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December 13, 2021

Casinos as Technology Innovators

We don't normally think of payments and gambling casinos together, but a recent trip reminded me how the casino industry has adapted technology in a number of different ways to improve their operations and how some of those innovations have found their way to the banking industry. In October my wife and I took a road trip to see the leaf changes and found ourselves in Cherokee, North Carolina, whose economy is dominated by a casino. The greatest number of options for dining in the town were in the casino's food court, so we parked and went inside. While this casino did not have the variety of high-end shops and celebrity chef restaurants found in Las Vegas, it did have a lot of the technology that's evident in those Las Vegas casinos, including lots and lots of rows of slot machines and table games.

Over the years, I have noticed the significant changes that have taken place in casinos with regards to coin handling and slot machine technology. For one, coins have been almost eliminated for both inserting into the slot machines and payouts. Now, if you hit a payout and press the collect button, instead of hearing the loud clang, clang noise of coins hitting the tray, you hear an electronic version of coins being dispensed and then the whirring of a paper voucher being printed out. This change has largely been motivated by the expectation of substantial cost savings from reduced coin handling and storage, as well as transportation expenses.

Another major change in casinos has been the transition from mechanical to electronic in all aspects of casino games. Much to my dismay, it is almost impossible today to find a slot machine with a handle that you pull to start the reels rolling. Now, you press a "spin" button to start the game. I am willing to bet the casino operators have found that eliminating the pull handle increased the number of plays per minute as well as eliminated the breakdown of mechanical parts, for additional revenue and reduced operational expense. Winner, winner, chicken dinner. Anyone who has visited a casino in the last 10 or so years knows that the mechanical reel slot machines have long disappeared and been replaced with electronic video displays, whether those show a hand of cards or symbols you are trying to match.

ATMs have long been present in casinos as a means for customers to get extra cash—with surcharges often as high as $10—but these single-purpose machines have been replaced by multifunction kiosks. The virtual teller machines you often now see in banking offices are an evolution of the casino kiosks. Not only can these casino kiosks perform account withdrawals like an ATM, but they can also redeem those winning paper vouchers down to the penny, break large denomination bills to smaller denominations, and provide dining locations and other guest information.

You can see another technological innovation with table games. Recently, some casino table games—including craps, blackjack, and roulette—have started using virtual dealers. Players sit around the table and place bets electronically from their "stack" of virtual chips while the holographic dealer operates the game. Based on my observations, casino patrons still seem to prefer the games staffed by real people.

Of course, casinos were one of the early users of facial recognition technology to spot individuals who have been banned for cheating or for some other reason. And you'll see the high-definition surveillance cameras everywhere, watching employees as well as patrons, monitoring possible cheating activities, and looking for situations of possible customer conflict.

Incidentally, while I was researching the changes that have occurred in casinos, I came across a paper Adobe PDF file formatOff-site link written by my colleagues at the Federal Reserve Bank of Richmond back in 2005. Although the paper is more than a decade old, it still provides an excellent overview of the technology and coin/currency operational changes that have taken place in casinos.