June 23, 2011 – The inaugural Coin Conference, held from May 31 to June 1, 2011, was the first event of its kind to focus on the challenges and issues faced by circulating coins in the context of countries’ currency management strategies.
Keynote speaker Justine Greening, MP and Economic Secretary to the UK Treasury (left ) with Richard Haycock, Coin Conference Chairman (centre) and Mike Davis, Chairman of the Royal Mint, honorary sponsors of the Coin Conference (right).
“There is still a key role for cash, even in the age of electronic payments”. So said Economic Secretary to the UK Treasury, Justine Greening, in her keynote address to the Coin Conference to an international audience comprising 190 delegates from 110 organisations and 40 countries.
The inaugural Coin Conference was the first event of its kind to focus on the challenges and issues faced by circulating coins in the context of countries’ currency management strategies. The audience comprised representatives from central banks and issuing authorities, mints and suppliers of material and equipment for the production, handling, processing, verification, distribution and reclamation of coins.
In her speech, Ms Greening welcomed the delegates to London, giving a history of coinage in the UK and of the Royal Mint, which is the responsibility of the Treasury. She also spoke about the importance of coins as part of the UK’s payments structure in terms of facilitating commerce, along with the need to imbue the public with confidence in these while providing them in the most efficient and cost-effective manner.
Her speech touched upon two of the key themes of the conference – namely cost impact and reduction, and optimising coins in circulation – with a number of presentations on these themes. Also covered in detail were security and authentication, features and materials, meeting demand and engaging the public.
Starting off the proceedings were a series of presentations covering the coin landscape. These included one on cash versus cashless from Paul Blond of Australia, who juxtaposed data on the continuing rise of cash in circulation in all the major economies over the past decade with a cautionary note on the potential of new forms of cashless payment – in particular contactless cards, m-payments and the new Google wallet – to displace cash transactions at the low value end of the payments spectrum.
While the threat of cashless payment is one major concern to the industry, another is the note/coin boundary, particularly for mid-value denominations. Methodologies for calculating where this boundary should ‘sit’ were presented by Jonathan Ward of Secura Monde International, while Mark Shaw of the Royal Mint demonstrated the potential for greater efficiencies by moving this boundary to accommodate more high value coins in place of notes.
Critical to the note/coin boundary debate is the ability of higher value coins to offer security on a level comparable to low denomination banknotes. This has to date been an enduring problem for the coin industry, but several of the presentations demonstrated new features and technologies that offer the opportunity for considerably improved overt and covert security for the public and cash handlers alike.
These included one from Maarten Brouwer of the Royal Dutch Mint, who provided examples of new features that owe much to classical banknote security technology such as intaglio printing and microtext, which can now be incorporated into coins to create optically variable and semi-covert features.
Günther Waadt of the Bavarian State Mint, and also chair of the Mint Directors Conference’s Sub-Group on Technical Features, gave an overview of traditional security features before detailing the next generation under development. These include flip-flop coins (with different colours on either side), complex shapes for bimetallic coins, coding, fingerprinting and tri-coloured coins.
Tal Gilat of InkSure covered the topic of taggants – forensic markers that provide unique covert identification – and how these could provide a security solution in future for coins, either incorporated within the alloy or added in the form of a special coating.
Thomas Bilas of blank specialist Saxonia EuroCin, now part of the Mint of Finland, gave an overview of different coinage materials with particular reference to electroplated version and the security and cost attributes of these. He also took the opportunity to introduce HealthGuardCoin, a new blank with anti-bacterial properties. While paper substrates with such properties are already available on the market for banknotes, this is the first time an anti-bacterial coin material been developed.
The development of new security features was one welcomed by Jeff Carr of ScanCoin, who spoke about the evolution of the modern cash centre, where typically 8-10 million coins a day are processed. He provided a “wish-list”, from the perspective of a manufacturer of the systems that process these coins, of design features and coin parameters that facilitate positive discrimination across all denominations and maximise throughput. He also expressed concern that the growing trend for more complex security features carries the risk that the resulting intellectual property costs would adversely affect costs downstream.
