Factors affecting the probability of detecting a counterfeit banknote: attitude, situation and design

Banknotes have been counterfeited ever since their introduction. Today, around 350,000 counterfeit euro banknotes are retrieved on an annual basis from circulation worldwide. These counterfeits are seldom of good mimicking quality. Nevertheless, they have been used in a transaction, implying that at some point (or several points) someone has encountered a financial loss. To central banks it remains somewhat of a puzzle that people accept counterfeited banknotes, as it is generally believed by central banks that security features of banknotes can be verified easily. In this thesis, I propose a Model for Accepting or Rejecting a Counterfeit (MARC) that is based on a dual processing theory in which it is assumed there are two different processes that people may use when making decisions. The central viewpoint is that rapid autonomous processes (Type 1) are assumed to yield default responses unless intervened upon by distinctive higher-order reasoning processes (Type 2). Regarding MARC, this means that the default response is an automatic acceptance of a counterfeit (Type 1), as research shows that people generally accept banknotes without consciously verifying their authenticity. This default process transitions into a deliberate authentication process (Type 2) due to a lack of confidence in the cash system, unusual environmental circumstances, or a poor quality of the banknote. Depending on the abilities of the assessor and the characteristics of the security features of a genuine banknote, this authentication process may or may not lead to detecting the counterfeit. Suggestions for the design of better security features are discussed, including attention-guiding features that fit the design of a banknote. This thesis comprises experimental studies that provide some support for MARC, with a focus on the factors prompting (or increasing) Type 2 processing and, consequently, the cognitive factors determining success rates. All these studies have made use of signal detection theory (SDT) measures to gauge participants’ counterfeit detection performance. The first study refers to one of the situational factors. Specifically, the research question was whether the quality of (genuine) banknotes in circulation (the environment) affects counterfeit detection. The study led to the conclusion that the cleanliness of banknotes in circulation helps counterfeit detection. However, the high detection rates in the clean sets of the samples were accompanied by a large number of false alarms. A clean circulation does not seem to contribute to authentication sensitivity. The second study refers to the respective roles of vision and touch, as well as exposure duration. Visual information mostly impacts the decision-making process during the first glance, whereas tactile information increasingly aids performance as it continues to be accrued over time. It could also be deducted that with more training and instruction, the performance of the general public could be much improved. A third study focused on the hypothesized benefit of (1) adding salient design elements to a banknote, and 2) manipulating trust. In summary, this thesis provides insight into why people accept counterfeits, using knowledge of attention, perception and decision-making processes. An overarching goal is to contribute to maintaining the trust of the public in banknotes in general. This will help central banking authorities in their task to promote a safe and reliable payment system and eventually will help the public at large through reduced counterfeit losses