Oberthur Fiduciaire – Leading the Way on Safer, Greener, More Secure Banknotes

The history of French banknote and security printer Oberthur Fiduciaire (OF) dates back 175 years, being founded by Francois-Charles Oberthur in 1842. It was acquired by the Savare family in 1984 and, although it was active for a period in a range of security markets, is now focused exclusively on currency – specifically, paper, print, features and cash protection – and is one of the top three commercial players in the market.

Etienne Couëlle.

 

It was also an early convert to the environment, establishing its Earth 365 programme several years before sustainability catapulted to the top of the cash industry’s agenda, and the development of greener products and manufacturing processes is central to what it does.

Etienne Couëlle joined the company as Managing Director in 2021 after a 15 year hiatus, having worked there in the 1990s and early 2000s. He appears to be relishing the challenge of positioning the company as a leader in innovation, the environment and more durable and safer banknotes, as he explained to Currency News™ during the recent Global Currency Forum.

Q: Could you provide a brief review of your background and previous positions/roles prior to your appointment.

A: I started in strategic and management consulting following a scientific education in engineering, mathematics and computer science. I worked for KMPG, before being hired by OF in 1995. I started as Plant Director at our Chantepie printworks, then moved to the US , where I managed the US, North America and Pacific card operations for the company, and then its global Lottery Division. In all, I spent eight years in North America, then returned to France and worked on strategic acquisitions for 18 months before leaving to join Europe’s first private equity house – 3i. We invested in LABCO, later renamed SYNLAB, which became Europe’s leading clinical diagnostic company, where I became CEO of the French operations.

I spent 11 years there, but kept close contact with Oberthur as I was a family-holding Board member for several years. When the current CEO, Thomas Savare, asked me to rejoin the company after his father passed away in 2019, I did not hesitate, as it had always been understood that I would return one day.

However, I couldn’t do so straightaway as then COVID struck and we had to build up testing capacity. SYNLAB was one of the largest labs in Europe, but in France we could only do around 800 tests per day. A month later I struck a deal with the French government to build capacity for 20,000 tests per say. When I left, this had risen to 50,000 per day. I finally arrived at OF in January 2021.

Q: Can you give an overview/update on OF – portfolio, production sites, capacity, turnover etc?

A: In the past, we had a large business in North America through Banknote Corporation of America, producing stamps for the US Postal Service, stocks and bond certificates and lottery tickets around the world. We sold this business back in 2003. We also had a large card and ID business, which we sold in 2011.

Today, we operate only in currency, and exclusively from the EU. We have two banknote printing facilities (in Brittany in France and in Bulgaria), and one paper mill in the Netherlands. We can print around 5 billion notes and produce 6,000 tons of paper per year. We also have a thread production unit. Our aggregated turnover is in the region of €300 million.

Our strategic choice has been to establish all of our manufacturing units in the EU to guarantee our customers a built-in ‘disaster recovery structure’, with sites sufficiently spaced out but close enough to back one another up.

Moreover, these sites being in the EU, a geography in which bans on supply and/or sales are the least likely, further increases supply chain security. Indeed, the unfortunate recent geo-strategic developments illustrate how important it is to offer customers such security.

In addition to print, paper and threads, we also have a cash protection business providing anti-theft systems globally for CIT vehicles and cash in ATMs.

Q: What did you see as the major challenges facing you when you took on the role of CEO? And how are you addressing them?

A: First of all, our industry – despite dealing with a highly secured and technical product – has turned into a deflationary commodity business in which most of the remaining value is captured by the ink and security feature segments.

There are many reasons for that: excess capacity on the paper side, unfair dumping from some monopolistic state printing works and paper mills, and an overall mindset developed in low-inflation peaceful times which seems to have disappeared and which will lead to big changes in our overall industry balance.

The way we address these challenges at OF is simple.

First, whether we make paper or print banknotes, we have to be best-in-class when it comes to quality, productivity, reliability and security. We do so by embedding Lean/6-Sigma in our day-to-day management and forcing us to adhere to the most stringent ISO management standards, with a 360° approach encompassing all dimensions of business, including ESG.

Second, we are also investing heavily in R&D – around 2-3% of turnover – to develop differentiated premium window thread and security feature solutions, highly secure innovative printing solutions and environmentally-friendly technologies increasing the durability and fitness of banknotes to avoid being overwhelmed by counter-intuitive polymer-based banknotes.

