We normally take the role of cash for granted in running our banks.

Sure, there are exceptions. When the public gets scared because of a notorious bank failure somewhere, people clear out their greenback from banks all over the nation.

Cash can be a nuisance when there is an unexpected outflow at some location and the management must get new supplies in a hurry - often on a weekend.

And cash needs can hurt profitability, as with the Y2K situation, when all banks kept heavy supplies just in case people got scared and wanted to withdraw money.

Basically, that's about all the attention that management gives to greenbacks and coins.

But sometimes the role of purveyor of cash can give banks a competitive advantage in getting the public's business.

Look at the smart card.

The drill looked simple: Take money out of your account and fill the smart card. Then, wherever it was accepted, you could unload some of that money to pay for goods.

Great, but two problems.

One: What if you didn't have enough left in the card to pay for what you wanted? How could you tell in advance without effort?

Two: What if the store you entered didn't accept the smart card?

Cash was the winner. No need to go in and load up. You could tell if you had enough by counting it, and it would be accepted everywhere.

Cash has played an even more important role in delaying a changeover to Internet banking.

Why is it that only 3% (or some people say 7%) of bank customers use on-line banking? Because it cannot provide cash or accept deposits.

Sure, you say, use ATMs. But your on-line bank has to be connected to your local ATM. And more important, most Americans still hesitate to deposit cash (or checks, for that matter) in an impersonal ATM, for fear that they will have no proof if the bank denies they made the deposit.

Will the role of cash change through the years?

One scenario I have heard is that the dissemination and collection of cash may become more efficient.

The year is 2025. I go to my bank for cash. The teller or ATM will read my card and take $500 out of my account. Then a machine like those that dispense movie tickets will spin out 10 brand-new $50 bills. Simultaneously the Federal Reserve will learn of this transaction and take $500 out of my bank's reserves.

When I deposit cash, an optical scanner will read the serial numbers, give the bank back its reserves, and add the amount to my account. Then the bills will be chopped up.

Isn't this wasteful? Some feel it is not. It is cheaper to print a dollar bill than to handle one, they say.

It is like restaurants. Only in the fancy ones do they wash the dishes and use them over again. In the fast-food places they use them once and throw them out, as it is cheaper to make a dish than to wash one. Mr. Nadler, an American Banker contributing editor, is professor of finance at Rutgers University Graduate School of Management.

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