UK to face £236m cost from polymer notes
Introduction of polymer notes by the Bank of England is expected to £236m to the UK economy, according to a payments intelligence firm.
The country's central bank is set to introduce polymer notes from September 2016 onwards by issuing the £5 note first. The bank plans to issue polymer the £10 note in late 2017 and the £20 note by 2020.
The BoE will release the full details of the design and security features of the new note on 2 June.
The cost of polymer notes introduction will be largely borne by retailers and ATM deployers, said payments consultancy CMSpi.
CMSpi , CEO Brendan Doyle said: "Due to the scale of the change, the introduction of polymer will affect every retailer in the country that currently accepts cash payments."
Due to a shift to polymer notes, retailers and ATM deployers are estimated to incur a cost of £113m and £108m, respectively.
Doyle said: "Nearly all cash handling machinery will need some degree of adaptation, as well as cash handling staff needing training to identify the new security features of the notes, both of which are likely cause operational challenges for merchants of all sizes."
The biggest disruption from polymer notes will be faced by merchants who have onsite note-dispensing equipment such as ATMs and self-service checkout (SSCO) machines, he said.
ATMs and SSCO machines may need physical hardware replacements along with software and firmware upgrades.
Further, note accepting equipment will likely require software and potentially firmware updates that can be performed remotely, Doyle added.
The co-circulation period, when both paper and polymer notes are present, is expected to pose problems for retailers, especially those operating ATMs, as lack of enough banknotes to fill ATMs may compel them to order further notes from their bank.
Demonetized and withdrawal of paper notes from circulation is expected to a temporary spike in cash spend.
Doyle said: "As consumers will want to get rid of their paper notes before demonetization, this includes £35 billion of cash hoarded by consumers or circulating overseas or in the shadow economy."
A decision to replace paper notes currently in use with polymer notes was made by the BoE in 2013 following a public consultation. Polymer notes are expected to be cleaner, more durable and more secure.
Besides, the notes are more environmental friendly and can be produced with reduced costs.
Image: UK to face £236m cost from polymer notes. Photo courtesy of Rob Wiltshire/FreeDigitalPhotos.net.