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Cash, a timeless concept

Special issue : n° 170 : Banknotes challenged by novel currencies

Politique InternationaleAt the start of the Covid-19 pandemic, there was increasing talk about how electronic payment methods would have to take precedence over cash. How did you respond to such declarations? Did Oberthur Fiduciaire, as a company specialised in the production of banknotes, feel vulnerable?

Thomas Savare — Comments of this nature did indeed do the rounds. To tell the truth, they were pretty confused. To summarise, the use of banknotes was represented as a means of propagating the virus. Operators of electronic payment systems probably did pass on the rumours, but is it really important to know that? For its part, the World Health Organisation (WHO) initially suggested there was an element of danger, but without really backing it up. Such arguments didn’t hold up for very long from the outset. Moreover, neither the WHO nor the European Central Bank (ECB), nor indeed any of the various central banks, now express the slightest fear. Each of these players is relying on scientific information: right after the start of the health crisis, Oberthur Fiduciaire carried out extremely rigorous tests to measure how risky banknotes were. The tests were subject to the strictest checks: they concluded that not only were banknotes not a favoured vector of transmission, they were even less of a vector than most other objects. This very reassuring feature does not mean that we sat on our hands as the pandemic progressed: alongside the tests, we developed protective measures. Specifically, this meant the application of a new varnish, which constitutes an additional defence against bacteria and the intrusion of germs. This work was not only geared towards the coronavirus: it is generally agreed that our world is likely to be subject to recurrent epidemics in the future; our industry therefore has the goal of preventing as many dangers as possible, working across a very wide spectrum.

P. I.Several months have passed since the period of general lockdown across the planet. With a bit of distance, was the use of cash affected by this episode?

T. S. — That is one of the big paradoxes of this health crisis, especially in connection with the aforementioned rumours: the use and circulation of cash increased in significant measure throughout the whole period of the pandemic’s growth. And I’m not talking about a few countries in particular, or a specific region of the world: this trend towards an increased recourse to cash has been ascertained as much in developed economies as in emerging ones. Economists will tell you there is nothing surprising in that: History shows that in periods of crisis, cash is perceived as even more of a refuge than usual; it’s a form of value protection, at a time when a degree of mistrust can set in towards a banking system perceived to be vulnerable. That said, crisis or no crisis, people’s fondness for cash persists throughout the ages. Certainly, from one year to the next, its market share continues to erode — to the benefit of electronic payment methods — but the decline is very slow. With less and less elasticity in household budgets, a cost-free means of payment retains firm advantages. Finally, cash generates little fraud, whereas wrongdoing in defiance of the security systems that surround electronic payments is legion. In short, cash is sustainable over the long term.

P. I. There is a lot of talk about the emergence of a new world in which electronic payment methods are in pole position. Cash, on the contrary, is said to symbolise the old world. Is that a reductive view?

T. S. — Reductive and above all simplistic. First of all, diversification of the means of payment is a strength, no matter the country. Secondly, the weight of History speaks volumes: cash is a time-honoured instrument, appreciated by people at large, and which has given every proof of proper functioning. Given such conditions, visions of a purely electronic system are an illusion, or else the best method for incurring serious risks. I’m thinking particularly of privacy protection. Pushed to its extreme, electronic payment constitutes a continuous incursion into the individual’s personal sphere. This is already the case when it comes to modes of consumption: when you are tracked by electronic means, you are quickly swamped with commercial offerings, most of them unwanted.

P. I.Listening to you, it’s almost as if democracy itself would be threatened if electronic payments were to replace cash definitively…

T. S. — It’s obvious that certain countries that are actively working to suppress the use of cash are motivated by a desire to control their citizens. Electronic payments have the enormous advantage of being able to track the activities of economic players. The justification is often the struggle against the ‘grey’ economy, but the real motivation is sometimes less virtuous.

What’s certain is that democracy is the State serving its citizens, and that cash is an essential public service thanks to its efficiency, its ubiquity and the privacy protection it entails.

P. I. There is also the case of Sweden, which has decreed the decline of the use of cash across its territory…

T. S. — The Swedish example is actually very interesting. Initially, the country took a very hard-line view: it even planned for the end of cash, plain and simple. But today, Sweden is backtracking: the authorities have realised that the path they initially took was disrupting the mechanisms that determine the proper functioning of society. Clearly, the most vulnerable members of society depend on cash to live; this is a population that is very often deprived of banking facilities and which, without the option of using cash, would be rendered even more vulnerable.

P. I. The protection of democracy on the one hand, preservation of the purchasing power of the most vulnerable on the other — your logic is well articulated. That doesn’t stop cash payments from suffering from opacity. For ages people have even spoken of an underground economy…

T. S. — This opacity is greatly exaggerated. Perhaps it existed in the past, but these days there are several ways of controlling the traffic flows of cash. The idea that cash systematically supports illicit transactions has been around for years. Rather than talk about an underground economy, it is worth emphasizing that banknotes irrigate all kinds of economies. In developing countries, where there is a low rate of banking-system use, our industry provides an essential base that allows trading to take place.

