Preview: Inside the U.S. Mint's R&D labJanuary 8, 2014: 6:13 PM ET
Pennies and nickels cost far more to make than they're worth. Is that a problem worth solving as we move toward a cashless society? The U.S. Mint thinks so.
FORTUNE -- In 2010, the U.S. government generated nearly $43 million in losses by manufacturing and distributing the penny and the nickel. That same year, a Congressional law called on the U.S. Mint to research alternative metals that could bring down the production costs of all its circulating coins. The clock was ticking: By 2012, the Mint's losses grew to $109 million, mirroring increasing production of pennies and nickels.
Money, it turns out, is rather expensive to produce.
In 2011, the Mint asked the scientific research and development firm Concurrent Technologies Corporation to perform an independent study on its coin costs. CTC scientists considered two distinct courses of action. One would involve switching to cheaper metal alloys using aluminum, zinc, and steel, while the other would just slightly reduce the relatively expensive nickel and copper content in the 5¢, dime, and quarter denominations. The former promised larger cost savings for the Mint. The latter minimized the coin conversion costs that could hurt any business with machines that accept coins.
After nine months of work, CTC concluded in 2012 that further testing was necessary. The ideal alternative alloy was not yet apparent. Among its recommendations, which were outlined in a 400-page report, CTC suggested that the Mint shy away from changing the composition of the penny -- the potential cost savings were too meager -- and focus its efforts on the nickel.
The Mint is still working to find the ideal metal or alloy candidate to bring down coin costs. When it finds one, it will be a milestone -- the composition of coins in circulation has not changed significantly for nearly 50 years.
On Thursday, Fortune will travel to Philadelphia to visit the U.S. Mint, tour its research and development lab and talk with Deputy Director Richard Peterson about why metal currency costs are still a problem worth solving -- to the tune of millions of dollars in research and development -- in an age when more and more people pay with plastic cards, glassy phones, and all manner of surrogates in between. It just may be that all those pennies, nickels, dimes, and quarters you probably have stuck between your couch cushions and car seats still matter.