Cash by Computer: Automated Teller Machines
　

Automated teller machines are now part of our life. Nationwide computer networks make it possible for a cardholder to withdraw cash in one state from a bank account in another state. An ATM can also offer several other banking services, which gives us the feeling that the bank is always next to you.

    In 1990, automated teller machines (ATM's) across the United States handled 6 billion banking transactions—a threefold increase from the early 1980's. Customers used the country's more than 80 000 banking machines primarily to withdraw cash, make deposits, check account balances, and transfer funds between savings and checking accounts.

    The popularity of ATM's has increased dramatically since the early 1970's, when Citibank of New York City and Banc One of Ohio became the first financial institutions to install ATM's on a large scale. At the time, the banks hoped simply to reduce their operating costs by replacing human tellers with machines, little suspecting that the cash machines would become so successful. But as more banks added round-the-clock automated service through ATM's, their competitors scrambled to keep pace and the machines proliferated.

    By the late 1970's, banks realized that they would save more money—and could provide service at many more locations—by electronically linking ATM's in networks. Today, nearly all large banks in the United States belong to one of 85 regional networks.

    A regional network may encompass a metropolitan area; a state; or, in a few cases, several neighboring states. Regional networks typically operate ATM's at hundreds of locations, thereby enabling customers to get cash not only at banks but also at airports, office buildings, shopping malls, supermarkets, and other sites.

    The largest regional networks include New York Cash Exchange (NYCE) in New York, Star System in California, Money Access Service in Philadelphia, and MOST in Washington, D.C. Only Banc One and a few other banks that pioneered ATM's continue to operate their own networks.

    In addition to a regional network, most large banks belong to one of the two large international networks—Cirrus System Incorporated, headquartered near Chicago, or Plus System Incorporated, based in Denver. These networks enable customers to use ATM's when traveling in the United States or in more than 20 countries abroad. Both systems convert foreign currency withdrawals to dollars at the day's exchange rate and subtract the amount from a savings or checking account back home.

    To use an ATM, all you need is a plastic cash card issued by your bank. The cardholder and the issuing bank are identified both by lettering and by embossed numbers on the card. In addition, a cash card carries the name of the regional network the bank belongs to, such as NYCE or Star System. The card works in any machine in that network. A card bearing a Cirrus or Plus System logo can be used in all machines in those networks as well.

    Your bank may also offer ATM service through a credit card, such as MasterCard or Visa. MasterCard International owns Cirrus, and Visa International owns about a third of Plus System. In addition, agreements between the American Express Company and several regional networks enable American Express cardholders to use machines in those networks.

    On the back of the cash card, a magnetic strip carries coded data, including the cardholder's personal identification number, bank account number, and a number that identifies the issuing bank. The strip is made of plastic coated with metallic particles magnetized to form a pattern that stores the card's numerical data. Magnetic strips on some cards also catty the cardholder's name, enabling ATM's to address customers by name.

    To begin a transaction, the customer inserts the card into an ATM and punches in a personal identification number on the machine's keypad. This personal ID number, which typically consists of four digits, prevents anyone else from using the card.

    The ATM next flashes instructions on its display screen for carrying out transactions. To get cash, for example, the customer presses buttons that indicate whether the money should be withdrawn from a checking or a savings account and the amount to be withdrawn. This request is then displayed on the screen. After the customer presses a button to verify that the information is correct, the ATM goes to work on the request.

    Inside the machine, an electromagnetic device called a card reader has already scanned the magnetic strip on the card and converted the data coded on it into electrical signals. These signals and electrical signals representing the cardholder's request travel together to a series of computers that check the information, route it to the next computer, and authorize the transaction. The information nearly always travels through the system by telephone lines, even though the computers that process transaction requests may be hundreds of miles apart. A few banks, which have branches in neighboring states, find it cheaper to relay requests by satellite instead.

    The request first reaches the computer that drives the ATM. This computer checks the numbers on the customer's card to determine whether the customer's bank belongs to the same regional network as the ATM. If so, the computer routes the request to the regional network's central computer, called the switch. If not, the computer routes the request to a national switch belonging to Cirrus or Plus System for identification of the regional network. The national switch then routes the request to the proper regional network switch.

