In most cities, there are hundreds of ATM machines available for consumer use. Many shopping malls, grocery stores and convenience stores include ATMs. The machines make it easy for consumers to obtain cash quickly without visiting a local bank. Thus, merchants who desire to increase customer spending usually encourage ATM usage.

When Were ATM Machines Created?

ATM machines were initially invented many years ago. In the 1930s, an American inventor designed the first ATM machine to facilitate the withdrawal of cash from bank accounts. The ATM was able to dispense cash to banking customers. Unlike the human banking teller, the ATM would be available even when the bank was closed.

To test the effectiveness of the ATM machine, the inventor requested a trial with a bank in New York. The bank allowed the ATM to be placed in the bank foyer, which could be accessed after banking hours. The ATM used paper vouchers that could be inserted into the machine. Each voucher was assigned a monetary value and could be purchased from a human teller during normal banking hours. The voucher's value was equal to its purchase price.

When the voucher was inserted into the ATM, the machine dispensed cash in the amount of the voucher's value. The idea to permit cash withdrawals after banking hours offered convenience, and the ATM functioned properly. However, banking customers of the 1930s were accustomed to performing transactions with the aid of a human. They did not embrace the usage of the ATM. Thus, the bank in New York discontinued use of the ATM after the initial 6-month trial. Because of the trial's failure, the inventor of the ATM decided to forsake the ATM and pursue other inventions.

How Do ATM Machines Work?

ATM machines are designed to read the magnetic strip of an ATM card and communicate with the computers of financial institutions to perform bank transactions. In order to use an ATM, the customer must insert his ATM card. The card functions in a manner similar to the original ATM vouchers. Each ATM card contains a magnetic strip that contains information linked to the account of the bank customer. The magnetic strip includes the personal identification number of the ATM card. In addition, the strip contains information that identifies the accounts associated with the ATM card. An ATM card may have multiple accounts, such as a savings account and a checking account, linked to it.

Once the ATM customer inserts his ATM card, he must enter his personal identification number. The personal identification number, which is typically abbreviated as "PIN," is usually comprised of four numbers. The PIN is linked to the ATM card and is entered as an indication that the card user is authorized to used the card. Since the personal identification number is used for security purposes, most people do not share their PIN with others. Without the PIN, the ATM card cannot be used to perform ATM transactions. If an incorrect personal identification number is repeatedly entered by a customer, the card may be held by the ATM machine. In some instances, the card is released to the customer, but a hold is placed on the card by the financial institution. The hold can usually be removed once the bank has verified that the card was being used by an authorized customer. After the proper PIN has been entered, the ATM customer can select the transaction that he would like to complete. Most common banking transactions, such as cash withdrawals, deposits, balance inquiries and balance transfers, can be performed using an ATM machine.