Automated Teller Machine

Automated teller machines (ATMs) or cash machines are simple electronic devices that provide instant liquid cash and other banking services. Hence, customers can avoid going to their banks for basic services. Instead, they can use any ATM, even the ones operated by other banks, using their debit or credit cards.

The main advantage of ATMs is that they are self-service counters and do not require an extensive workforce, provided the number of locations they are in. However, digitalization has paved the way for internet banking, and customers only have to use ATMs when they need liquid cash.

• Automated teller machine (ATMs) refers to electronic kiosks and outlets operated by banks that offer basic banking services to customers by alleviating the need to visit the bank.
• The uses of automated teller machines include cash withdrawals, deposits, account transfers, and checking account information.
• It functions 24X7 and is present in multiple locations. It offers great flexibility, too, i.e., the ATM operated by any bank can be used for its purposes.
• However, ATMs also have some disadvantages; it limits cash withdrawal and sometimes hold insufficient cash.

Automated teller machines were a disruptive technology when they were first introduced. It changed banking to a great extent. It enhanced convenience for customers and banks alike. No more waiting in long queues for bank staff to finish their lunch. Instead, customers can visit their nearest ATM. No wonder ATMs are often wrongly abbreviated as ‘any time money.’ However, cash withdrawal is not the only function of ATMs. It also provides many other banking services.

Any person with a debit/ credit card can enter an ATM and perform transactions. The automated teller machine card first authenticates and identifies the user. Then, the personal identification number (PIN) validates the user’s transaction.

Nowadays, additional security is offered by banks. Thus, one-time passwords (OTP) are communicated with the user. Then, they have to enter the OTP into the ATM to validate the transaction. It also alerts the user if they do not authorize the transaction. In addition, there are other methods to secure the process, like a biometric scanner.

Debit cards allow users to draw money from their savings or current account, whereas credit card allows withdrawing money in credit. Banks collect a fee for the transactions they perform. Suppose the user’s bank operates the ATM; the fee will be lesser than the third-party bank. However, it is advised to use debit cards for cash withdrawals. Otherwise, extremely high fees are charged on credit card withdrawals.

The invention of an ATM is marked with milestones of other electronic devices which provided similar banking services.

In 1960, American inventor Luther George Simjian invented the automated deposit machine, which could accept coins, notes, and other deposits. It was later called the pantograph. It remained functional for six months and was removed due to reduced customer response. In 1962, American engineer Adrian Ashfield developed a card system for secured account holder identification, which could dispense goods based on this.

The Japanese computer loan machine, in 1966, provided an automated loan to customers using a credit card. In 1967, Barclays in the United Kingdom launched the first automated teller machine in North London or the cash machine. Tellers provide paper cheques which can be entered into the machine for cash withdrawal. However, the Chemical Bank introduced the first ATM in the United States in 1969 in Long Island.

Nevertheless, the era of ATMs is slowly coming to an end. For the first time in 2019, the number of ATMs worldwide fell by 1%. This is due to the online banking facilities that allow customers to conduct a wide variety of transactions than an ATM. In addition, the COVID-19 pandemic has further worsened the situation. With most of the population sitting at home, almost everyone who previously used an ATM switched to internet banking.

The following are the main features of ATMs:

• ATMs are versatile devices that have many functions. Though its main function is cash withdrawal, customers can make deposits, transfer money, and check account information using modern ATMs.
• Banks charge a service charge on cash withdrawals, deposits, etc. An advantage of using the customer’s bank-operated ATM is that the fee will be lesser.
• ATMs can also offer maximum security, at least more than internet banking which is subject to data threats, hacking, etc. Moreover, the adoption of newer technologies like biometric scanners, and one-time password (OTP) systems, keep customers safe.
• They are user-friendly and can be used by anyone, despite being a sensitive process. It also operates in multiple languages, which helps everyone adopt the technology.
• ATMs restrict the withdrawal amount. For example, many ATMs limit the amount drawn in a single drawing and on a single day. This ensures sufficient cash for other customers.
• They use credit or debit cards to authenticate the user. Using card systems to identify customers securely has helped ATMs flourish greatly. OTP systems and biometric scanners are currently being used to secure the process further.
• ATMs are becoming helpful in eliminating paper use by sending alerts and receipts to email and phone numbers.

ATMs can be classified based on their functions, location, and installation.

1. Based on functions, ATMs can be mono-function or multi-function. Mono-function devices are the most basic ATMs that allow cash withdrawal and statement printing. Thus, customers will be able to check their account balance. On the other hand, multi-function devices are the more complex ones and, as the name suggests, have more functions like accepting deposits, transferring money, and checking account information.
2. Based on location, ATMs can be on-premise or off-premise. The former is also called on-site ATMs and are located along with the bank. Off-premise or off-site ATMs are located away from the banks, as individual establishments and malls.
3. Based on the installation, cash machines can be interior or exterior. For example, interior ATMs are installed inside an establishment, while exterior ATMs are installed in open spaces, like a footpath or outside a building.

ATMs have always evolved from one thing to another, incorporating newer technologies and making the experience more convenient for customers. Crypto ATMs are the next new thing. Using a debit or credit card allows users to purchase and sell cryptocurrencies in exchange for cash in their fiat currency. As a result, many new crypto ATMs are popping up worldwide.

However, Singapore has decided to put an end to crypto ATMs. Earlier this year, in January 2022, the central bank of Singapore limited public access to such ATMs to curb impulse trading. The government fears that these devices can be easily misused and turn counterproductive. Following the announcement, most crypto ATMs have shut down in the country.

ATMs are an important innovation in this digital era. It simplified the banking experience much before internet banking services became available and reliable. Let’s look at its pros and cons.

This article has been a guide to Automated Teller Machine and its meaning. Here, we explain its advantages, disadvantages, example, history, features, and types. You may also find some useful articles here -

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