De La Rue - making money-v2 PDF

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Making Money ~Case Study~ Jas Ahmad & Adriana Unguras ©2017

Introduction When the Bank of England introduced the £5 ‘Churchill’ banknote in September 2016 it joined 25 other central banks to issue “plastic” or polymer banknotes. Like many currencies in the world, British banknotes are made by De La Rue, a 200-year old company based in Basingstoke, Hampshire. Ten awards in the past 10 years indicate De La Rue’s status as an industry leader in banknote design and production. During this period the firm has worked on about 150 currencies across the world as designer, printer or banknote paper supplier. Increasingly, De La Rue is producing polymer banknotes as countries invest in durability and in security features which make counterfeiting more difficult. Polymer-based notes combine enhanced technical security features in more elaborate and vibrant designs than previously possible in cotton-paper based banknotes. Polymer banknotes also last longer – by a factor of two to three times – thus saving significant costs to central banks. In 1988 Australia was the first country to introduce polymer notes. Since then 25 countries have adopted the more expensive but also more hard-wearing banknotes.1 The UK introduced its second polymer note, the £10 ‘Jane Austen’, in September 2017 and plans to introduce a new £20 polymer note in 2020. In addition to technology and design, De La Rue has gained the confidence of governments and central banks around the world for its ability to deliver in hostile environments and in fraught conditions. In 2011, after its brutal war of secession with Sudan, South Sudan became the world’s newest country and turned to De La Rue to make its banknotes. Similarly, it also designed and printed post-Qaddafi banknotes for Libya and in post-Saddam Iraq, in 2004, De La Rue secretly flew in planeloads of new Iraqi dinars into the country. 2 "In terms of secure printing and making physical documents difficult to counterfeit, we are the biggest and best in the world," claims CEO Martin Sutherland.3

Brief Company Background De La Rue Plc traces its history to 1813 when founder Thomas de la Rue started publishing Le Miroir Politique, a newspaper, in Guernsey. Thomas moved to London in 1821 and 1 Giles, C. & Sharman, A. FT.com; London, UK. 18 Dec 2013. 2 Sharman, A. FT.com; London Apr 28, 2014. 3 Bow, M. Evening Standard; London, UK. 18 Aug 2017: 40.

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established himself “as a printer, stationer and fancy goods manufacturer”. In 1831 he was “awarded a Royal Letters Patent from King William IV for the manufacture playing cards” 4 using the new ‘typographical method’ and so began De La Rue’s journey as a specialist printer. De La Rue’s “colorful and eventful history” 5 – fuelled by innovation and intrigue – has seen it play a leading role in the development of new technologies and new industries. From the first perforated fiscal stamp to automated cash handling hardware and software, secure printing products such as passports, and product authentication, De La Rue has influenced banking, payments and transactions, tax collection, retailing and quality assurance amongst others. Its customers include governments, central and commercial banks, and firms who buy products such as banknote paper, security and authentication labels. Today, De La Rue operates in three core business areas: Cash Supply Chain, Citizen Identity and Product Authentication. For more than 200 years, the company has developed the expertise and experience to support governments and commercial firms across the globe facilitate financial transactions and assure “the secure free movement of goods and people”.6 When Martin Sutherland was appointed CEO in 2014 De La Rue was in some disarray. There had been several profit warnings, sales were suffering and the share price was in a downward dive. The company was being run by its Chairman after the sudden departure of its then CEO Tim Cobbold to head another company. Its previous CEO (James Hussey) had also resigned suddenly, leaving the company entangled in paper quality problems at one of its UK production plants which was affecting its contract with the Reserve Bank of India – “a customer that accounted for 30 per cent of currency printing revenues” 7 – as well as an unwelcome takeover bid from its French rival Oberthur. Sutherland began a close examination of the company’s activities upon joining, including once working a full shift with employees in a printing plant, which resulted in a plan to cut costs and invest in new product development. His simple conclusion was that the company had failed to invest in developing new products which addressed its customers’ agenda. The “gentle course correction” which followed means that De La Rue is now focussing on bringing to market swiftly products suitable for a world of digital authentication. "Our focus has really been to do that. We're starting to see the fruits of our labour." 8

Source: Company website, Annual Report 2016 4 http://www.delarue.com/about-us/our-history 5 http://www.fundinguniverse.com/company-histories/de-la-rue-plc-history/ 6 http://www.delarue.com/about-us/who-we-are 7 Sharman, A. FT.com; London Feb 25, 2014. 8 Bow, M. Evening Standard; London, UK. 18 Aug 2017: 40.

