How Do Automated Teller Machines Work?

ATMs bridge the gap between our digital world and the physical one – so how do they work?

ATM machines are some of the most useful technologies today, and perhaps one of the most prominent that connects our digital world to the physical one. By simply putting in your card you can instantly get cold hard cash from your bank account, but how is that even possible?

We’ve all used an ATM: After you input your card into an ATM, you then input a PIN to ensure proper security measures, then you’re met with prompts for how and how much money you want to extract. Once the entire process is approved by the bank, you get your money out.

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In essence, an ATM machine is a computer that has a mechanical dispenser for cash. Notably, that computer is connected to a secure network that can link up and validate the information with your bank account. So what all goes into this giant computer that dispenses cash? The major parts are the

Mainboard: The processor of the ATM that houses the CPU, memory, and connects all of the other ATM parts together.

Card Reader: The device that reads the card and account information stored on the chip or magnetic strip on your card. Most card readers in ATMs are enabled to work with EMV standard. EMV used to stand for "Europay, Mastercard, and Visa" which are the companies that created the standard. EMV is managed by EMVCo now, and the standard includes the use of American Express, Discover, JCB, Mastercard, UnionPay, Visa, and more.

Display: The LCD screen that shows you what you are doing, typically a touchscreen.

Keypad: The main input of the ATM for secure information like the PIN and the transaction amount.

How Do Automated Teller Machines Work?
Inside an ATM. Source: Bjoertvedt/Wikimedia

Cassette: The part that holds all of the cash in the ATM.

Cash Dispenser: The part that moves the cash to the tray.

Printer: Prints out the receipt.

Power Supply: External supply of power to the ATM.

I/O Board: This circuit board controls the communication between the processor and the internet or phone line.

Modem: This executes the communications from the processor through the internet.

How Transactions are Processed

Now that we understand the makeup of an ATM machine and the fact that they are basically just secure computers that hold money, how then does it make sure that you get the right amount of money? Or that you are really you requesting cash?

The entire ATM process starts when you insert your card. The mainboard then signals you to enter your PIN. After the PIN makes it back to the mainboard, the board sends off the unique EMV transaction code and your PIN to the processor through the I/O board and modem. The processor takes all of the information and routes it to the ATM network associated with your debit card. Each debit card is actually federally required to have two networks so that the transaction will work in case one network is down.

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The ATM network then relays your info to your bank that then determines if the transaction is valid. If the bank thinks it is, it sends an approval message back to the ATM. This entire process occurs every time you make a new input, like the amount of money you want to get out of the ATM.

When the process is completed, the mainboard initiates dispensing the cash and the dispenser transfers cash from the cassette one at a time. The dispenser mechanism is actually incredibly sensitive and is able to determine if the bills are dispensed properly in the right number. After your money is dispensed, you get a receipt and the mainboard prepares for the next transaction.

It’s all fairly simple, but also incredibly secure. Each transaction request and codes are heavily encoded and protected by various digital security measures. 

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