How do they work?
How do they work?




ATM (Automatic Teller Machine)




ATM (Automatic Teller Machines) The first ATM was installed into a bank 40 years ago. For the first time, customers could get hold of their money without having to queue. This saved the customer’s time. It also saved the bank a huge amount of money since fewer staff were needed. Modern ATMs provide customers with their bank account balance, they can issue money, print statements and even take cash deposits. Customers are able to use almost any ATM in any bank, supermarket or garage.

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How do ATMs work?

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An ATM is connected to, and communicates through a host processor. A host processor is similar to an ISP (Internet Service Provider), the ATM networks are available to the card holder.


Most host processors can support either leased-line or dial-up machines. Leased-line machines connect directly to the host processor through a four-wire, point-to-point, dedicated telephone line. Dial-up ATMs connect to the host processor through a normal phone line using a modem and a toll-free number, or through an Internet service provider using a local access number dialed by modem.

Leased-line ATMs are preferred for very high-volume locations because of their thru-put capability, and dial-up ATMs are preferred for retail merchant locations where cost is a greater factor than thru-put. The initial cost for a dial-up machine is less than half that for a leased-line machine. The monthly operating costs for dial-up are only a fraction of the costs for leased-line.

The host processor may be owned by a bank or financial institution, or it may be owned by an independent service provider. Bank-owned processors normally support only bank-owned machines, whereas the independent processors support merchant-owned machines.

Related Links:
HowStuffWorks "How ATMs Work" Strand 1: People & machines & Strand 3: Hardware, Software, Networks, Databases
BBC.co.uk Bank of Ireland refunds 'forgotten' ATM cash