ATM, short for Automated Teller Machine is used for performing banking operations. Understanding how ATMs work is crucial for everyone involved in banking or financial transactions. In this article, we will discuss the meaning of ATM and its various uses. We will also explore the step-by-step process of how an ATM works, allowing you to perform tasks such as cash withdrawals, deposits, fund transfers, and balance inquiries.

What is an Automated Teller Machine (ATM)?

An Automated Teller Machine lets you access your bank account and perform various transactions without the need for a human teller. You can insert your debit card or credit card to identify yourself and enter your personal identification number (PIN) to access the ATM services.

The Key Functions of ATMs include:

1. Cash withdrawals

You can conveniently withdraw money from an ATM using your debit or ATM card. Simply insert your card, enter your PIN, and enter the amount you wish to withdraw.

2. Balance inquiries

 ATMs allow you to check your account balance, enabling you to stay updated on your finances.

3. Fund transfers

Many ATMs allow you to transfer funds between your accounts. This feature enables quick and easy money movement without visiting a bank branch.

4. Account deposits

Some ATMs are equipped with deposit functions, allowing you to deposit cash or cheques directly into your account via the machine.

Types of Automated Teller Machines

ATMs are labelled based on specific purposes they cater to –

1. White-label ATMs

These ATMs are owned and operated by non-bank entities. 

2. Brown-label ATMs

These ATMs are outsourced by banks to third-party service providers, who own the hardware and lease the ATM.

3. Green-label ATMs

They are dedicated to agricultural transactions, such as crop insurance, loans and subsidies. Banks in rural areas set them up to cater to the needs of farmers.

4. Orange-label ATMs

These ATMs are used for share transactions, such as buying and selling stocks, mutual funds, and bonds.

5. Yellow-label ATMs

These ATMs are provided for e-commerce purposes, such as online shopping, bill payment and mobile recharge.

6. Pink-label ATMs

They are designed exclusively for women’s use only. They aim to provide safety and convenience for women customers.

ATMs are also categorised into two types based on features they offer:

7. Basic units:

They allow you to withdraw cash, check your balance, change your PIN, get mini statements, and receive account updates.

8. Complex or full-service units: 

They offer additional features such as cash or cheque deposits, line of credit facilities, and bill payments.

Another way to categorise ATMs is based on their location:

9. On-site ATMs: 

They are located within the bank premises and provide convenience for the customers already at the branch. For banks, on-site ATMs can reduce operational costs and risks by using the existing infrastructure and security.

10. Off-site ATMs: 

They are situated in several locations nationwide. These ATMs can reach out to more customers in different geographical areas and increase the market share and brand awareness of the bank. However, off-site ATMs face more operational risks and challenges due to vandalism or theft.

How to Withdraw Money from ATM?

You need to follow the below-given steps to withdraw money from an ATM –

STEP 1: Insert Card

 Look for the card slot on the ATM and insert your ATM card with the chip facing up or as indicated by the machine. 

STEP 2: Select your preferred language

Once the machine reads your card, you are required to select your preferred language for the transaction. 

STEP 3: Enter your PIN securely

 Enter your PIN using the physical or on-screen keypad. 

STEP 4: Select the transaction type

After entering your PIN, you will see a menu of transaction options on the screen. These options may include “Withdraw Cash,” “Deposit Cash,” “Transfer Funds,” “Balance Inquiry,” and more. Select “Withdraw Cash” for this specific transaction. 

STEP 5: Select Bank Account Type

Choose which type of bank account (savings or current) you want to withdraw money from

STEP 6: Enter withdrawal amount

Enter the amount of money you need to withdraw from your account.

STEP 7: Collect your cash

Once you have confirmed all details on the screen, including the withdrawal amount, press “Enter” or the equivalent button on that specific machine. Your cash will get dispensed within a few seconds and you can collect it from the dispenser.

STEP 8: Print receipt

Some ATMs offer the option to print a receipt for your transaction. If you wish to have one, you can select this option on the screen and wait for the receipt to be printed.

How to Deposit Money in ATM?

While all ATMs allow cash withdrawals, not all devices offer a cash deposit facility. To deposit cash in your account, you need to follow the below-given steps – 

STEP 1: Insert your card

Begin by inserting your debit card into the ATM. Make sure the card is inserted in the correct orientation as indicated on the machine.

STEP 2: Enter your PIN

Enter your PIN using the keypad provided.

STEP 3: Choose an account type

After entering your PIN, you will be asked to select the account type (Savings or Current) or enter the account number of the account you wish to deposit the money into.

STEP 4: Insert cash

Insert the cash you want to deposit into the machine. Follow instructions provided on the screen regarding how to insert the cash properly into the deposit slot.

STEP 5: Confirm deposit amount

After you have inserted all the cash and it has been counted by the machine, carefully review and confirm the amount displayed on the screen. The money will reflect in your account within just a few seconds.

STEP 6: Confirmation receipt

Make sure to obtain a receipt for your records. The ATM will provide different options for receiving a receipt – it can be printed, emailed, or even sent as a text message.

What are the uses of an Automated Teller Machine?

