Bob, this idea was around at last year's show. As I understand it, there's a couple of problems. One, the hoppers to dispense multiple, different denomination notes are expensive. More importantly, Uncle Sam does have a big problem with casinos printing up their own paper money. To prevent counterfeiting, the note must have security features very much like real money. There are federal regulations to deal with.
The easier solution is to put the security in a central system, using a secure validation number. The slot machine prints a voucher for any amount it needs to. The voucher is the same size as a dollar bill, and can be redeemed in the bill validator of another slot machine. But the security is in the validation number, not the piece of paper. A voucher can only be redeemed once, so a copy is useless. IGT demonstrated their EZ Pay system at the gaming show, and the concept is VERY popular. A slot machine can have both a printer and a hopper, so it can pay small amounts from the hopper, and larger amounts with a voucher. You can also have multi-denomination machines, where the player can select a penny, nickel, quarter, dollar, whatever game. The machine can easily pay amounts that are not divisible by the hopper.
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