ATM Machines

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ATM Machines

It is your money and you want immediate and easy access to it. Can you imagine a time, way back in the 1970s, when people had to wait in line during a bank's limited hours to get money from their own accounts? The advent of the automated teller machine (ATM) changed the way consumers handle their money. The ATM also shows how technology can change traditional business and consumer practices.

The evolution of the ATM reflects the technology of the time. As personal computers (PCs) and networks became more sophisticated, the ATM followed. The first ATMs were proprietary (i.e., the private property of a single individual or institution) and stand-alone (i.e., independent devices that did not connect to a network). These original ATMs were not PC-based; they did not have a PC processor or hard drive. They were based on a proprietary processing chip that was developed by the ATM manufacturer. Because the first generation of ATMs were stand-alone devices, they had to be updated each day with account balances from the host bank. The magnetic strip on the back of the bank card recorded the customer's activity for the day to maintain an accurate account balance between updates from the host.

In the 1970s, the online network became part of the ATM. With a modem and phone line, the ATM could connect to the bank's computers to verify account balances. Banks realized they could reduce their hardware and expand their reach through shared networks (i.e., the once private networks of one bank communicated to another bank's network). Through the decade, these networks expanded regionally and later consolidated their interests into national networks, such as Cirrus and Plus.

Inside most ATMs in the early twenty-first century are PCs with an Intel processor chip running IBM's OS/2 Warp operating system . Software and hardware developed by ATM manufacturers connects all of the peripheral devices of the ATM: card reader, currency dispenser, receipt printer, depository, and optional equipment such as an electronic audit printer or camera. At the application or software level, however, ATMs remain proprietary. Vendors have their own transaction processing language to direct the interaction of customer and machine, pass messages to and from the host processor, and handle any errors.

The input device for an ATM is a card reader, which initially identifies the account. A keypad is used to enter passwords and select transactions. A depository allows the user to deposit cash or checks. Some ATMs have a camera to record transactions, a useful tool to combat fraud. The output devices include a currency dispenser, receipt printer, speaker, electronic audit printer, and display screen.

Displays on some early ATMs used plastic letter wheels that would spin and form words. By borrowing the cathode ray tube (CRT) technology from the television, text messages could direct a customer through the steps of a transaction. Early-twenty-first-century ATMs use a graphical user interface (GUI) with sophisticated color display and dialogue.

The latest movement in ATM technology is to use a browser-based interface , similar to what is seen on an Internet web page. This type of ATM connects to a host computer through a web server. The trend is moving away from proprietary application software to become more vendor independent.

Technology was not the only driving force behind the ATM phenomena. Two other changes created the incentive and opportunity. First, the two largest regional networks changed operating procedures in 1996 and permitted surcharges on foreign transactions (i.e., transactions initiated on ATMs not owned by your bank could be charged with a service fee). Second, a federal law in the same year eliminated the requirement of a federal bank charter to establish an ATM. This allowed independent service organizations (ISOs) to enter the market.

Credit card companies introduced a new product, the "debit card," to add utility for bank customers that, in effect, worked against the ATM. The debit card, like a credit card, allows one to purchase a product or service. Unlike the credit card, however, the funds for the purchase move immediately from the user's account to the merchant's account. Debit card users can also request additional cash at the time of purchase. The use of credit and debit cards and shopping on the Internet do not require constant trips to the ATM for physical currency.

How have these changes affected the number of ATMs and the volume of activity? The numbers are not exact, but the trend is clear. In 1995 there were around 120,000 ATMs in the United States. By 1999 the estimate was 220,000. That number is expected to approach 300,000 by 2003. While the number of machines is increasing, the overall volume of transactions has steadily decreased since 1999 and is expected to decline further while the debit card flourishes.

So what is an ATM to do when its primary function of dispensing cash is challenged? It can offer new features, such as selling stamps or display advertising. New software features created by ATM vendors along with the development of web-enabled ATMs will make ticket purchases for concerts, theater, or sporting events possible through the ATM. An ATM receipt could be exchanged at the box office for the actual tickets. A web-enabled ATM could execute electronic trades over the Internet. But do consumers really want to manage their portfolios from an ATM? With Internet access so available, does this add value to the ATM?

ATMs in convenience stores have already started to issue money orders, wire money, pay bills, print maps, deliver stock prices, and arrange video rentals. The applications that power the ATM continue to evolve. Perhaps the ATM will replace the old voting booth. So, while technology and legislation spurred the growth of ATMs, technology, new applications, and a trend toward a cash-less society will certainly change and enhance their utility in the future.

see also IBM Corporation; Interactive Systems; User Interfaces.

Paul R. Kraus