4) 

Keeping Currency Processing Equipment Current

While the Treasury diligently works to develop the new currency designs, an important step that should not be overlooked is the work being done concurrently by banknote equipment manufacturers to ensure that machines are ready to accept the new note designs once they enter circulation.

In addition to recognizing and denominating the notes, equipment must also authenticate them based on built-in, high-tech machine readable security features.

A few select vendors are actively involved in the redesign process, working alongside central banks to leverage their expertise in sensor and authentication technologies into the designs of currency processing equipment. This represents a major investment of time and money on the supplier side to assist in the research, development, and testing of these technology-laden currencies—plus the subsequent development and testing of equipment to process the new currencies.

With large-scale currency changes on the horizon, retailers can take steps now to protect their operations from the risks of both counterfeit currency and operational disturbances. Purchasing equipment that incorporates the latest advanced counterfeit detection hardware and software and accommodates future currency upgrades will contribute to a seamless experience for customers and free retailers from the worry of how changes associated with currency redesigns will affect business operations.

Sources:

1 Federal Reserve Bank of San Francisco, “The State of Cash: Preliminary Findings from the 2015 Diary of Consumer Payment Choice” http://www.frbsf.org/cash/publications/fed-notes/2016/november/state-of-cash-2015-diary-consumer-payment-choice

2 A.T. Kearney Inc., “On Solid Ground: Brick-and-Mortar Is the Foundation of Omnichannel Retailing” https://www.atkearney.com/documents/10192/4683364/On+Solid+Ground.pdf/f96d82ce-e40c-450d-97bb-884b017f4cd7

3U.S. Secret Service, “2015 Annual Report” https://www.secretservice.gov/data/press/reports/USSS_FY2015AR.pdf

4Treasury Department, “An Open Letter from Secretary Lew:” https://medium.com/@USTreasury/an-open-letter-from-secretary-lew-672cfd591d02#.f9g90zdvm

-Tim Grabacki, product management director, Cummins Allison

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