What is an ATM? Understanding automated teller machines

The article was updated on 28.11.2024

ATMs are so common among banking services nowadays that most people likely take them for granted. However, if, by some unexplained mystery, all ATMs disappear from the planet tomorrow – you will definitely notice. They are an integral part of essential banking tools and people’s day-to-day errands.   

But what is an ATM exactly? Have you ever wondered how ATMs work and which services they provide? Well, Genome is here to answer your questions! Learn more about them in this article.  

What is an automated teller machine (ATM)?

The automated teller machine (ATM) is a banking technology in the form of a specialized computer that allows bank clients to access some of the financial services without the need to contact bank representatives. 

Different financial institutions install ATMs, so you will likely see them under various bank brand names. ATMs are usually placed outside banks, shops, and other public places where people can easily use them. ATMs are most commonly used to withdraw money. 

This answers the “what is an ATM” question, but where did it originate? The idea of a cash-operating device started roaming worldwide in the early 1960s. There are many records of proto-ATM gadgets, but all were somewhat flawed. 

In the USA, Armenian-American inventor Luther Simjian invented the so-called bankograph. This device was used to deposit cash, coins, and cheques into a bank account but did not have cash withdrawal features. It was installed in New York City in 1961 but was removed after six months due to the lack of customer acceptance. 

The first ATM was introduced in June 1967 by the Barclays Bank in Enfield, London. The machine was designed by Scottish inventor John Shepherd-Barron, who took inspiration for his creation, in his own words, from a chocolate vending machine. 

The first generation of ATMs was way different from today’s – there was no such thing as an ATM card. Instead, they used a paper voucher system.

The invention allowed to solve some crucial issues of banking services: 

1. Limited access to cash: Before ATMs, customers could only withdraw money during banking hours in person or via a bank teller. This new banking service became a revolution, granting access 24/7 to deposit cash with no bank branch visits. 

2. Operational costs and speed: Banks faced a high demand, and it was tough to serve all clients. The new solution automated one of the most requested services.

In short, ATM usage fundamentally transformed banking by solving these problems, making financial management more convenient, eliminating the need to visit bank branches for some of the services, and paving the way to modern banking. 

How do ATMs work?

In essence, you can think of an ATM as a big computer created specifically to deal with your financial requests. Let’s review what it consists of, starting from the parts that are visible to you:

• The screen, which displays the primary services provided;
• The keypad contains buttons for clients to enter their PIN, select operations, and more;
• The ATM card reader is the place you insert your debit or credit card in. It allows reading the information from the card, usually thanks to the EMV chips on the card that store information;
• The printer, which prints checks;
• The cash dispenser allows a person to receive money from an ATM card. It is used to dispense cash – move money from the cassette, which is a place inside the ATM that holds cash.

Now to the internal parts: 

• The mainboard is the heart of any automated teller machine (ATM), as it connects all other parts of it. The CPU and memory are stored inside of it, and it is responsible for the processing;
• The cassette, which we previously mentioned, is connected to cash dispensers and stores money inside the ATM;
• The modem, which provides the internet connection;
• The I/O board is required to control the communication between the internet and the processor.

Now that you know about the main components of the ATM, let’s review how it works. Let’s use an example: Ben is planning to go to a local store that only accepts cash payments. Naturally, he needs to withdraw cash. Here’s what happens next:

1. Ben goes to one of the label ATMs (an ATM that his bank’s network has installed) so he doesn’t have to pay fees for using another bank’s automated teller machine. He also doesn’t need to visit any bank branches.  

2. He inserts the debit card into the ATM card reader. The display screen then instructs Ben to enter the personal identification number (PIN). He ensures that no one is watching him and enters the PIN using the keypad.

3. Once Ben gains access to the ATM features, he selects the cash withdrawal option. He then enters the sum he wants to withdraw and sends the request, as well as fills out the PIN once again.

4. The request is sent to Ben’s bank, which then approves or denies the withdrawal based on whether Ben has enough money inside his account;

5. The bank approves the transaction, and money is dispensed to Ben via the dispenser. 

Types of ATMs

In general, ATMs can be classified by their functionality:

• Basic ATMs. These allow customers to withdraw cash and provide some of the basic services like balance inquiries and mini-statements. It is the most common ATM device, and when people talk about ATMs, they mean the basic ones.
• ATMs for depositing cash (deposit machines). This type allows clients to deposit money directly into a bank account. It can also function as a withdrawal machine but added functionality makes it more expensive.
• Multi-function ATMs. These ones allow both depositing money and withdrawing cash. You can often find this machine in high-traffic business areas. They have the highest fee but provide additional services like bill payments, fund transfers, and currency variation.
• Cardless ATMs. A Cardless ATM allows you to withdraw cash via a mobile app or an electronic device with NFC instead of debit/credit cards. It is not usually a stand-alone ATM type, as more regular ATMs have started including the contactless reader feature. 

Fees and limits

ATM fees vary based on the types of ATM transactions. Here’s a breakdown of common fees:

Bank fees for out-of-network ATMs. These are charged when a customer uses ATMs that are not owned by their bank (non-label ATMs or ATMs that are not in the bank’s network). Range: €1 – €2 per transaction, depending on the country and bank.