Another key aspect of security is the authentication of coins in circulation to prevent counterfeits filtering through the system. This is being addressed in the Eurozone through the EU’s introduction next year of its “Regulation Concerning Authentication of Euro Coins and Handling of Euro Coins Unfit for Circulation”. Michael Muller of the European Anti Fraud Office (OLAF) described how this will provide a common method for verifying that euro coins are both authentic and fit for re-circulation, requiring banks and other payment service providers to check for both against agreed standards and using processing equipment that is capable of detecting counterfeits.
He was followed by Rainer Elm of Deutsche Bundesbank, which for several years has operated its own standards for detecting counterfeits to facilitate the exchange of coins directly between firms operating coin-accepting machines, credit institutions and parties requiring coins. His presentation covered the organisation of coin sorting and authentication in Germany, and the impact the new EU Regulation will have on these arrangements.
A final presentation on the topic of security came from Leon Dieters of Kusters Engineering, who described how in-house coin crushing equipment can substantially reduce the costs of decommissioning coins by rendering them worthless, and hence much cheaper to transport to scrap and recycling facilities. The presentation provide a case study of the euro changeover in 2002 and the logistical challenges that were overcome in taking all the Dutch legacy coins out of circulation and selling the metal, which resulted in a benefit to the Financial Ministry of 60-70 million Euro.
Another major thread of discussion and debate was public acceptance of coins and, critically, making sure that they are where they are needed, when they are needed.
Andrew Wallace of the UK Payments Council provided a case study on coin circulation in the UK, where the Royal Mint’s role is limited to the provision of new coins and destruction of old coins, with all stages of circulation and recycling in between being devolved to the commercial sector. In particular, he explained how the stakeholders work together with the Mint and the Treasury to forecast and then meet public demand.
In complete contrast was the presentation from Lenard Cheung of the Royal Canadian Mint, the role of which is unique in that its mandate dictates not only the production of coins, but also the management of the overall circulation coin distribution system. Duties include forecasting demand, engaging in the strategic rebalancing of coin inventories, monitoring market activity, recirculating coins and the recovery of alloys from withdrawn coins.
Pedro Tordilla of the Central Bank of the Philippines explained how the bank is frequently criticised for not providing enough low denomination coins, despite the fact that ratio of coins in circulation per head of population is higher in the country than almost anywhere else in the world. The problem, he said, is not insufficient supply, but poor recirculation, with coins not getting to where they are needed. Hence the country’s implementation of a National Coin Recirculation Program to ‘flush’ coins out of storage and back into circulation.
Ewout van Haeften of the De Nederlandsche Bank (DNB) spoke about the currency changeover in the three Caribbean islands of Bonaire, Saba and St Eustatius, which have recently swapped the Netherland Antilles Guilder for the dollar. All three are part of the Netherlands and hence the payment system in is the responsibility of the DNB. He described how, working with the US Federal Reserve, the changeover was successfully implemented with particular respect to the coins.
Ger Koole, from the VU University of Amsterdam, looked at circulation from another angle – namely patterns of circulation. This is normally difficult to measure since coins, unlike banknotes, have no form of unique identifier. Euro coins, however, all bear the image of the country that issued them, and these images make it possible to track the spread of the coins beyond their borders. From the research done thus far on Dutch coins, he and his colleagues have devised a model to predict future dissemination of euro coins, which he explained in his presentation.
In the context of public demand and acceptance, Brian Lang covered the topic of good coins/bad coins in terms of optimum designs, sizes, weights and denominational structure for public use and acceptance, as well as cost-effectiveness. He provided example of both good and bad, concluding that the series of new coins in 2006, for which he was responsible during his tenure at the Reserve Bank of New Zealand, is an example of the former!
Taking a different tack, Fergus Feeney of the Royal Mint described the Olympic 2012 coin programme. While commemorative coins are well-recognized as a means of engaging the public and generating revenues for mints, even better in terms of their broader public appeal are circulating coins that also commemorate special events. The Royal Mint’s “London 2012 Sports Collection” will see the issue of 29 different 50 pence circulating coins, each representing one of the Olympic or Paralympic sports, and all designed by members of the public.