    The switch lies at the hub of an ATM network. It acts as a traffic officer, directing requests from thousands of ATM's to the proper banks. The switch stores identification numbers for all the banks that share the regional network. By checking the data received from the ATM against numerical tables stored in its memory, the switch can identify the customer's bank and direct the request to it.

    The bank's computers process the request in two stages. One computer stores personal ID numbers in its memory. It identifies the customer and verifies that the personal ID number keyed in at the ATM matches the ID number on the card. If the numbers do not match, a message comes back to the ATM informing the customer that he or she has entered an invalid ID number.

    If the ID numbers do match, the computer forwards the request for cash to a computer that stores records of customers' accounts. After this computer receives the request it checks how much money is in the customer's account, and—if there are sufficient funds—subtracts the cash requested from the balance. The computer then sends a signal approving the transaction. If the account does not contain enough money, the computer sends a denial of the request.

    The approval or denial travels back to the ATM via the same series of computers. An approval arrives with signals that instruct the machine's cash-storage bins to extract and dispense the correct number of bills. Although various methods have been developed for delivering cash, most machines use rollers or suction devices to count and spit out the precise number of bills.

    The ATM's printer then makes out a receipt indicating the amount of the transaction and its date and time. Many receipts also note the new balance in the cardholder's bank account.

    Deposits and other transactions are handled by the system in much the same way as withdrawals. But deposits must be placed in an envelope and inserted into a slot in the ATM. The envelope is collected and sent to the bank by people who service the machine. For this reason, it can take three or four days from the time of an ATM deposit until the funds are available for withdrawal. To limit the delay in entering deposits, some banks allow customers to make ATM deposits only in machines at the bank.

    Machines in busy locations receive daily service visits to remove deposit envelopes and restock them with cash. Less active machines may be serviced only weekly or monthly. An ATM may be stocked with as much as $80 000 and typically handles about 5 000 transactions—including deposits and transfers of funds—before needing a refill. Cash withdrawals are the most common transactions, and the average withdrawal is $55.

    How safe is banking by ATM? The personal ID number is meant to prevent anyone from using a cash card without authorization. If someone enters the wrong identification number for a card, a message on the ATM's screen will ask the user to try again. If three attempts fail to produce the correct number, most machines keep the card. This safeguard prevents anyone who might find a card from trying to crack the identification code by trial and error. As another precaution against card theft, the bank generally limits the amount that may be withdrawn by cash card in a single day, in most cases to $200.

    The ID number and account number magnetically coded on the card are kept confidential during transmission by a process of scrambling called encryption. A coding device inside the ATM scrambles the numbers before they are sent to the switch. The switch and the other computers along the way unscramble the information to read it, then scramble it again before relaying it. Finally, the computer with the bank's records unscrambles the information once more before gaining access to an account. Encryption prevents someone from electronically tapping into an ATM network and stealing money. In addition, all the information on a cash card's magnetic strip is also encrypted so that someone finding a card cannot learn the cardholder's personal ID number or bank account number.

    What happens if you make a mistake in entering information? If you deposit a check for $1 000 but press buttons indicating a deposit of only $100, the mistake will be caught once the envelope with the check arrives at the bank. The additional $900 will then be credited to your account. As another safeguard, a computer tape inside the machine records each transaction and the number and denomination of the bills dispensed.

    ATM technology has changed little since the early 1970's, though today's machines operate with much greater speed and reliability and perform a wider variety of operations. An entire transaction, from inserting the card to receiving the cash and printed receipt, now takes as little as 10 seconds, even though the request may have gone to computers in several different states.

    ATM's may perform more operations in the future. A pilot system in Philadelphia, for example, allows ATM customers to cash paychecks for exact amounts, make installment payments on loans, reorder checks, and print bank statements. Access to some ATM's can be adjusted at the touch of a button to accommodate people in wheelchairs or in automobiles.

    The U.S. government even plans to deliver welfare benefits through ATM's and has instituted pilot programs in Baltimore, Houston, and several other cities. Under these programs, welfare recipients receive cash cards, which they use to withdraw funds from a monthly deposit made by the government.

    By 1991, banks had issued more than 190 million cash cards. Holders of these cards will one day be able to use almost any machine in the United States, Canada, Mexico, or overseas, as regional networks hook up with the international networks.

    ATM's have already transformed America's banking habits. As more financial transactions are performed electronically, the role of ATM's will become even larger.

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