These days it has been established that a large number of illicit transactions, representing very considerable sums, are carried out via paperless electronic money systems.

P. I. Has a business like Oberthur Fiduciaire been rattled by the upheaval that the Covid-19 pandemic represents? Have any of your goals been thrown into question?

T. S. — In comparison with other economic sectors, other industries and/or other companies, we have been affected only in a limited way by the health crisis. Furthermore, our core business has been totally protected because demand for banknotes has remained strong. That has not stopped us from redoubling our efforts to adapt to the new situation. For although demand remains dynamic, the supply capacity of our industry as a whole has been slowed. Some of our manufacturers have been obliged to halt their production units temporarily. Amid this context, Oberthur Fiduciaire has for a long time had the support of a particularly solid balance-sheet structure. If a heavy blow were to fall, we would therefore be in a position to avert it. As for our goals, these have been met: our performance for 2020 has been satisfactory and prepares the way for exciting possibilities in the near future.

P. I. When a crisis erupts, certain economic sectors are often threatened by moves towards consolidation, the difficulties of some providing opportunities for others… How do things look for your industry?

T. S. — Periods of crisis are always unusual moments. You have to make sure the fundamentals are secure while keeping an eye on the opportunities that invariably arise. However, banknote production is not a sector in turmoil. Our industry is already concentrated around a handful of players: in such conditions, no alliance comes to fruition spontaneously. And I repeat that this double crisis — in health and the economy — has not prevented us from continuing to work: not one of the sector’s forty-five main companies is on its knees. Furthermore, our business is both sensitive and essential: the authorities, no matter the country, closely track the slightest movement. This fact enters the equation when examining a potential reconfiguration.

P. I. How important is innovation in businesses like yours?

T. S. — Every year we devote a sizeable budget to research and development. Whether in paper, printing techniques, ink or security elements, our different fields of activity are constantly making technological advances.

The banknote, for example, is by its very nature a high-security and highly technological product. The security aspects of banknotes are under constant development. Our R&D division works relentlessly to create new security features that we offer our clients in order to deal with counterfeits. Developments in our clients’ banknote series are a perfect illustration of the technological innovations at work in our industry. It’s the same for the fiduciary paper that we produce; techniques are constantly changing and we have to invest in equipment of increasing efficiency and precision. That is the case with the latest machine for producing watermarks, which we conceived jointly with the manufacturer so as to adapt it to our specific needs.

On a different note, we offer our Bioguard clients a treatment that is integrated into the paper itself, or else takes the form of a varnish that protects bank bills from bacteria and viruses.

P. I. Oberthur Fiduciaire’s business centres almost exclusively on the printing of banknotes. Do you have plans to diversify? Five, ten or fifteen years from now, could we envisage the company expanding into other areas?

T. S. — We are not going to diversify just for the sake of it. Experience shows that diversification doesn’t happen with a snap of the fingers. In reality, it’s innovation that should generate a desire for diversification. Know-how linked to our businesses can be applied to other fields: our proven technological expertise is likely to find additional applications, for instance in the area of sensitive documents. That said, as soon as you step up to the manufacturing stage, the path has to be well prepared. Our goal is not to send up test balloons but, should the situation arise, to deploy products that are innovative and efficient.

P. I. What are Oberthur Fiduciaire’s main markets? Has your client base changed geographically over the years?

T. S. — The market for banknotes extends to every country and every government. And, contrary to what you might assume, the market is constantly growing, linked to growth in the world economy and demographics. But for Oberthur, the main axes of growth stem from the technological intensity of banknotes and the added value we bring through the dynamism of our innovation.

P. I. Let’s turn for a moment to the organisation of the company: are there things you were doing before the start of the pandemic that you are no longer doing today?

T. S. — The health crisis presents a daunting question: how to introduce fluidity into the company’s operations when it has thrown on a number of brakes, notably in the supply chain? At the height of the crisis, we were able to gauge our capacity to carry out a large number of tasks from a distance. That, however, must not become the rule, even if certain procedures born of responses to the pandemic will be adopted over time. It is men and women above all who create the life of a company. The further its social ties are developed, the more the seeds of the company’s progress can flourish. In the same way, contact with our clients is nourished by extensive interaction. During the pandemic, by necessity, we had to reduce our in-person exchanges, but we had no desire to give up on them. In our commercial division, we increased our video communications in order to continue accompanying our clients despite the distance and the impossibility of visiting them. We are fortunate to have had a number of means available to us by which we could maintain ongoing and effective relations with our clients and our sales leads. Like many companies, we increased our contacts via email and video, but we also created new methods of communication including mini client-seminars, regular newsletters and even short, targeted videos …