Cash handling experts Volumatic have delved into the history of banknotes or ‘paper money’ to see how they’ve changed, developed and become more innovative around the world since they were first introduced over 2,000 years ago.
The origins of paper money
Paper money can be traced as far back as the Roman Empire; however, the first proper kind of banknotes came about in the 7th Century in China, which issued promissory notes as an alternative to carrying heavy copper coins in large transactions, making trade easier and safer. They were private notes, not issued by any kind of central bank, but were precursors to the widespread use of paper money that would eventually spread across the Western world.
Many centuries later, the first kind of European banknotes were issued in Sweden in 1661, with the UK following suit in 1697 – three years after the Bank of England was established. These notes were called ‘running cash notes’, or ‘promises to pay’. They could be for any amount and were usually handwritten.
Combating counterfeits
Many early types of banknotes were easy to forge and could easily be destroyed, so action was needed to rectify this. Without doubt, the main driver behind the many changes made to banknotes over the years has been innovation to help combat counterfeits.
With every advancement in technology, counterfeiters have been given new tools to create more sophisticated forgeries. So, the Bank of England’s objective has been to play the counterfeiters at their own game, regularly introducing new high-tech security features to give UK businesses and consumers ongoing confidence in their currency.
One of the first anti-forgery devices on banknotes and their forerunners was the use of specialist inks and papers, which were introduced in the 1730’s by Benjamin Franklin during the American Revolution. Also around this time, as the demand for notes increased in more civilized nations, they began featuring a printed (rather than handwritten) denomination for the first time, making it difficult to alter the value of the note from this point.
The first fully printed notes were issued in 1793 by the Bank of England, to compensate for the gold shortage caused by the French Revolutionary Wars. There were many more note denominations at this time than exist today, with £1, £5, £10, £20, £30, £40, £50, £100, £200, £300, £500 and £1,000 notes available.
Printed paper money didn’t appear in the U.S. until 1861, when it was authorized by Congress to provide emergency funding for the Civil War. This was the birth of the U.S. dollar as we know it today.
The U.S. dollar is now the world’s foremost reserve currency and is issued and is now controlled by the Federal Reserve System (FED), which was created in 1913. The FED has also strived to continually develop its banknotes through ever-evolving technology.
Banknotes evolving
From the early 1900s, banknotes were designed to include secret markings to prevent forgery. They were deliberately made to look like small flaws in the printing process, which counterfeiters would then attempt to correct, making forgeries easier to spot.
1928 saw the introduction of the first banknote produced in color in the UK, and then with World War II in 1940 came another advancement in forgery detection – the metallic security thread. This was added by the Bank of England to stop Nazi plans to flood the country with counterfeit notes.
In 1961, we saw a step toward the banknotes we’re familiar with today in the UK, with the introduction of a portrait of the then monarch on notes – Queen Elizabeth II. The portrait was considered to be an added security feature, as changes to an image of a face are easier to detect. This led to faces of monarchs, presidents and other officials being added to banknotes around the world.
Access to cash and more advanced security features
The World’s first ATM was introduced by Barclays Bank in England in 1967, giving the public access to withdraw cash for the first time outside of a banking facility. Today, there are over 3.5 million ATMs worldwide and access to cash remains as important as ever for both businesses and consumers.
Another advancement in counterfeit prevention came about in 1970, when a watermark image that could only be seen when held up to the light was added to the £20 UK banknote.
In 1975 – and an important milestone for Volumatic – German firm G+D created the first automatic banknote processing machine, allowing banks to count and check notes for authenticity and condition at a rapid pace for the first time. This was the forerunner of the many cash handling devices available today, including the intelligent solutions in Volumatic’s current product range.
The birth of holograms and polymer
1988 saw two firsts in the world of banknotes, both of which made their debut in Australia.
Polymer notes were introduced and would eventually replace paper notes across the majority of the world. Polymer is far more durable than paper and also enables more security features to be added to notes, such as transparent windows and the addition of ‘optically variable devices’ (OVD’s) – something that looks different depending on the angle it is viewed at, which cannot be scanned, photocopied or easily replicated
Holograms were also featured on banknotes for the first time, which could be printed on the transparent windows on the new polymer notes, and were again an important step in the fight against counterfeits. The UK followed Australia by rolling out a hologram of their Britannia vignette across all UK notes in 2000 and then launched their first polymer notes in 2016, which eventually replaced all paper notes.
The past 30 years have seen other advancements in banknote security features, such as omron rings and micromirrors, both of which make notes even harder to forge. However, as clever as these are, forgeries are still an ongoing issue for busy businesses, and counterfeit detectors still remain a vital tool to help eliminate counterfeits.
The future of banknotes
Despite their long history, one thing is certain – banknotes are still as relevant today as they were 2000 years ago. 2025 has seen something of a shift in the UK payments landscape – the rise in digital payments is slowing down, and banknotes and coins are once again resurgent, with physical cash proving to be a useful and resilient payment method in the current era of ongoing cyber-attacks and network outages across the world.
It’s not just the UK that are seeing the tide change. Over the past year, Federal Reserve Board staff, alongside other U.S. Currency Program partners, have collaborated on banknote and technology development, focusing on improving security, manufacturing capabilities and on security features that can further bolster the counterfeit resistance of U.S. currency.
The Federal Reserve’s goal is to develop the next family of banknotes with new, robust security features integrated into their design, which is easy to authenticate and difficult for counterfeiters to emulate. This continued investment and infrastructure shows their commitment to the future of cash in the U.S. and beyond.
Another country also investing in the future of cash is Australia. The ongoing demand for polymer banknotes in Australia, which were first introduced there in 1988, has led the Reserve Bank of Australia (RBA) to invest in major advancements in security features such as holograms, security threads, color-shifting inks and more advanced digital printing methods.
Like in the Eighties, Australia are again leading the way in banknote evolution, and it seems certain that global collaborations and research into next-generation banknotes will follow.
The production of new banknotes continues to grow globally, and cash retains an advantage over other forms of payment in that it is convenient, reliable and anonymous. All of this means that cash isn’t going anywhere, and the ongoing evolution of banknotes is proof that they are still very much in demand around the world and still play a very valuable role in our society.
