What is an Automated Teller

Machine & Its Working

The term ATM stands for automated teller machine. It is an electronic device

that is used by only bank customers to process account transactions. The

users access their accounts through a special type of plastic card that is

encoded with user information on a magnetic strip. The strip contains an

identification code that is transmitted to the bank’s central computer by

modem. The users insert the card into ATMs to access the account and

process their account transactions. The automated teller machine was

invented by John Shepherd-Barron in the year 1960. This article discusses an

overview of the automated teller machine (ATM).

What is an Automated Teller Machine (ATM)?

By using an automated teller machine or ATM we can perform different

financial transactions such as cash deposits, withdrawals, transfer funds,

information of account, ATM PIN change, and also linking the Aadhaar

number to the bank account so that the interaction between the bank staff and

the customer can be reduced.

The automated teller machine (ATM) is an automatic banking machine (ABM)

that allows the customer to complete basic transactions without any help from
bank representatives. There are two types of automated teller machines

(ATMs). The basic one allows the customer to only draw cash and receive a

report of the account balance. Another one is a more complex machine that

accepts the deposit, provides credit card payment facilities and reports

account information

History of Automated Teller Machines

The first ATM concept arose in different countries like Japan, the UK, Sweden

& the US. So, Japan invented the Machine for Computer Loan that is called a

computer load machine to supply cash. This device was used in the year1966.

After some developments, the initial cash dispensing machine was developed

by Britain, in London, 1967. This machine was first used by “Barclays Bank”

which is located in Enfield Town of North London. This machine was

developed by the firm De La Rue & John Shepherd-Barron. This was the

essential point for current ATMs.

In India, the development of ATMs was very slow because they were

launched in the early 1990s to the Indians and assisted through foreign banks.

When most of the banks were facing severe problems because of the lack of

a strong branch system, then automated teller machines appeared like the

best solution to these problems.

The ATM machine was implemented to reduce the obstructions of the branch

networking by reaching out to the customers by offering comfortable services

with fewer transaction charges. After that, many improvements in this

technology have arrived & also customer accessibility has also improved

through boundaries.

Block Diagram of Automated Teller Machine

The block diagram of the automated teller machine consists of mainly two

input devices and four output devices. The input devices like card reader and

keypad whereas output devices are speaker, display screen, receipt printer,

and cash depositor.

Automated Teller Machine Block Diagram

Input Devices

The input devices like card reader and keypad.

Card Reader

The card reader is an input device that reads data from a card. The card

reader is part of the identification of your particular account number and the

magnetic strip on the backside of the ATM card is used for connection with

the card reader. The card is swiped or pressed on the card reader which

captures your account information i.e. the data from the card is passed on to

the host processor (server). The host processor thus uses this data to get the

information from the cardholders.

 A
TM Card Reader

Keypad

The card is recognized after the machine asks for further details like your

identification number, withdrawal, and your balance inquiry Each card has a

unique PIN so that there is little chance for some else to withdraw money from

your account. There are separate laws to protect the PIN code while sending

it to the host processor. The PIN is mostly sent in encrypted form. The

keyboard contains 48 keys and is interfaced to the processor.

ATM Keyboard
Output Devices

The output devices are speaker, display screen, receipt printer, and cash

depositor.

Speaker

The speaker provides audio feedback when a particular key is pressed.

Display Screen

The display screen displays the transaction information. Each step of

withdrawal is shown by the display screen. A CRT screen or LCD screen is

used by most of the ATMs.

ATM Display

Receipt Printer

The receipt printer prints all the details recording your withdrawal, date and

time, and the amount of withdrawal and also shows the balance of your

account in the receipt.

Cash Dispenser

The cash dispenser is the heart of the ATM. This is a central system of the

ATM from where the required money is obtained. From this portion, the user

can collect the money. The cash dispenser must count each bill and give the

required amount. If in some cases the money is folded, it will be moved to

another section and becomes the reject bit. All these actions are carried out

by high precision sensors. A complete record of each transaction is kept by

the ATM with the help of an RTC device.

ATM Cash Dispenser

ATM Networking
The internet service provider (ISP) also plays an important role in the ATMs.

