ATMs and how they work

These machines have made keeping your money in a bank easier because of how quickly one can withdraw it. But besides the instructions one has to follow to make a transaction, how do they really work?

You would not be hard-pressed to see an Automated Teller Machine (ATM) nowadays. They seem to be everywhere. Many people use an ATM every day, and as long as it provides the money they need, they probably do not think much about how it works. But have you ever wondered what’s inside? How much money is actually in there? Where it all comes from? Is there someone behind physically doing all the transactions?

Unlike human bank tellers, an ATM works round the clock, so you can withdraw your money during an emergency. ATMs are found not just at banks, but at supermarkets, shopping malls, and on the streets. All that is required to use an ATM is a bank-issued ATM card.

Inside the ATM
Inside every ATM is a computer that really is not that much different from any personal computer, but with the basic function of connecting you to the bank ATM network and accessing your account information. Many ATMs actually run on common Microsoft software, although some older and international ATMs run on operating systems such as Linux or MS DOS. Then there is a safe, an actual physical safe and a printer for receipts.

In order to understand how the ATM works to do all these transactions, you have to think of it like a data terminal. The data terminal must connect to a host computer. This host computer is the gateway to the ATM network which allows the user to follow through the four stages of processing needed for all information systems to operate namely, input, data processing, output and storage. Some ATMs have a dedicated line for point to point connections, others use the dial up method by using a modem.

The host computers may be owned by a bank, or it may be owned by an independent service provider. Bank owned host computers normally support only bank-owned machines, whereas the independent host may support several banks’ ATMs just like Bankom network and VISA.
When a customer wants to do an ATM transaction, he or she provides the necessary information by means of the keypad.

The ATM forwards this information to the host computer, which routes the transaction request to the customer’s bank or the institution that issued the card. If the cardholder is requesting cash, the host computer causes an electronic funds transfer to take place from the customer’s bank account to the host computer’s account. Once the funds are transferred to the host’s bank account, the processor sends an approval code to the ATM authorising the machine to dispense the cash. All these transactions stay true to the basic accounting concept of debit and credit.

The bank monitors the levels of cash in the ATMs in real time and physically replenishes it when it is running low. Your card allows you to receive cash, make deposits, pay utilities, request your balance etc.

Most ATMs operate using the same basic steps. These include insert your card, entering your Personal Identntification Number (pin), selecting the type of transaction you wish to make, selecting or typing in the transaction amount, remove your cash from the cash slot or place your deposit envelope in the deposit slot, select additional transactions if you wish etc

Making a deposit
On the other hand depositing money is not that automated. When you make an ATM deposit, the bank staff has to come in every so often and verify the funds and post them onto your account.

ATM Security
Because an ATM has access to your digital banking information through the card reader and also provides physical cash, two layers of security are necessary. The first is the card reader that is equipped with high level security techniques that safeguard the information you input. This card reader will also hold the card if it is left for too long or too many incorrect pin input attempts are made.

The second layer of security is physical, and essentially consists of a safe built into the machine to safeguard all the money. Inside this safe are several cash cartridges or cassettes, which hold the notes to be dispensed. Each cassette can be setup to have one kind of denomination. Most ATM have cassettes filled with Shs50,000, 20,000 and 10,000 notes, but can also be filled with any other denominations depending on the amount of cash going through the ATM and customers’ bill size preference. For instance some banks offer Shs5,000 notes.

There is a mechanised system with conveyer belts that pick notes from the specific cassettes making up the amount you are withdrawing. There are also readers that determine if the right number of notes has been selected and whether the customer has taken the money.

If too many notes were picked, notes are worn, folded or old or if the money is not extracted in a certain amount of time, the machine will set aside the money in a “purge” bin.

The safe that holds the cassettes with the money is made of heavy steel, which probably is the main reason that this thing is so heavy. You can certainly see why ATMs just do not get stolen. They might look small and easy to manage, but you would need three or four men, fork lift of sorts and a pickup to make a successful and timely get away with this small ATM, and good luck getting the safe opened up. It would certainly be more trouble than it is worth.

editorial@ug.nationmedia.com