2012.16 | New Canadian Notes & Coins – The Whole Story

The past number of months has seen an unprecedented change in the physical composition of Canadian Currency.  I have spent many hours over the past weeks and months discussing new physical currency, and I’ve not seen a single resource of detailed information on this subject anywhere.

For the greater good of Canadians trying to navigate the various changes, here is an overview of all of the changes and what retailers need to consider.

A large part of the challenge in navigating these changes is that there is no single body responsible for all of these changes together.  The Bank of Canada is responsible for design, production and distribution of Canada’s paper currency.  The Royal Canadian Mint is responsible for minting Canada’s circulation coins.  As far as the decision to eliminate the penny, the Governor of the Bank of Canada works with Canada’s Minister of Finance on monetary policy.

To provide a simple straightforward overview, all of the changes that have occurred and are planned to occur to Canada’s notes and coins are highlighted in the chart above.   Note that these dates are based on publicly available information as of April 30, 2012 and are subject to change as per the Bank of Canada and the Royal Canadian Mint.  Ensure you consult their sites to validate if any changes have occurred.

Note Changes 

To enhance security and provide more durable currency, Canada has a plan to replace all paper based currency with polymer notes.  Two out of five replacement circulation notes have been released so far, and the other three notes will be replaced in the next year or so.

Key changes include a change to polymer from paper, as well a transparent window down the side, a maple leaf with a clear border, and various other security features.  The notes are obviously physically different though they are physically the same size.

For full details on the changes to notes, I recommend the following links:

Bank of Canada – Bank Notes

Bank of Canada Polymer Notes Retailer Resources

Bank of Canada – Checking Notes

As per the notes in the Bank of Canada website, retailers and all consumer facing organizations that handle cash should ensure staff are prepared to accept the new notes.  Ensure that they are  aware of the security features of the new series.  Retailers should also ensure that any cash handling equipment is able to handle the new polymer notes.  While they are the same size and most cash drawers will not require any changes, there are many technology solutions in place that are more sophisticated and they may require changes to handle the new notes.

Retailers should be certain to contact solution providers to validate if changes are required to any equipment.

Coin Changes

As part of cost reduction initiative, $1 and $2 coins were changed to steel composition from nickel this April.  The new coins are physically the same size as the previous releases, but are noticeably lighter compared to older coins.  While I’ve not actually weighed the coins and compared them on a sensitive scale, this change may impact weight based coin counting.  The new coins have distinctive maple leaves stamped into them so that they are easily recognized as steel based coins.  Canada 2 Dollars is also stamped around the outside diameter of the $2 coins.

For full details on the changes to the $1 and $2 coins, I recommend the following link:

Royal Canadian Mint – New $1 and $2 coins

Retailers should also ensure that any cash handling equipment is able to handle the new coins.  While they are the same size and thickness and most cash drawers will not require any changes, there are many technology solutions in place that are more sophisticated and they may require changes to handle the new coins.

Retailers should be certain to contact solution providers to validate if changes are required to any equipment.

Canada Penny Elimination

As part of the 2012 Canada Federal Budget, it was made public that the penny will be discontinued in 2012 based on their declining utility and a cost of production that exceeded value.  The coins are no longer being minted as of April 2012, and the Government of Canada has indicated that Financial Institutions will no longer distribute pennies as of Fall 2012.

Canada will use a rounding strategy like those used in Australia, New Zealand and Sweden to make the change.  All cash transactions will be rounded to the nearest nickel after applicable taxes.  Transactions ending in .01 and .02 will round to .00.  Transactions ending in .03 and .04 will round to .05.  Transactions ending in .06 and .07 will round to .05.  Transactions ending in .08 and .09 will round to .10.

Debit and credit based transactions will still be rounded to .01.

For full details on the changes to the $1 and $2 coins, I recommend the following links:

Budget 2012 – Eliminating the Penny

Fact Sheet and FAQ – Businesses

Fact Sheet and FAQs – Rounding

The Penny Elimination project represents some interesting challenges to retailers.  With the rather vague deadline of Fall 2012, it’s unclear when the new rounding process should be implemented.  I expect the Retail Council of Canada to call for some additional clarity around the timing as fall 2012 approaches.  I encourage retailers to voice these or any other concerns to the RCC.

While the government documentation notes that there are no changes required to cash registers, and that is technically true, there will be some work required.  Large scale retailers are unlikely to leave the rounding in the hands of store staff, and change calculations should be rounded based on tender.  There will also be changes required to self service solutions like ticketing kiosks and self-checkouts to accommodate the logic changes to transactions.

Retailers should be certain to contact their solution providers to validate what changes are required and to get a plan in place to time the change.

2012.12 | The End of Money?

Having finished The End of Money last week, I can recommend it as a useful overview of all of the issues concerning a move to a cashless (or cash “less”) society.   I was particularly taken with the concept that all of us perceive and hold true the “value” of paper money, though effectively it is our faith in monetary instruments like cash that gives us that perception of value and nothing more.

We are so close to our money and monetary system, that we rarely stop to think about it.  The book underscored that point for me more than any other.  Money and gold are really just proxies of value that we perceive as instruments that can ‘hold’ value for us over time and make value transferable.  Taking the time to think about it, it’s quite incredible that we have somehow all agreed to this arrangement as a society; but we have.