This provides communication between ATM and host processors. When the

transaction is made, the details are input by the cardholder. This information

is passed on to the host processor by the ATM. The host processor checks

these details with an authorized bank. If the details are matched, the host

processor sends the approval code to the machine so that the cash can be

transferred.
 Automated Teller Machine Networking

Types of ATM Machines

There are different types of ATMs in the market which include the following.

Most of the host processors can support either leased-line or dial-up

machines

Leased Line ATM Machines

The leased line machines connect directly to the host processor through a

four-wire point to point dedicated telephone line. These types of machines are

preferred in place. The operating cost of these machines is very high.

Dial-Up ATM Machines

The dial-up ATMs connect to the host processor through a normal phone line

using a modem. These require a normal connection their and their initial

installation cost is very less. The operating cost of these machines is low

compared with leased line machines.

White Label ATM

These ATMs are arranged, operated & owned through non-bank entities.

These ATMs were launched by RBI (Reserve Bank of India) for assisting
financial insertion as well as drive ATM access within the country. These

types of ATMs will not show any bank’s logo. The first white logo ATM was

launched by TATA in India beneath the brand name like Indicash.

Brown Label ATM

Brown label ATMs were maintained & owned through a service provider

where a supporter bank whose brand can be employed on ATM to take care

of network connectivity as well as cash organization.

Onsite ATM

These ATM machines are arranged in locations wherever a bank branch is

located. So, both the bank as well as ATM can be used physically for several

purposes by being on-site. Many customers can utilize this to keep away from

the queue lines at the branch of the bank so that time taken to finish their

bank transactions can be reduced.

Offsite ATM

These machines are arranged on a separate basis, which means that the

bank has a place where there is only an ATM machine then this becomes an

offsite ATM. This can be done to make sure that the bank reaches out to more

geographical locations to utilize its services by the people even when there is

no branch of the bank within the region. So these machines will operate

outside of the bank locations.

Cash Dispenser

These machines allow simply balance inquiry, mini statement & cash

withdrawals..

Mobile ATM

These machines move in the locations for the users because COVID 19 has

led to the rush within the several Mobile ATMs.

Green Label

These types of ATMs are used especially for agricultural transactions.

Orange Label

These are mainly used for share transactions.

Yellow Label

These ATMs are used for an online purchase by providing an E-Commerce

facility

Pink Label

These ATMs are used especially for women. These ATMs are observed by

protectors to make sure that only women are accessing or not so that women

waiting in long queues can be reduced.

ATM Security:
The ATM card is secured with a PIN which is kept secret. There is no way to

get the PIN from your card. It is encrypted by strong software like Triple data

Encryption Slandered.

Automated Teller Machine Working Principle

The automated teller machine is simply a data terminal with two inputs and

four output devices. These devices are interfaced with the processor. The

processor is the heart of the ATM. All the ATMs working around the world are

based on a centralized database system. The ATM has to connect and

communicate with the host processor (server).

The host processor is communicating with the internet service provider (ISP).

It is the gateway through all the ATM networks available to the cardholder.

When a cardholder wants to do an ATM transaction, the user provides

necessary information through a card reader and keypad. The ATM forwards

this information to the host processor. The host processor enters the

transaction request to the cardholder bank.

If the cardholder requests the cash, the host processor takes the cash from

the cardholder’s account. Once the funds are transferred from the customer

account to the host processor bank account, the processor sends the

approval code to the ATM and the authorized machine to dispense the cash.
This is the way to get the amount on ATMs. The ATM network is fully based

on a centralized database environment. This will make life easier and secure

cash.

How to Operate ATM Machine?

The Automated teller machine is very simple to operate. The step by step

algorithm for ATM operation is discussed below.

● First, need to visit the nearby ATM center & place your ATM card
within the machine.
● Select your language which appears on the ATM monitor like your
local language, Hindi, and English.
● Select the transaction type from different transactions like money
transfer, withdrawal, deposit, etc.
● Choose the account type like savings or current.
● Enter your 4-digit ATM pin number and enter the required amount to
withdraw.
● Gather the money and collect your receipt
● For further transactions, you can perform another also by selecting
the option.

