Malcolm Knight holds a banknote up to the window. As the light hits the paper, a shiny oval of blue lightbulbs on the face of the note suddenly disappears, revealing – as if by magic – a cluster of lighthouses. “It’s very hard for a counterfeiter to rise to that challenge,” he says.

Mr Knight is a former research and development director and now consultant at De La Rue, the discreet British banknote maker that has designed more than 40 per cent of the paper currency to have entered global circulation in the past two years.

Since 2008, it has worked on about 150 currencies either as printer, designer or provider of secure paper. It is trusted by central banks around the world for its security features that can shield a currency from forgers.

When South Sudan became the world’s youngest country in 2011, it was De La Rue that got the call to provide the banknotes. It also designed and produced the first notes in post-Gaddafi Libya and hired 24 jumbo jets to supply Iraq after the fall of Saddam Hussein.

The disappearing lightbulbs might seem like a cute trick. But the technology lies at the heart of the battle to uphold the value of the world’s paper currency against the evolving threat posed by “digifeiting” – forgery made possible by home technology.

It also forms the heart of De La Rue’s mission to keep the banknote – a product that accounts for almost two-thirds of its revenues – relevant in a world of ecommerce, mobile payments and virtual currencies.

Despite, or perhaps because of, the rise of the cashless society, the bank­note is evolving. It is not just in the security features, which can number up to 30 on a single note. It is also in the design, as central banks demand vivid colours and even vertical orientations to create striking and recognisable tender.

Meanwhile, alternative materials are accelerating change, with plastic or “polymer” notes moving into the mainstream, deployed by countries from Fiji to the UK.

To keep up, De La Rue in December opened an R&D centre in Hampshire, alongside its historic paper mill, as part of a plan to invest £100m in the business over three years. The centre employs 47 – more than half of them PhDs – who test the latest in materials science in Fort Knox-like security. Journalists are made to surrender mobile phones, tablets and cameras at the front gate.

Inside, De La Rue’s physicists, chemists, adhesive experts and polymer specialists work in climate-controlled laboratories and assess how banknotes perform in high humidity, how quickly light fades the face of the note and how many times they can be folded without tearing. The centre has a washing machine to see how notes perform when left in pockets.

The company files 15 to 20 patents a year for security features including foils that temporarily change colour when scratched; superwide “depth stripes” that appear to move; and a raised printing technique known as “intaglio” that never fully dries (try rubbing the face of a crisp sterling note on a piece of white paper).

Banknote security must, like the lightbulb feature, be hard to replicate but easy to see and explain to the public. “It’s about getting the balance right between something that’s difficult to counterfeit but very simple to authenticate,” says Victoria Cleland, head of notes at the Bank of England – another De La Rue customer.

This is just the first line of defence against forgery. Beyond publicly recognisable features such as security threads, watermarks and holograms are tricks that retailers and bank tellers can pick up using UV lights. The final, never discussed, line of defence is formed by the so-called sleeper features known only to central banks.

De La Rue is something of an industry leader in banknote design, having won 10 awards since 2007 for its work on currencies from the Kazakh tenge to the Samoan tala.

It falls to company’s design team to incorporate the secure technology into an attractive and culturally relevant note. “If you’ve got a good-looking banknote, it is like a national monument,” says Luis Morris, a designer at De La Rue.

Mr Morris, an architect by training and a painter by passion, has exhibited at the National Portrait Gallery. That background is no coincidence. Portraiture is considered an integral part of banknote design. “People will notice when a face looks wrong,” says Ms Cleland, which means greater defence against fakes. “There is something about portraits that make us more alert to changes.”

If portraiture works, fictional bridges tend to be less successful. The euro banknote family – which features neither people nor places but imagined bridges inspired by architectural themes – has been described as “ugly”, “mute” and “ghost money”.

“I suppose it didn’t conform to a lot of the basic design rules, such as ensuring you’ve got recognisable features,” says Alan Newman, De La Rue’s head of design.

Banknote makers including De La Rue are rewriting those design rules with a current trend for vertical bank­notes, which harks back to the Chinese Ming tender of the 14th century.

But the biggest recent development has been the introduction of plastic, or polymer, substrates – the film upon which the banknote is printed. Polymer notes last two and a half times longer than their uncoated, cotton and linen-based paper equivalents. They are also harder to counterfeit.

De La Rue’s polymer “house note”, a specimen to display its latest technology, features a heron dipping its beak into water. The ripples are completely transparent and are overlaid with an ornate fish design, using a “blind embossing” technique.

The group produced the notes last year for its bicentenary. It hopes such innovation will see it dealing in cash for another two centuries.

Admired for artistic prowess, not its financial record

De La Rue might have a sterling record when it comes to banknote design but its recent corporate fortunes have been less bankable.

The company is engaged in the search for its fourth chief executive in a decade after Tim Cobbold left to lead global events company UBM.

His departure came just three years after he was parachuted in with De La Rue reeling from production problems at its British paper mill, which were affecting a contract with the Reserve Bank of India – then its biggest customer.

He was credited with boosting operating earnings from £40m in 2011 to a forecast £90m this year, and achieved £40m in cost savings as he imported manufacturing practices learnt from his time with industrial companies Smiths and Chloride.

But Mr Cobbold oversaw two profit warnings and, according to some analysts, may have simply run out of ideas for the banknote company.

His plan was to keep things ticking over on the currency side of the business, which accounts for about 60 per cent of sales, while moving into areas of higher growth, such as passports and work with governments on alcohol and tobacco duties.

But in a business based on winning contracts with long lead times, financial performance is often “lumpy”, as Mr Cobbold would say. Or, rather, as one analyst puts it: “If you look at the profit numbers, it looks like a range of mountains – it’s going through the roof and then it’s going through the floor.”

Copyright The Financial Times Limited 2023. All rights reserved.
Reuse this content (opens in new window) CommentsJump to comments section

Follow the topics in this article