As discussed, an ATM device allows you to perform various banking transactions without visiting a branch.

Some of these services are listed below:

  • Access your bank account and perform routine tasks like cash withdrawals and balance checks.
  • Perform more advanced functions such as fund transfers and bill payments. For example, you can transfer money from your savings account to your current account or pay your electricity bill using your debit card.
  • Newer ATMs allow you to open a fixed deposit account, apply for a personal loan, book railway tickets and recharge your mobile number. They might even include the facility to pay insurance premiums, income tax and utility bills.

ATMs are designed to provide you with seamless accessibility to your bank account. You can find ATMs in strategic locations such as public spaces, malls, transportation hubs – wherever you could require cash to purchase goods / services. You can use any ATM that is compatible with your bank’s network, regardless of the bank that operates the ATM.

ATMs are extremely convenient as they are available 24×7, unlike traditional bank branches that have fixed working hours. You can use ATMs at any time of the day or night, without having to wait in long queues at the bank branches. There are no charges for the first 3-5 transactions per month and you can also save money by avoiding service fees for using ATMs of your own bank or its network partners. ATMs are secure and reliable as they use encryption and authentication methods to protect your data and transactions.

What are the Design Elements of an ATM?

Each bank automated teller machine across the world is different, but all machines have a few basic elements in common, such as:

1. Input devices:

  • Card reader: Every ATM has a card reader where you insert your debit or ATM card. This device recognizes the account details stored on the magnetic strip or chip of your card and passes them on to the server.
  • Keypad: The keypad on an ATM allows you to input numbers, clear inputs, or cancel any transaction. You can use it to enter your Personal Identification Number (PIN) and the amount you wish to withdraw. 

2. Output devices:

  • Display screen: The display screen on an ATM is usually an LCD or CRT monitor that provides transaction information and guides you through each step of the process. It displays options for actions such as PIN change, quick cash withdrawal, balance check, and more.
  • Cash dispenser: Once you’ve completed your transaction, the cash dispenser stocked within the ATM allows you to collect the requested amount of cash.
  • Receipt printer: After finishing a transaction at the ATM, you can request a receipt from the receipt printer. This printer records important details such as the type of transaction, amount withdrawn, and remaining balance.
  • Speaker: Most ATMs are equipped with speakers that provide audio instructions for accessing the machine and performing transactions. 

Few full-service ATMs also have slots for depositing cheques and cash.

Do ATMs Charge Fees?

ATMs may charge fees for certain transactions, such as cash withdrawals or balance inquiries. These fees vary depending on the bank and type of account you have. Some banks offer free ATM access to their customers, while others charge a nominal fee for certain services. Keep in mind that using an ATM from a different bank or network may result in additional charges.

ATM fees impact customer convenience and choices. For banks, they can serve as a source of revenue and influence competitive advantage.

History of ATMs

The concept of Automated Teller Machines was introduced by Barclays Bank in London during the late 1960s. These machines were created to provide banking services outside traditional banking hours and locations. Initially, there were technology issues and concerns regarding safety. However, over time, advancements in technology improved the reliability and security of ATMs. PINs were introduced as a crucial step in ATM usage to enhance security. PINs ensured that only authorised individuals could access their accounts through an ATM.

During the 1970s and 1980s, ATMs rapidly spread throughout the world, revolutionising the way people conducted banking transactions. This widespread adoption allowed individuals to conveniently withdraw cash, deposit money, transfer funds between accounts, check account balances, and perform various banking tasks for which they previously had to spend a significant amount of time at the bank.

Over time, ATMs have evolved to offer additional services such as bill payments, mobile recharge, balance inquiries, and even mini-statements.

The Bottom Line

  • An ATM is an electronic device that allows you to perform various banking transactions. It enables you to withdraw cash, deposit money, transfer funds between accounts, and check your balance.
  • ATMs provide convenience and accessibility, allowing you to conduct these transactions 24×7.
  • You can use an ATM by simply inserting your card, entering your PIN, selecting the transaction type, and then following the instructions on the screen.
  • Although there are different kinds of ATMs across the world, every ATM shares common elements like card readers, keypads, display screens, cash dispensers, receipt printers and speakers.
  • Keep an eye on potential fees, as some ATMs charge for certain transactions.

Frequently Asked Questions

1. How important is an ATM card?

An ATM card is essential for accessing the services and benefits offered by ATMs. It allows you to conveniently withdraw cash, deposit money, transfer funds, and check your account balance at any time.

2. Which card type is best? 

When deciding on the best ATM card, consider factors such as the bank’s reputation, network coverage, fees and security features.

3. Who launched the ATM card?

The first ATM card was introduced by Barclays Bank in London, in 1967.

4. Is an ATM safe?

ATMs use advanced security features like encryption and PIN codes to protect your information. However, it’s important to be cautious and follow basic safety practices.

5. How to Use an ATM?

Using an ATM is simple. You need to insert your ATM card into the machine’s card slot with the chip or magnetic stripe facing up and toward the machine. Next, enter your 4-digit PIN. Now, select the language and transaction type and follow the instructions on the screen to complete your transaction.


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