Foreign transaction fees. These are charged when a person uses an ATM abroad. Range: A currency conversion fee (usually 1% to 3%) plus additional out-of-network ATM fee.

Over-the-limit fees. These are charged when a customer exceeds their daily withdrawal limits. Range: Flat fee or percentage of the excess amount depends on the bank.

Balance inquiries. It is a fee for checking account balances at out-of-network ATMs. Range: €0.50 – €1.

Types of banking transactions handled by ATMs

Let’s list some of the common services you can find within automatic teller machines. But before we do so, please note that not all ATMs share the same features. Some of them serve as one-stop shops of sorts, while others are limited in what they can do. 

They provide banking services such as:

Cash withdrawals

No doubt, cash withdrawals are the most renowned feature of an automated teller machine. And, you can withdraw cash fairly simply. You need to insert your card into the ATM (or tap it if it uses NFC technology), enter your PIN, and start withdrawing cash from the card.

Deposit cash

It is the opposite operation of money withdrawals. To make account deposits, you need to insert your card into the ATM, select the account you want to allocate money to, and then place cash into the cash dispenser. Note that not all banks provide such services, so you’d better check if your financial institution has automated teller machines that can help you deposit funds.

Check your balance

The current account balance inquiries are also pretty self-explanatory. You can check your card balance by inserting it into the ATM. However, you can now easily check account balances anytime if your financial provider has an app like Genome does. 

Transfer funds

Some ATM networks allow you to transfer funds between your accounts if you have more than one or if these are accounts for different purposes (current account/savings account, etc.). This feature might be helpful if there are multiple account holders with mutual funds. Note that there might be additional fees for transferring money at non-label ATMs.

Bill payments

Some banks offer their clients the option of paying their bills (such as utility, electricity, phone bills, and other various banking transactions) via ATMs from clients’ bank accounts. Moreover, you can even buy a train ticket – if the automated teller machine has the respective banking services. 

Print bank statements

Sometimes, you need to print out your bank statement, and an ATM can easily be used for that. To print a bank statement at an ATM machine, insert your card, enter your PIN, and select the “bank statement” or “account details” option from the menu. 

Change PIN

Lastly, you can use an automated teller machine to change your card PIN (personal identification number). Just make sure that you’re doing it safely, and no one is watching you doing it. 

Benefits of using ATMs

• Quick access to cash. You get instant cash withdrawals without needing to visit a bank branch or wait in line for a teller. Just be mindful of withdrawal limits. 
• The convenience of performing banking operations outside business hours. Many ATMs operate 24/7. Thus, you can access deposits, credits, balance checks, and transfer money anytime.
• Enhanced security features. Modern ATMs incorporate the most advanced security measures, including multi-factor authentication, one-time Passwords, and, overall, the best encryption & anti-skimming programs.

ATM fraud: how it happens and how to prevent it

ATM fraud is associated with several security threats. Card fraud includes skimming devices that steal card details, card trapping to retrieve cards, and cloning to create counterfeit cards. Personal identification number (PIN) theft occurs through methods like shoulder surfing, hidden cameras, or fake keypads that capture PINs. Additionally, phishing and vishing scams trick users via fraudulent messages or calls into sharing sensitive card details.

When using the ATM or performing ATM transactions, you need to be vigilant, not share your PIN, regularly monitor your bank account/recent transactions, and use the best security option nowadays – multi-factor authentication for all your accounts.

ATMs and digital banking: what Genome offers

Genome offers personal and corporate Visa physical cards that can be used at any ATM where Visa cards are accepted! Additionally, we have virtual cards, which can be used at contactless ATMs or cash-free online and contactless payments. Issue hundreds of cards and link them to accounts in different currencies for beneficial currency exchange. 

Genome also makes transferring funds easy! All our account holders can transfer money using regular and instant SEPA payments. Our business wallet users also get access to international transfers to over 40 countries. 

Key takeaways

ATMs are a crucial banking tool used for money withdrawal, checking account balance, deposits (cash acceptance), basic transactions, and other banking tasks. It is one of the key factors in banking digitization, allowing for more client-oriented services. 

FAQs

How do I safely use an ATM?

When you use an ATM for various financial transactions, always inspect the machine for signs of tampering, shield your PIN while entering it, and avoid using ATMs in isolated or poorly lit areas.

Are there any fees associated with using ATMs?

It depends. If you use an ATM of the same bank that issued your bank card – there are usually no fees, and you can enjoy free ATM services. However, if you use another bank’s ATM, it may charge you for some operations, financial transactions, or funds transfers. Most ATMs will warn you about fees that will be applied before you execute the said operations.  

Can I access ATMs internationally with Genome’s services?

Yes, Genome issues virtual and physical Visa cards. Thus, you can use any ATM where Visa is accepted. For virtual cards, you will need to use a cardless ATM. 

What should I do if an ATM malfunctions during a transaction?

If an ATM malfunctions during a transaction, note the location, time, and any error messages. If your debit or credit card got stuck inside the ATM, contact your bank representative/bank immediately. 

How do ATMs secure my financial information?

ATMs secure your financial information through encryption to protect data during transactions and require PIN authentication for access.