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Technology It is technology versus technology in the battle against home-based forgery. Newly available home technologies have made forgery at home easier – at least potentially. Technology also plays the lead part in De La Rue’s strategy to remain relevant in the world of e-commerce, mobile payments and cryptocurrencies. The payments industry is undergoing significant changes in different parts of the world. In some societies, contactless and mobile payment systems, such as “wallets”, are gaining consumer confidence while in others the pressures to reduce costs and counter forgery are increasingly important. Some central banks consider banknotes an expression of national identity and demand vivid colours and eye-catching designs. Figure 2: The banknote printing process

Source: De La Rue (2017a)

Banknotes are still central to the world economy as about 85% of the global transactions are still made with cash.9 Banknotes are, therefore, a prime target for counterfeiters and fraudsters who have ever more sophisticated technology at their disposal. As a result, governments require notes that are not only beautifully designed but that are also highly technically advanced to protect against counterfeit. De La Rue fulfils these requirements by designing, integrating, manufacturing and delivering banknotes, banknote paper, polymer and security features to its customers around the world, certifying that their currency is secure against the threat of counterfeit and fraud. A key technical development is the introduction of polymer substrates. Substrates are the thin film upon which upon which banknotes are printed. Polymer notes are about two and a 9 De La Rue (2017a) ‘An Integrated Banknote Solution’

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half times longer lasting than uncoated paper notes and they are harder to counterfeit because as many as 30 safety features can be embedded in them, some of them kept secret from the public. For example, a sample polymer note produced by De La Rue has the image of a heron dipping its beak into water. The water ripples are transparent and overlaid with two colourful fish, made using a technique called “blind embossing”. The resulting image is easily recognisable by the public, assists bank cashiers to make a secondary check and is machine readable. Figure 3: The polymer printing process

Source: De La Rue ( 2017a)

Polymer substrate is made from sheets of Bopp – biaxially oriented polypropylene – which are coated with a white layer upon which the design can be printed. Small windows of clear polymer can be included with elaborate security features such as colour-changing writing or holographic images. Polymer substrate structure has six layers: bi-axial oriented polypropylene (BOPP) material, design, gravure cylinder, white opacity ink, antistatic ink, Knowhow and IP on structure and manufacturing.

Design It is De La Rue’s design team which converts these highly technical banknotes into visually appealing and culturally appropriate “national monuments”.10 The design team is led by Creative Director Julian Payne whose 22-strong designer team develops banknotes, passports and other documents from the ‘drawing board’ to the print-ready stage. The work starts with an initial meeting with representatives of the client and usually takes 18 months to two years to complete. In some circumstances, however, the work can be done much faster. "It can be really quick when economic necessity can drive very fast decisions, for example if there's inflation, deflation, fraud or regime change," Payne states, “The biggest variable is generally how quickly a central bank wants to move.” 10 Sharman, A. (2014) ‘The bold designs that deter banknote forgers‘

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His team worked on the new UK £5 ‘Churchill’ note which was announced in 2013 and unveiled in 2016. The note has many of the design features now required in modern banknotes. It is printed on polymer which is much stronger than cotton or linen-backed paper; it has a security window with the Queen embossed, a colour rainbow that is visible only at an angle and the £ symbol which changes from purple to green.

Figure 4: Kuwait banknote series

Source: delarue.com

There is plentiful talent and inspiration in his team. The requirements of the job, however, are complex and changing artistic and scientific skills are required to maintain superior standards. There is, Payne notes, “a big gap between a cool piece of graphic art and a secure product".11

References Bow, M. (2017) ‘When cutting-edge tech and combating global forgery is a licence to print money’, Evening Standard; London (UK) 18 Aug 2017: 40. Cookson, C. (2013) ‘New money: polymer pound notes’, FT.com; London, Sep 10, 2013. De La Rue (2017) ‘An Integrated Banknote Solution’, De La Rue. Available at: http://www.delarue.com/markets-and-solutions/cash-supply-chain/an-integrated-banknotesolution (Accessed: 5 April 2017). Giles, C. & Sharman, A., (2013) ‘UK to introduce wipe-clean banknotes’, FT.com; London, 18 Dec, 2013 Hurley, J. (2017) ‘The creative director of De La Rue tells James Hurley how a team of designers gets projects from the drawing board to the high street,’ The Times; London (UK) 27 Apr 2017: 51. Sharman, A. (2014) ‘De La Rue chief Tim Cobbold quits to join UBM’, FT.com; London, Apr 28, 2014. Sharman, A. (2014) ‘The bold designs that deter banknote forgers‘, FT.com; London, Apr 28, 2014. 11 Hurley, J. (2017) ‘The creative director of De La Rue tells James Hurley how a team of designers gets projects from the drawing board to the high street.’

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