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Automated Teller Machine (ATM)

A specialized computer that allows bank account holders to manage their money conveniently

What is an Automated Teller Machine (ATM)?

An Automated Teller Machine, better known as an ATM, is a specialized computer that makes it convenient for bank account holders to manage their money. It allows them to check their account balances, withdraw or deposit money, transfer money from one account to another, print a statement of account transactions, and even purchase stamps. By inserting an ATM or debit card in the machine and entering a Personal Identification Number (PIN), one can access the services above 24 hours a day, 7 days a week.

 

Automated Teller Machine (ATM)

 

Summary

  • An automated teller machine (ATM) is a specialized computer that allows bank account holders to check their account balances, withdraw or deposit money, transfer money from one account to another, print a statement of account transactions, and even purchase stamps.
  • The first ATM was set up in June 1967 on a street in Enfield, London at a branch of Barclays Bank, credited to a British inventor named John Shepherd-Barron.
  • The social backdrop in different countries in the 1960s and 1970s played a pivotal role in furthering the cause of ATMs. Their advent revolutionized the field of banking and changed the way banks interacted with their customers.

 

History of Automated Teller Machines

By the 1960s, several teams around the world were working independently to devise a method for withdrawing cash from a bank after hours without committing a crime. The timeline for the advent and spread of the ATM is given below:

  • In 1960, an American named Luther George Simjian invented the Bankograph, a machine that allowed customers to deposit cash and checks into it.
  • The first ATM was set up in June 1967 on a street in Enfield, London at a branch of Barclays bank. A British inventor named John Shepherd-Barron is credited with its invention. The machine allowed customers to withdraw a maximum of GBP10 at a time.
  • In the U.S., the deployment of the ATM was pioneered by Donald Wetzel, a Dallas-based engineer. The first ATM in the US was installed in September 1969 at the Chemical Bank branch in Rockville Center in New York with the slogan, “On September 2, our banks will open at 9 am and never close again.”
  • In 1970, a British engineer, James Goodfellow, proposed the concept of a personal identification number (PIN), which automated verification of the identity of customers, thus marking a landmark moment in the growth of self-service banking.
  • The U.S. witnessed a major surge in ATM numbers in 1977 when Citibank pledged more than $100 million for the installation of the machines across the city of New York. ATM use rose by 20% when a blizzard forced all the banks in the city to close their branches for days.
  • In 1977, National Cash Register, a software and technology company in the U.S., launched the NCR Model 770, an easy-to-operate ATM that allowed the banks to offer services 24/7. The newer model (5070 ATM) launched in the early 1980s proved to be more reliable, flexible, and customer-friendly.
  • By 1984, the number of ATMs installed worldwide totaled 100,000.
  • As of 2018, there were more than three million ATMs operational around the world. According to the consulting firm, Retail Banking Research, that figure is projected to cross four million by 2021.
  • The first decade of the 21st century saw a rise in the number of ATM frauds via sophisticated malware or technologies, such as skimming devices. To stay one step ahead, banks developed software that could detect anomalies in transactional data that hint towards illegal activity.
  • Even though digital payment services are gaining popularity in the 21st century, cash is still preferred in most parts of the world for transactions. ATMs, bank branches, mobile banking, and internet banking are expected to complement each other in the foreseeable future.

 

Role of Social Environment in the Growth of ATMs

The social backdrop in different countries in the 1960s and 1970s played a pivotal role in furthering the cause of ATMs.

  • In the U.K., worker unions were gaining power and influence during that period. Banking unions were putting unprecedented pressure on the banks to close on Saturdays. At the same time, “automation” was a buzzword that appealed to the masses and was thought to save time and labor costs. Automating the teller process seemed to appease all the stakeholders, satisfying the customers and the banking unions, and driving innovation in the banking industry.
  • In the U.S., banks were encountering resistance from their employees for their horrible working hours. The push for ATMs was motivated by the need to shorten banking hours, reduce congestion in bank branches, and cut labor costs. The prospect of attracting more customers with shiny new gadgetry appealed to the businessmen and opened the doors to up-selling them on loans and credit cards.

The advent of ATMs revolutionized the field of banking and changed the way banks interacted with their customers. People began identifying themselves with the bank’s brand, rather than the individual branch. The ATM amplified the ubiquitous nature of banking, where banking wasn’t tied to a branch or a human being, was available 24/7, and could be accessed through machines, and later through mobiles and laptops.

 

More Resources

CFI is the official provider of the global Certified Banking & Credit Analyst (CBCA)™ certification program, designed to help anyone become a world-class financial analyst. To keep advancing your career, the additional resources below will be useful:

  • Available Balance
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  • Night Depository
  • Top Banks in the USA

Financial Analyst Certification

Become a certified Financial Modeling and Valuation Analyst (FMVA)® by completing CFI’s online financial modeling classes and training program!