The 2020s will pose a variety of challenges to suppliers of security papers as consumers move to more online and contactless payments options in response to advancing technology and the risk of COVID-19. According to the new Smithers report – The Future of Security Papers to 2025, this year 914,000 tonnes of specialty paper grades with a projected value of $6.27 billion will be used worldwide in different security document applications. This accounts for increased demand for banknotes and an overall decline in paper volume by about 0.3% annually. Spending on security papers is increasing by about 2% over the forecast period.

In its latest security papers research, Smithers has forecast an increase in market value to $6.58 billion in 2025 at a compound annual growth rate (CAGR) of 1.8%. This increase will take place even as volumes fall and suppliers adjust to new priorities in an altered commercial landscape. The Smithers analysis of security papers covers banknotes, cheques, personal identity documents; postage and tax stamps. It also looks at trends and demand for specialty papers used by the transportation, event, and lottery ticket segments, among others.

Impact of coronavirus

Smithers found that the coronavirus lockdown is having a bigger impact on certain security papers segments than others. For example, demand for ticket papers has been hard-hit as events have been largely shut down across the globe. Transportation tickets have been equally affected by ongoing travel restrictions and as consumers and the industry shift towards paperless or fully electronic ticketing. Similarly, cheque papers have suffered the move of consumers to more online and contactless payment options to minimize infection risk.

Demand in banknotes and personal ID documents – principally passport visa pages – will be much less affected by the coronavirus and will continue to benefit from wider use of identity documents and the cash economy in developing regions through to 2025.
 
Postage stamp volumes will continue to decline, but the segment will benefit from the wider use of tax stamps as authorities look to clamp down on illicit and grey market trade. The EU’s Tobacco Products Directive (EUTPD) and the WHO’s Framework Convention on Tobacco Control (FCTC), will continue to provide stimulus to the segment.

Banknotes, a bright spot

The current uncertainty has led consumers to withdraw and hold cash, driving peak demand for banknotes in H1 2020, with paper banknote printing volumes forecast to remain stable in the medium term. Polymer substrates are now in use for all denominations in two G8 countries; but no other changeovers for major currencies are anticipated. More importantly, central banks are increasingly looking for full-service providers to supply note substrates, security features, and design expertise, as a single package; opening new revenue potential for larger, integrated security print firms. 

Conversely for those governments that retain a state-owned banknote paper mill; there is impetus to adopt a more commercial outlook and compete with private-sector security printers for contracts.

Leading regional consumers

Volume increases of security papers over the period of 2020-2025 will be confined to growth in Asia and Eastern Europe. Asia-Pacific specifically will expand its share of the security paper market by volume from 41% to 47% across the forecast period. This will prompt existing suppliers to diversify their sales forces and pursue new joint ventures in these active regions.

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