What Is Automated Teller Machine (ATM) And How Does It Work?

ATMs have been in existence for quite some time. Like most of us, you might be unaware that these machines are not new. In fact, their existence goes back to the early 1960s. The creation of ATMs was in response to the rising demand for a banking service that could be provided by a machine. With the introduction of ATMs, banking services became widespread, including in remote villages.

What exactly are ATM Machines?

ATM stands for Automated Teller Machine, and it can be defined as a self-service banking facility. You can make a withdrawal, check your account balance, as well as transfer funds from these machines. ATM services are provided by several banks in various locations of the nation. You may withdraw cash from these ATMs regardless of whether you have an account with the same banking institution.

With the advancement of technology, ATMs have become sophisticated. The ATM is not just for withdrawing cash anymore; it has evolved into a human interface (HMI) for numerous financial services such as cash deposits, bill transactions, as well as bank transfers. Based on your banking institution, ATM services are either complimentary or incur a small fee. Typically, institutions do not charge fees for the initial 3-5 transactions by an ATM card every month. If you exceed your complimentary ATM transaction limit, you may be required to pay a small fee. Furthermore, some banks impose fees if you withdraw cash from an Automated Teller Machine of an institution with which you do not have an account.

How does an ATM function?

The ATM has been a familiar part of the banking experience for years, but what many people don’t know is how it all works. How can you type in a random series of digits and get money from an ATM? What is the network that approves of the transactions? Why do they approve your transaction when someone else’s is denied?

An Automatic Teller Machine or ATM is a type of banking outlet that receives fund deposits and disburses cash withdrawals. ATM services are started by either putting cash (in the case of Cash Deposit) or a debit/credit card into the machine.

The machine is simply an add-on of the bank’s servers; it contacts the bank’s servers to check an account balance and the legitimacy, disburses or collects the money, and then sends a ‘successful transaction’ notification.

To sum it all up, it is safe to say that an ATM terminal is essentially a remote banking device with a secure cash vault connected to it.

What are the features of Modern ATMs?

With the advent of the internet age, ATM machines have seen many changes over time. From being operated manually, they are now automated and are even capable of generating customised and personalised messages for their users. Technology has evolved to deliver a better user experience and faster transactions. Modern ATMs include the following features:

1. Multipurpose in Nature:

ATM machines have changed the face of banking, and we’ve evolved from a time when these kiosks simply provided access to cash. Modern ATM machines now provide a wide range of services and can accomplish most of your banking tasks. They let you deposit money, transfer funds, settle bills, and generate PIN and micro statements. These are only a handful of the services offered by banks, which also offer a wide range of sophisticated ATM services.

It’s hard to imagine a world without ATM machines—particularly given how much human time they reduce. For example, you might choose to complete your business transactions by withdrawing funds from an ATM when your local bank is closed or if you are visiting another country and need cash.

2. Simple and Quick Services:

Every second of our lives, at least one ATM transaction is being carried out somewhere in the world. From simple withdrawals to elaborate transactions, ATMs make life easy. ATMs are simpler to operate for everybody, including first-time customers as well as individuals with disabilities. Biometric identity scanners, for example, make it easy for practically everyone to use.

3. Multiple Language Support:

India is a land of innumerable cultures and languages. The usage of a single language in ATM machines creates a stumbling hurdle for many consumers. The usage of multilingual or multiple languages in ATMs functions as a remedy to this issue. Modern ATMs are integrated with numerous languages, and the customer may select his preferred language, making it simpler for him/her to operate the machine.

What are the Different ATM types?

Here are the different ATM types available in India:

What are the advantages of using ATMs?

The benefits of using ATMs are listed below:

• ATM Machines assist in quick and hassle-free cash withdrawals.
• ATM also provides transaction details as well as account balance and mini statements to cover any of your balance-related enquiries.
• Most ATMs also offer cash deposit and transfer facilities. You can also pay utility and other bills from the machine.
• ATM usage is completely safe. It can only be accessed by using your bank’s ATM card and a unique PIN. In the event of card theft, you can call your bank to get the stolen card locked. However, if the thief does not know your unique PIN, he or she will be unable to utilise ATM services.
• You no longer need to bring cash with you on holidays or long-distance excursions, as you can always access your bank funds by withdrawing money from ATMs. ATM machines are available 24 hours a day, seven days a week, and may be found almost anywhere.

Why are ATMs important?

Customers are now accustomed to enjoying ATMs at convenience shops, petrol outlets, and even bars. These ATMs are significant because they serve a key role in supplying people with convenient access to currency without requiring them to drive long distances. Hence, saving both their time and money. Without ATMs, travellers would be required to visit banks or financial institutions with set opening and closing times. This would make it very difficult for individuals working 9-5 jobs, and large companies with regional offices, to gain access to their money. This is why ATM services are so important.

When you travel abroad, one thing that you don’t really want to worry about is having access to cash, and ATMs help you with that! ATMs are an important aspect for both local and visiting patrons. The travel industry is constantly developing and making advancements to provide a better experience for its customers. ATMs with local language support, extended hours, and weekend facilities are becoming more commonplace. This creates certainty for local business owners that want to develop themselves as competitive providers of service. Everyone appreciates the convenience of having their own ATM in their store and how it promotes a cashless visit.

If you’re a business owner, there’s a good chance you already know the importance of ATMs. ATMs are vital to companies as they provide them with numerous benefits. ATMs assist retail outlets, hotels, cafés, and other businesses in increasing traffic, basket spending, and customer retention.

ATM History:

ATMs, or Automated Teller Machines, are a common sight in western countries, but it’s taken longer for them to catch on in India. 

• India was introduced to a new way of banking by HSBC in 1987. The bank set up the first ATM in Mumbai that year, and it revolutionised how people accessed their money.
• Swadhan was the very first network of shared Automated Teller Machines in India, and it was set up in 1997 by the Indian Banks’ Association (IBA).
• NFS (National Financial Switch) operates the biggest network of shared ATMs in India. It was established in 2004 by the Institute for Development and Research in Banking Technology (IDRBT) with the intention of facilitating interconnection between all ATMs in India. 
• The SBI group, which had led the ATM revolution in the country a decade ago, came up with the idea of “floating” ATMs on boats and began examining its feasibility. In 2004, Kochi SBI inaugurated a floating ATM aboard a ferry that ran between Ernakulam and Vypeen jetties in the town’s vast harbour. It was the first of its kind anywhere in India.
•  The State Bank of India (SBI) branch, which is located in Ladakh, is currently India’s highest altitude branch at 10,310 ft above sea level. It was inaugurated on 14th September 2019.
• As of January 2022, the number of Automated Teller Machines in India under the NFS network was calculated to be over 2,55,000.

Frequently Asked Questions (FAQs)

What is an ATM?

An ATM or Automated Teller Machine is a type of computerised banking terminal that allows consumers to conduct simple actions without the assistance of a branch operator or supervisor.

What is an ATM PIN?

An ATM PIN is a unique four-digit passcode that must be obtained immediately after receiving your ATM card. The one-of-a-kind code is necessary for safe online and offline transactions and for withdrawals from ATMs.

How many times can an ATM card be used in a month?

If you have money in your bank account, you can use an ATM an infinite number of times. However, once the number of complimentary

turns for using your ATM cards has expired, you may be charged a small fee.

What is the withdrawal limit through ATMs?

The withdrawal limit on your ATM card will be decided by your banking institution.

How to get an ATM card?

After creating an account, most banks offer an ATM card. If you have not yet received your card, you must contact your bank via online or offline channels and apply for one.