The future of currency, physical and digital, consumed much of the discussion time during the 27th Mint Director’s Conference conducted May 7 and 8 in Austria.
The conference, hosted by the Austrian Mint in Vienna, was an industry gathering for officials from the mints that strike coins, the central banks that issue them, and the equipment manufacturers and material providers employed in the process.
Also participating were affiliated parties including some of the dealers and distributors that channel the coins to customers.
The theme of the conference was “Tradition meets innovation,” but it may well have been “remaining relevant in a digital age,” based on the presentations and discussions that resulted.
“Coins will not go away in our lifetime,” said Jin Roy Ryu, chairman and CEO of Poongsan Group, the South Korean conglomerate that produces coinage strip and ammunition, during the gala dinner May 8, an event sponsored by Poongsan. “That’s a problem for future generations to worry about.”
Others in attendance at the conference aren’t so sure about that timetable, and the diminishing demand for coinage — and ways to forestall it — was on the minds of the estimated 350 or so attendees, many of whom rely for their livelihood on coinage playing a vital role in commerce.
Gerhard Starsich, director general of the Austrian Mint, said that he is “strongly convinced that [multiple] ways of payment will continue to coexist but mints will have to deliver improvements in technology development, security features, improvements in processing and distributing coins and manufacturing coins. But we also have to improve our skills and efforts at marketing — in the global market, now we have to market our product as everyone else does.”
Leading the challenge, experts agreed, are the myriad digital payment systems that are meant to ease transactions and smooth the barriers of commerce, especially when smaller payment amounts are involved.
Digital payment systems
One of the latest initiatives, dubbed MintChip, is from the Royal Canadian Mint.
J. Marc Brûlé, vice president of finance and administration and CFO of the RCM, outlined the growth of the project, noting that by 2015 an estimated two-thirds of Internet users will be located in developing markets and 80 percent of their Internet connections will be made through mobile phones.
MintChip “can be as private as cash, can be person-to-person,” Brûlé said. Users would load data onto a chip, a USB card, a computer, tablet, into the “cloud” or “maybe some future device that doesn’t even exist yet.”
No age restrictions would hamper users and no bank account would be needed (for more about MintChip, see related story on page 5).
MintChip’s main benefit would be for smaller transactions, especially those under $1 (nanotransactions), Brûlé said. It can be a cost effective tool for transactions of that type, he said.
MintChip is “mobile commerce meets social commerce. ... Money as we know it today is fine, but tomorrow is another story,” he said.
Carmen Whateley, managing executive of financial services at the South African mobile phone company Vodacom, sees a similar future.
Vodacom has developed its own mobile payment system, named M-Pesa, allowing users to accept or transfer money through their mobile phone; one’s phone number in essence becomes the user’s bank account.
Users do not need to be Vodacom customers to establish an M-Pesa account, but money always has to be in the account for it to remain open.
“New doesn’t displace the old, it’s an evolution, not a revolution, it’s additive rather than displacive. ... Cash is not necessarily going to be replaced, it’s going to be enhanced,” Whateley said.
Collector coin challenges
With circulation coinage generating less and less activity and profit, as digital payments diminish coinage demand, collector coins are going to be an increasingly important segment for world mints, many participants at the conference said.
Rodolphe Krempp of the Monnaie de Paris (the French Mint) explained how the mint has helped develop a collector market in France for precious metal silver and gold coins at face value over the past few years, thus establishing a new market.
The French Mint’s offerings of this kind have also generated a new wave of collector that the mint was not previously reaching.
Ivor Masters of New Zealand Post also spoke about reaching new collectors with novel approaches, in this case relying upon the ties between stamp and coin collectors.
Coin collectors, who he described as being different from stamp collectors, have very similar psychographic and demographic qualities to stamp collectors, he acknowledged.
He noted that New Zealand Post’s products already reflected New Zealand’s unique identity, which is also the aim of commemorative coins.
The philatelic agency took over the rights to issue collector coins for New Zealand about 2001, and over the past decade has expanded from what was a very traditional agency, dedicated to issuing stamps with traditional themes, to a company that, rather than relying on serving an existing base of collectors, offers products geared to generate new customers.
“The [old] business model was not sustainable in the long run,” Masters said, noting the increasing ages of customers and dwindling order size experienced during the 1990s.
Product themes of the agency have included New Zealand’s culture, history, landscape, wildlife and more, and in many instances themes were celebrated on both coins and stamps, according to Masters.
“Like coins, stamps are little works of art. ... Stamp collectors in general are more likely to buy a coin than coin collectors are to buy stamps,” he said.
Among the subjects discussed were pseudo coins, with one mint official taking a stance generally in opposition to such pieces, prompting a later response from a firm that strikes commemorative coins for various nations.
René J.R. van Dijk of the Royal Dutch Mint took aim at what he called “pseudo coins” in the collector realm, what collectors know as “noncirculating legal tender” coins.
A major component of the “pseudo coins” category are official legal tender coins issued on behalf of tiny island outposts like the Cook Islands or Niue Island.
These are generally minted for sale to collectors only and, therefore, advanced collectors typically avoid them, van Dijk said, who added that “for this reason there is only a shallow secondary market for pseudo coins, so that they can only be sold at melt value.”
Issuers try to hide the status of pseudo coins by using certain terms like “legal tender,” “limited mintage,” and “demanded by collectors,” among others, van Dijk said.
These coins are often the vehicle for color, different shapes or other exciting technology, and “beautiful examples in terms of craftsmanship can be found,” van Dijk said.
The fact that some world mints strike these pseudo coins lends an air of credibility to their issue, he said.
However, “it would be interesting to see whether a supermarket on the Cook Islands would accept these coins as payment — as I said the basic functionality of a coin — if anybody in his right mind would try to offer the coin as such,” van Dijk said.
He identified other categories of pseudo coins, including medals issued in the name of islands with no inhabitants and medals resembling legal tender circulation coins, but intended to confuse and deceive, the latter including “euro look-alike coins” from Denmark and the United Kingdom, “countries that clearly don’t use the euro at this moment.”
Van Dijk acknowledged that the Royal Dutch Mint offers some of the pseudo coins in its Web shop, as a concession to the fact that a collector market for these coins exists.
“And whether we like it or not, the fact that this market exists means that, on the demand side, collectors were not satisfied with the products that the regular mints brought onto the market,” Van Dijk said.
A focus on product development can turn the tide back toward national mints, van Dijk said, pointing to the Netherlands’ issue recently of a commemorative coin with color, celebrating the relationship between the Netherlands, Turkey and the tulip, as well as the issue in 2011 of a coin that featured a QR code.
Mints have a role to educate customers on the differences between legal tender and nonlegal tender issues, between coins and medals and their official status, but ultimately, it is up to the collectors to decide whether to collect such items.
“If he favors a pseudo coin because he thinks it is beautiful, so be it. This means that we as mints have not succeeded to fulfill his needs [which is] an extra incentive to focus on product development, and to create products that do fulfill his needs.”
An opposing view
Niels Hagemann, managing director of MdM, a large European coin firm that often spearheads the issuance of commemorative coins from places like Palau and Samoa, wasted no time in challenging van Dijk.
Hagemann noted that it is up to the mints that strike the coins in the names of these nations to demand the official paperwork from dealers distributing “pseudo coins” proving that they have been approved by the issuing authority, which he said MdM has received for all of its issues.
Other challenges in attracting collectors for commemorative coins also face mints. ■