Q: In recent years OF has expanded its product portfolio by acquiring paper manufacture and by developing its own security features. Was this a strategic move or opportunistic?

A: These moves were not opportunistic but plainly strategic. We had to gain control of our paper supply and of our ability to develop security features, including those integrated in paper. And we also had to move into the high-value security feature segment.

Q: Has this approach proved significant in winning new business?

A: It is a long process, but it has already generated incremental revenue for us in paper, thread and IP. We are now reaching the point where our efforts over the past five years are all blooming at the same time, as proven by the launches of our RELIEF™ and PULSAR™ threads, for example, as well as our latest evolutions for safer and more durable banknotes such as BIOGUARD™, SECURICOAT®, HIGHLINK and HD VISION.

Q: How well developed is your pipeline of security threads and other features?

A: RELIEF, which we launched at the Global Currency Forum, is probably the most innovative as it brings a brand new premium 3D or bas-relief effect. And it will be available not only on windowed threads, but also in due course on foil stripes and even patches with front/back reverse effects.

We should of course not forget our very recent PULSAR development, which provides colour shift and movement effects, and Arc-en-Ciel² (a superimposition of offset and intaglio to create different coloured moire effects), which is an upgrade of the initial version. Not to mention our break-through in the incorporation of alternative organic environment-friendlier fibres such as sisal and eucalyptus, and, of course, our latest BIOGUARD formulations, to name a few.

Q: Are you looking to develop a movement and/or depth security feature?

A: We now have both effects with RELIEF, which provides 3D, and PULSAR, which provides movement. We will maintain our R&D efforts to develop new innovations but we are not looking to develop a product that mirrors other micro-optics features such as MOTION®, because there are already a large number of other companies going that route.

Q: The move to polymer from paper (cotton) for banknotes is accelerating. How do you view this change?

A: Thomas Savare, our Chairman and CEO, took the opportunity of the 21st COP meeting in Paris in 2015 to launch our group-wide ‘Earth 365’ initiative. But – and I’ve known him since 1995 – he didn’t wait until 2015 for such ideas. They had already been with him for at least 20 years. I am totally aligned with him on his position regarding the advantages of paper, as is the whole company.

Therefore, for us, seeing how other sectors are substituting plastic solutions with organic materials, such as paper or wood, the fact that our industry is going in the opposite direction is puzzling, not to say worrying.

Q: Do you have any plans to launch a polymer product?

A: No. Culturally, and with our Earth 365 programme, it would be difficult for us to produce plastics. And while we do print on polymer if our customers require it, we are not encouraging them to do so.

Our view is that with the combination of durability-enhancing solutions that we have developed (HD VISION, HIGHLINK, DIAMONE, alternative organic fibres insertion, ULTRA and BIOGUARD), we can substantially reduce the durability gap between paper and polymer notes, making the switch to polymer unnecessary and undesirable, both economically and environmentally.

And it’s worth remembering that, when polymer first emerged, we were comparing a paper on which no-one had ever worked for durability with plastic, which is inherently more durable. But over the years there have been so many developments – structural solutions, all the varnishes, anti-fungal treatments etc; all of this is really changing the duration of a paper banknotes. By doing this we get closer to the benefits of plastic, without being plastic. Take the US dollar as an example; it’s paper – the $1 average duration is more than six years, so what do you need plastic for?

Q: Banque de France produces a paper/polymer hybrid – EverFit. Have you ever considered licensing this?

A: We have of course had, and are having, discussions with Banque de France around EverFit, as we see hybrid-type solutions as more acceptable than pure polymer and as we want to be able to answer customers’ requests.

However, hybrid still means plastic, so we are not in a hurry to actively promote such solutions and, as already explained, prefer to focus on enhanced natural solutions like cotton and alterative fibres.

Q: We understand you were successful with the recent JET euro tender. How important is the euro indent to you?

A: We have been involved with the printing of the euro since the very beginning. Exclusively operating from within the EU, with 100% EU shareholding, to us, ES/2 is more than business. For a private printer, it is also the symbol that we have reached such a level of quality and security that we are now entrusted by the ECB and its NCBs to print one of the world’s most desired and complex currencies.

Q: What has been the uptake of your anti-viral solution as a result of the pandemic, and do you think interest will maintain post-COVID, or diminish?

