The issue of counterfeit banknotes continues to be a significant challenge for convenience retailers across the UK. Despite the shift towards digital payments after Covid, cash remains the main payment method for many, many customers.
Particularly within our industry, where an impulsive ‘just going to pop to the shop’ goes hand-in-hand with having a spare £5, £10 note.
This week, we thought we’d delve deeper into the scale of the problem by exploring recent statistics and the impact that these have on small businesses.
According to a 2023 report by the Federation of Small Businesses, cash is still the primary payment method for 25% of customers in small high street businesses.
With this ongoing reliance on cash, retailers are vulnerable to fraudsters who attempt to pass off counterfeit notes, especially those of high value such as £20 and £50. This trend is much more prevalent during peak periods- such as the festive season- when cash transactions usually surge as people try to keep an eye on their spending.
The introduction of polymer banknotes by the Bank of England, which began with the £5 note in 2016, has played a crucial role in reducing the number of counterfeits in circulation.
However, counterfeiters have adapted, creating replicas that can fool unsuspecting retailers and their staff without the proper training.
The Bank of England, in collaboration with the Federation of Small Businesses, has launched initiatives like the Banknote Checking Scheme to educate businesses on identifying these fake notes and minimising their exposure to fraud.
For retailers within our industry, the implications of accepting counterfeit banknotes are twofold: financial loss and reputational damage. Each fake note accepted is not only a direct monetary loss, but the business’ credibility can also tarnished; that note will circulate, after all, most likely to customers and people within the community.
Retailers who fall victim to this method of fraud are often targeted repeatedly, as fraudsters see them as easy marks.
The ACS highlighted the severity of retail crime in their 2024 Crime Report, noting a record 5.6 million incidents of shop theft in the past year alone. While not all of these incidents involve counterfeit notes, it does involve financial crimes impacting small retailers.
Of course, we are very aware that this is a problem that cannot be stopped easily.
Fake notes will still be made, fraudsters will still attempt to see what they can get away with, and there will always be the chance of human error; however, to combat the issue, the Bank of England has emphasized the importance of training for retail staff in identifying fake notes.
Key security features on polymer notes include the hologram image that changes from ‘Twenty’ to ‘Pounds’ when tilted, see-through windows, and a 3D image of the coronation crown. Retailers are encouraged to invest in UV lamps to check the fluorescent features on banknotes, as recommended by the Bank of England.
The FSB has been proactive in putting out information and resources to its members. The scheme offers free training materials, regular updates on banknote features, as well as a dedicated point of contact for businesses dealing with counterfeits.
Martin McTague, National Chair at the FSB, emphasized the scheme’s value: “Many small businesses rely heavily on cash; it provides a form of commerce to less digitalised businesses, acts as a check on pricing fees of card transactions, and serves as a backup for when digital methods fail.”
On a personal level, retailers can take several steps to protect themselves against counterfeit banknotes. Staff training should be a priority and not taken lightly, especially during the busier periods of the year. Employees should be familiar with the security features of genuine notes and be vigilant when handling high-value notes.
Additionally, investing in counterfeit detection devices, such as UV lamps and automatic note checkers, can help identify fake notes before they are accepted on top of manual checks, such as examining the quality of print and texture of the note.
The combined efforts of the Bank of England, FSB, and retail associations like ACS are critical in the fight against counterfeit banknotes.
However, continued awareness and proactive measures from individual retailers remain the frontline defence in protecting small businesses from financial loss and fraud.
In conclusion, while the fight against counterfeit banknotes in the UK’s convenience retail sector won’t end anytime soon, enhanced staff training and effective detection measures can help pave the way towards a more secure retail environment. We advise retailers to always remain vigilant and informed, in order to safeguard their businesses and protect their communities.
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