ATM Software
The ATM (Automated Teller Machine) design is a combination of hardware

and software. The hardware of the machine is mainly designed for deposits of

cash, withdrawal, payments of credit card & for reporting the information of
account. The software of ATM is designed to control ATM transactions &

channels on centralized databases.

The famous ATM software that works on the XFS platform comprises Diebold

Agilis EmPower, Triton PRISM, NCR APTRA Edge, AbsoluteINTERACT, KAL

Kalignite Software Platform, Wincor Nixdorf ProTopas, Phoenix Interactive

VISTAatm, Intertech inter-ATM & Euronet EFTS. Once the ATM machines

were shifted to industry standards then anxiety has increased on the software

stack of ATM.

ATM Charges

At present, everyone goes to ATM centers frequently for different purposes

like to withdraw, deposit, mini statement, pin change, etc. But for the account

holders, the transactions are not free from their bank ATM as well as other

bank ATMs.

So for bank account holders, they allowed for five free transactions from their

ATMs and three times from other bank ATMs. The ATM transactions not only

include withdrawal but also include changing PIN numbers, balance inquiries,

mini statements, etc. It charges for when we withdraw the amount.

When the number of transactions exceeds the fixed transactions like

withdrawing/non-cash withdraw then it will charge some amount which is

deducted from your account.

Every bank provides ATM cards for their bank account holders at the time of

account opening without any charge. But, different banks will charge while

using the ATMs for transactions when it exceeds a fixed number of

transactions. For initial transactions, it will not charge for transactions. For

instance, the top banks like SBI, ICICI, and HDFC will charge per transaction

like the following.

● For SBI bank, the free transactions per month are five at SBI and
three in other banks. The cost per each transaction is 25 rupees.
● For ICICI bank, free transactions at all ICICI banks & charges 25
rupees in non-ICICI bank ATMs
● For HDFC Bank, free five transactions at metro ATMs-3 whereas
non-metro ATMs-5 and charges 20 plus rupees

Some Facts about ATMs in India

Some facts about an ATM in India are discussed below.

● As per 2019 records, the total ATM machines located are 222,318
● The highest number of ATMs used in Maharashtra, India.
● For SBI bank, the highest ATM machines were installed in India are
59,521.
● The first talking ATM in India is located in AhmedabadHighest cash
withdrawal limit in an ATM is 20k to 1 lack depending on the bank.
ATM Maintenance

The following five things must keep in mind while maintaining the ATM.

● Standard ATM parts must be cleaned

● The machine must be checked for inspecting
● Surveillance camera must be checked whether that is working or not
● ATM must be protected from the elements

Advantages
The advantages of an automated teller machine include the following.

● Automated teller machines are easily arranged in different areas so

that every bank customer can visit the machine to execute any
transaction.
● It is used to withdraw the money in a fraction of minutes so that time
can be saved.
● To get an ATM card at present, the process is hassle-free because
no documentation work is required. All the banks are providing an
ATM card at the time of opening an account.
● ATM machines provide the transaction details to know the balance of
the account holder
● Utility payments can be done by using an ATM card
● ATMs provide 24X7 service
● ATM is much secured because it can be used only when the person
knows the ATM password.
● ATMs will reduce the workload for the bank employees.
 ● It reduces the cash-carrying because anyone can withdraw the
money at any ATM center so it works like a cashpoint
● The ATM provides 24 hours service
● The ATM provides privacy in banking communications
● The ATMs reduce the workload banks staff
● The ATM may give customer new currency notes
● The ATMs are convenient for banks customers
● The ATM is very beneficial for travelers
● The ATM provides services without any error

Features
The features of the automated teller machine include the following.

● Transfer funds between linked bank accounts

● Receive account balance
● Prints recent transactions list
● Change your pin
● Deposit your cash
● Prepaid mobile recharge
● Bill payments
● Cash withdrawal
● Perform a range of features in your foreign language.

Disadvantages
The disadvantages of automated teller machines include the following.
● IT charges some amount once free transactions exceed
● Once ATM card damages then cash withdraw is not possible
● Possibility of cash robbery from ATMs
● ATM pin can be easily hacked by criminals by operating an ATM
● The risk of theft is high while going to ATMs