A: BIOGUARD has been around for quite sometime, with limited uptake from the market, despite strong and valuable antibacterial and antifungal performance. That changed with the pandemic – not only because BIOGUARD has proven to be effective against SARS-CoV-2, but also because COVID-19 made the general public and public decision-makers aware of long-known sanitary challenges that our industry had conveniently ignored.

Thus BIOGUARD is not a protection for this pandemic only. It is more of the right move for all central banks to invest more in durability and in better safety of the banknotes that they issue for the future.

The reality is that banknotes do carry viruses and bacteria, but they act in very different ways. Viruses need a living host to survive and multiply. If you don’t do anything, they will eventually disappear but they can survive for several days on surfaces in the right environment, and there was evidence that they could so on banknotes long before the pandemic struck.

Bacteria are a different story – they can live for ever in the right environment. And whilst everyone has been focused on COVID-19 – the first truly global pandemic our generation has ever known – in reality, most of the problems in mankind are caused by bacteria.

We definitely weren’t ready for the pandemic. Had we been treating banknotes for the past few years, then it would have been very easy to reassure the public that banknotes are safe. But we weren’t prepared, and we didn’t have the right communications to counter the argument that they aren’t.

Next time, if we have done a proper job and treated our banknotes, then we won’t have the same problems. This is definitely something we should be doing as an industry.

Q: Since OF launched the Earth 365 sustainability programme in 2016, you have taken a leading role in adopting sustainable practices and developments. What difference has this made to the company and what are your plans for the future in this area?

A: First of all, our employees are very engaged, even proud, that we have put together such a programme dealing with their day-to-day environmental concerns as private citizens.

As already said, we have made good progress for enhancing natural banknote sustainability. And there is an Earth 365 dimension in everything that we do, starting with R&D.

We will keep developing our business along the guidelines set by Earth 365, with a particular focus on greener and less energy, less-impact security features and overall banknote sustainability.

The largest impact from banknotes is transportation of the finished products, so the more durable the note, the greater the reduction in new notes and transportation impacts. And, because our notes are pure paper, there is no serious environmental impact at end of life when they are destroyed.

Q: Are you seeing a slowdown in the paper market and in the print market as central banks start to reduce stocks built up during the pandemic?

A: For sure, since 2021, we are facing an unusually low overall level of demand, both for paper and banknotes. This is likely the counter effect of the high demand in 2020 as a result of the pandemic.

But the situation is not the same everywhere. There is lower demand in Asia, for example, whereas Africa is more in line with usual levels.

Q: Given the overall trend in declining cash usage, what do you think will happen to the market over the next ten years. How should the industry respond?

A: Difficult to predict. Cash is a primary good which all populations need as it is the only really free, 100% interoperable solution, in all conditions, wherever you are and whatever time.

Structurally, the digitalisation of payments and increase in e-commerce are driving forces limiting the natural progression of cash in low-inflation, low-economic growth and slow-demography areas, these last two factors being connected. Some to the point that the need for cash is declining.

On the other hand, countries with more dynamic economies and populations are still needing increased volumes, though less than they would without digitalisation.

Unfortunately, nothing is stable and given for good in this world – as we can see with the recent developments with COVID-19 or in Ukraine.

So at what point do we start really entering a recessive banknote market era? Very hard to tell.

Certainly, the industry should advocate and prove that cash is the reference mean of payment and the one that brings total freedom and independence. As we have started doing, also we need to increase durability, sustainability and environmental impact, while continuing to elevate levels of security.

Q: One year or so into the role, what are your ambitions for the company going forward?

A: I first joined Oberthur Fiduciaire in the early fall of 1995. Back then we were producing about 1 billion notes per year, and were one of the outsiders, far behind De La Rue and G+D. When I returned last year, I was amazed by the immense progress accomplished by OF over the past 25 years. Not only in terms of volume, capacity and customer base, as well as paper autonomy, but also with R&D innovations and 360° ISO certifications.

We are now positioned to leverage these, patiently building on our non-material assets to not only be a leading manufacturer in our industry, but also to be a trendsetter and leading innovator in banknote sustainability and security solutions.

Not only will we manufacture what we develop, but our ambition is to make our most generic solutions accessible to all public and private players of our industry, thanks to licensing agreements.

Q: And finally, do you see a future for OF beyond currency?

A: Maybe. We already cover the full spectrum of currency so if we were to expand, it would be into a completely different industry. We are cash-rich, so we could invest in other industries, for examples those that relate to e-technology. But we will keep investing in what we do today as well.