I was also deeply affected by reading ‘Digital wallet’ will transform smartphone and how we spend in the Globe and Mail last week.  While the article revealed nothing new and was sketchy on details, the vitriole in the 335 comments was somewhat disconcerting.  Many of the comments from unsurprisingly anonymous accounts expressed outright hostility towards the idea.

While I have been enthusiastically anticipating and already using digital alternatives to cash, there are many individuals who are vehemently against a digital wallet.  As described in “The End of Money”, there are massive and pervasive concerns around this technology in the general public.

Some concerns outlined in the 335 Globe and Mail comments included:

  • being forced to use a particular payment network
  • transactions being tracked by banks, government, network owners and others
  • no privacy for transactions
  • account numbers and value being stolen
  • being forced to have and use a mobile device
  • being forced to use a mobile network like Rogers, Bell or Telus and paying them a cut of transactions
  • providing no additional value to citizens
  • ‘hackers’ taking over the system (by the way, the terms hackers and cyber anything have to be removed from the common lexicon – this is not the age of the information superhighway)
  • criminals stealing account information just from proximity the owner (NFC)
  • what to do when there is no electricity or your mobile device has no power
  • corporate organizations usurping or becoming a crucial transport to the sovereign responsibility of government for currency
There are many rational arguments in this list.  Almost all of them are issues today based on debit and credit payments.  Replace mobile device with card or mobile carrier with bank or processor, and the concerns are almost identical, be it a mobile wallet or a debit or credit card.
And yet, as I also found in The Future of Money, cash is not a panacea.  While cash can potentially provide anonymous, electricity free portability and ease of transaction in a way that no current widely used electronic format can, there are many issues around the complexity of cash – though they are more apparent to retailers to consumers.
In Canada we have had numerous reminders of the complexity of cash, but most consumers don’t think about them as complexities.
  • On March 26, a new $50 note was released to reduce counterfeiting of large denominations and increase acceptance of these notes.
  • Last week it was announced that pennies will be no longer be minted, and will be removed from circulation in Canada to save the cost of producing them – which has exceeded their value for some time.
  • The Royal Canadian Mint is in the midst of releasing new versions of the $1 and $2 coin (okay, loonies and toonies) which replace nickel composition with steel – once again, to reduce the cost of minting.

For most, these are news items for discussion with friends and colleagues.   For retailers and other consumer facing organizations, these are logistical issues that have to be carefully considered and dealt with.  Vending machines, self-checkouts, self service kiosks, cash drawers, cash counting equipment, counterfeiting measures, store associate training, taxes on purchases, rounding to five cents on cash purchases, end of day balancing procedures, and more all have to be considered.  All of them require time, effort, and more cost.

While the average consumer may consider these issues irrelevant to them, these are costs that are passed on to them one way or another.  If a retailer can find a way to deal with transacting more cheaply in a way that suits a target market, they should do so, tradition or no, and use that competitive advantage to win business.

So, what is the answer?  The answer is choice.

The issue I had with the comments on the Globe and Mail article was that people were basically responding as though they are being told cash is being eliminated and they have to use an electronic wallet.  That is not the case.  There will be cash, there will be debit and there will be credit for the foreseeable future.  There will also be electronic wallets.  These digital modes of transaction are currently options; not requirements.

There are all sorts of people and transactions in the world, and they should all be able to transact in the manner that they wish.  Cash, Debit, Credit and eWallets can all play a role.  [Don’t believe the eWallet hype? – check out mPesa.]

Electronic wallets are imperfect for many reasons.  It’s absolutely true.  So are debit and credit cards.   There is fraud, there is theft, there are many inconveniences associated with using cards.  And yet 65-70% and more of many Canadian retailers’ transactions are made via debit and credit.

Somewhere, somehow, somebody is going to evaluate the list of bullets in this post and see opportunity; see a missed chance to do things better.  With emerging technologies, and changing consumer attitudes to mobile and electronic transactions, it’s only a matter of time until mobile digital wallet options become a bigger proportion of the payments people make.

As retail technology professionals, we should ensure that all of the infrastructure we put into place provides the flexibility to accommodate future payment modalities – whatever they may be.  Reading “The End of Money” provides a great background on why we should be ready for these new payment models.  Understanding the history helps to drive us into the future.

From my perspective, the Government of Canada is responsible for the money supply including the Bank of Canada and the Royal Canadian Mint.   They should be considering how Canada can move from a cash based society to a cashless society.  They should remember that they are not printers or minters – they represent monetary value in Canada and should continue to play that role electronically if it suits their constinuents.   They have already made a jump moving to polymer from paper.  Perhaps their next move should be silicon.

All of the national banks around the world should be considering this or find a way to harness private enterprises in this effort – before AppleSquareGooglePaypalStarbucksBumpPayGeodeWallet or others do it for them.

Update:  The Royal Canadian Mint has obviously been thinking the same way.

2010.11 | Paper or Plastic…Cash?

A customer sent me an article last week highlighting Canada’s plans to shift our paper money to leverage polymer in the 2011 timeframe.  

For retailers this means potential changes to counterfeit detection, and firmware updates for automatic cash acceptors.  On the upside, it also means cash that can last four times longer in circulation, and a more difficult note to copy.

Australia, New Zealand and seven other countries are using polymer based banknotes as of 2009.

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