The third major theme of the conference was the reduction of costs and optimisation of coins – whether in production, management or circulation.
Genie Foster, formerly of the Federal Reserve Board, spoke on the topic of the dark side of seigniorage, with specific reference to the costs that the US government is incurring in producing commemorative and dollar coins that the public does not appear to want, thereby building up a balance sheet liability and losing income that could be better invested elsewhere.
David Wise of the US Government Accountability Office also spoke about the dollar coin, this time in the context of the savings that the US government could make – up to USD 5.5 billion over 30 years – if it was to replace the dollar bill with a coin, according to a new report recently published by the GAO.
Across the border in Canada, meanwhile, a debate is in full swing on the future of the penny. Francois Dupuis of the Desjardins Group and Jean Pierre Aubry of CIRANO presented the findings of their two surveys that examined the cost of the penny in circulation for all economic agents and the benefits of its removal, questioning why – with such clear evidence to support its removal – the government has yet to act.
Marten Gomer of Sveriges Riksbank, in his presentation on the programme in Sweden to redesign the country’s note and coins, showed how reconfiguration of the coin denomination structure and the switch to smaller, lighter coins will result in a 70% saving on the costs of coin purchase. This, together with the income from reclaiming and recycling old coins, will be nearly enough to finance the total costs of the note and coin changeover over a seven period.
A similar point was made by Erick Lesko of the Hungarian central bank, who spoke about the recent withdrawal of the country’s low denomination coins and the replacement of the lowest banknote with a coin, and the savings to society as a result. She also covered the changes to cash logistics through the bank’s withdrawal from day-to-day coin services and the introduction of a Coins Held to Order scheme, which have resulted in lower costs and improved coin circulation.
The Bank of Israel has also recently reconfigured its cash logistics, introducing a new cash management policy that went into effect for banknotes last year, and for coins this May. The policy has involved the bank’s withdrawal from everyday cash services, devolving these to the commercial sector. It has also involved reconfiguring the coin processing centre, standardising the procedures for handling and distribution coins and introducing new processes similar to the EU regulation for checking the authenticity and fitness of coins in circulation.
In addition to the central banks and issuers, a number of vendors also gave presentations demonstrating how costs can be reduced for coins in circulation.
Ed Brindley of Wincor Nixdorf spoke about the continuing rise of coins in circulation, and how managed solutions involving the latest automation technology for handling and processing coins at the checkout and in cash offices can generate substantial operational savings for retailers, improve security and efficiency and enable early credit from banks.
Anne Richard Schaafmsa also spoke on the topic of managed cash solutions, this time in the context of a new service model developed by G4S in the Netherlands. In this model, G4S has ownership of the machines that accept and dispense the coins, provides the IT infrastructure supporting the service and manages the transactions. The result, he said, is a solution that offers retailers and banks more control, lowers cost and can even make the recirculation process profitable for them.
David Wallace talked on a similar theme – this time in the form of how recycling technology can be used to encourage people to stop “warehousing” coins at home and redeem these. Such technology benefits the public by making it easy for them to cash in their coins. It also benefits retailers and banks that offer such services by increasing footfall and providing an opportunity for a new source of revenue. Everyone benefits, meanwhile from the increased recirculation and hence availability of coins.
The issue of coin circulation and costs was also covered by Daniela Sheffer of Amera International, who spoke about the coin production landscape and the structural inefficiencies that are built in through over-capacity and the preponderance of primarily government-owned producers.
There were 28 presentations in total, arranged in sessions of four with a panel discussion at the end of each session. A notable feature of the conference was the high level of attendance throughout the two days, the number of questions asked of the speakers and the lively discussions that continued during the breaks and cocktail receptions.
The Coin Conference was organised by Currency Publications Ltd, publishers of the industry newsletter Currency News and was sponsored by the Royal Mint, the Dutch Currency Association (Transtrack, the Royal Dutch Mint and Kusters), ScanCoin, Saxonia EuroCoin, Honeywell, HME Minting and Wincor Nixdorf. The 2nd Coin Conference will be held in June 2013.
For further information on the Coin Conference visit its website.