As they grapple with shrinking profitability and the threat of a British exit from the European Union, the UK’s banks also face another challenge, slippery banknotes.
Lenders from HSBC Holdings Plc to Royal Bank of Scotland Group Plc are working to upgrade or replace thousands of cash machines before the Bank of England starts to switch paper money with notes made of sophisticated polymers later this year. While the plastic notes have many advantages, they can be “too slippery” for older machines using friction to count bills, Andy Mattes, chief executive officer of ATM manufacturer Diebold Inc., said in an interview in London. Britain’s central bank is seeking to follow nations from Canada to Australia in adopting the plastic bills, which are tougher to forge, more durable and collect less dirt than paper money. Using the new bills, which are also about 15 percent smaller, can be difficult for older rollers and counting machines to hold on to and dish out accurately, so banks are taking steps to prevent machines doling out too many bills — or too few. “Every bank has a polymer note project team working right now,” said Diebold’s Mattes. The U.K. already has one of the more “mature” fleets of ATMs, and introducing polymer notes will probably accelerate efforts to replace older machines, he added.
The ATM upgrades could bring a potential cost of 45 million pounds ($65 million) across the industry, according to CMS Payments Intelligence, a researcher. There are more than 70,000 ATMs across the country, according to payments processing firm VocaLink.
At Nationwide Building Society, costs to handle the new bills are included in a 500 million-pound refresh of the customer-owned lender’s branch network that’s already under way, said Mike Pighills, the firm’s head of self-service.
“The older machines — which were built and deployed before polymer was even a twinkle in anyone’s eye — require an upgrade,” Pighills said.
The costs come as many predict digital payments will erode the use of bills. Deutsche Bank AG co-CEO John Cryan in January predicted the disappearance of physical cash within a decade. Diebold’s Mattes said the death of cash is “greatly exaggerated” as a majority of the world’s transactions are still completed with bills.