At first, when I talk about my interest in ATMs, my interlocutor's eyes glaze over. But then, when I explain why I think their role is important, many people begin to remember their stories related to them. A chance meeting in line, or the fear of being robbed in an unfamiliar place, or the feeling that arises when you see the line “insufficient funds.”
Most citizens have encountered the ubiquitous ATMs. The Fed's Paul Volcker called them "the single most useful innovation in banking." They are often mentioned on TV and in the news because they are what connect people to the usually ephemeral world of financial services.
Despite their cultural significance, ATMs get lost in the shuffle of daily events. Few people think about how they became the basis of modern retail payments.
The cash dispensing machine appeared almost 50 years ago, in 1967. Its appearance marked the dawn of digital banking. Several people attribute the fame of the inventor to themselves. John Shepherd-Barron and James Goodfellow from the UK, Don Wetzel and Luther Simiyan from the USA, engineering companies like De La Rue, Speytec-Burroughs, Asea-Metior and Omron Tateisi. But an ATM is a composite technology. There was not one such moment of insight that would become the moment of its appearance.
In the 50s and 60s, self-service gas stations, supermarkets, and ticket and candy vending machines began to grow in popularity. Apparently, the first ATM appeared in Japan in the mid-1960s, but almost nothing is known about it. The most successful start was in Europe, where bankers, in response to strengthening trade unions and rising wages, ordered engineers to solve the problem of issuing cash outside working hours. In 1967, three such attempts were made: Bankomat in Sweden, Barclaycash and Chubb MD2 in the UK.
They were born through a long chain of innovations. Ranging from more general inventions like steel, video screens, plastic, magnetic tape and (more recently) the Windows OS. And ending with special things - the mechanism for issuing money and the algorithm that associates the PIN with the user’s account. These components were invented through the collaboration of groups of bankers and engineers who were trying to solve various problems in the complex problem of creating an ATM.
It was a good test for automation and electronics. Something could get stuck in them, they could run out of bills. Or they could issue several bills instead of one, and the bank would not know about it. A specific ATM was activated with plastic or paper tokens, which were issued only by one bank, and sometimes even only by a specific branch. Some ATMs did not give out the token - they were then returned to customers by mail. As a result, early ATMs were a thing of the past, clunky, unfriendly, and inflexible. They could only issue cash in exchange for tokens.
Therefore, it took banks more than 10 years to exit the stage of experimental checks. Back then, few people believed that ATMs would change the banking world. Of course, they predate the popularization of credit and debit cards, when most people handled cash. With the exception of the United States and France, only the rich used checkbooks.
Nowadays it is easy to update the record on the central server after every transaction, we have mobile banking and e-commerce. And then ATMs became one of the first devices using real-time network technologies. Back then, creating a system to communicate with a central computer was a very difficult task. Swedish banks, together with IBM, launched such a system in 1968. IBM then partnered with Lloyd's Bank, and network devices arrived in the United Kingdom in 1973. In the 1970s, IBM engineers developed payment ecosystem standards on which future systems would be based.
The ATM freed consumers from long lines at banks that were only open at certain times of the day. As devices proliferated, they changed consumption patterns, making weekend shopping and sudden trips to the restaurant possible. And they allowed banks to grow their customer base at the expense of customers who previously could not use a credit account or card. Bank employees have become less involved in issuing cash and more involved in sales. Highly profitable businesses such as auto insurance, credit cards, mutual funds and mortgages are thriving as part of banking services has moved to ATMs.
Banking regulators constantly monitored the operation of ATMs and specified who could own them, monitored the cost of cash withdrawals and their locations. Ordinary people also influenced this market - how they look, how they work, and their role as a platform for many modern transactions - requests, deposits, transfers and payment for services.
In 1971, shortly after the first machines appeared in England and Sweden, manufacturers were working in Britain, the USA and Japan. Together they developed cars in their own countries and throughout Europe, Canada, Israel, Cyprus and Latin America. In the early 1980s, pioneers such as Chubb, De La Rue, Docutel and Asea-Metior left the industry, unable to cope with the development of computers and electronics. Others, like Burroughs, fell short of their intended goals. Citibank failed to commercialize its CAT-1 and CAT-2 devices, but instead continued to use them in its worldwide proprietary network until the 90s.
But IBM, with their marketing capabilities, experienced engineers and connections, could dominate the market. The company seemed intent on crushing all competitors until they decided to develop a new model, the IBM 4732, which was not backward compatible with previous ones, including the very successful IBM 3624. Many banks refused to buy the new model because it canceled out all the investments in previous models. As a result, IBM encouraged banks to turn to other ATM manufacturers. Subsequently, IBM abandoned work in this industry altogether.
Around this time, two Ohio companies, NCR and Diebold, were working on technology that would allow them to dominate the ATM supply market for the next two decades. Due to the failure of the IBM 4732, NCR relied on software that emulated the popular IBM 3624. Meanwhile, IBM and Diebold formed a joint venture in 1984 called InterBold. The plan was to combine Diebold's self-service technology with IBM's worldwide distribution network. After 7 years, despite the growth in sales, the company ceased operations. Diebold failed to achieve its desired goals, and IBM's revenues were weak, partly due to the rise of local query processing architectures that killed IBM's desire to connect ATMs to its expensive mainframes.
NCR and Diebold have transformed the first cash-dispensing dinosaurs into today's sleek, feature-rich ATMs. Among their innovations were a user-friendly video display, programmable buttons next to the screen, horizontal cash dispensing, money transfers, and balance inquiries.
The growing popularity of ATMs has led to an increase in the number of their manufacturers: Honeywell in the US; Phillips, Olivetti and Siemens-Nixdorf (now Wincor) in Europe; Fujitsu, GRG, Hyosung and Hitachi in Asia. Large European banks developed proprietary networks of hundreds of ATMs, while American banks preferred to use shared networks.
Despite all the innovations, the ATM remained a costly device. The use of dedicated telephone lines limited their use to bank branches or very popular places in cities - train stations, airports. With the advancement of digital telephony and Windows operating systems, these restrictions began to become a thing of the past. These two seemingly simple changes led to major changes, and made it possible to remotely diagnose machines and integrate with credit card processing networks. Independent ATM installers—manufacturers not affiliated with banks—have also emerged.
And yet, not everything is chocolate in this industry. For example, in a cost-cutting move in 2014, Chilean banks reduced the number of their ATMs (and the frequency of refills) and began promoting the use of government-run cash collection networks. This led to public outrage and media campaigns against the banks. The rise of mobile banking in Africa has called into question the need to deploy an ATM network there. Mobile banking reduces the need for cash and the deployment of bank branches in rural areas.
From humble beginnings 50 years ago, ATMs have penetrated almost everywhere. But their success did not become clear until the 80s. Today we are asked for PIN codes in libraries, on the Internet and in every retail store where debit cards have become the default payment method. Almost complete worldwide integration of ATM networks means that you can travel almost anywhere in the world with a piece of plastic in your pocket, and have access to cash in the most remote corners of the planet. Some machines work as Internet kiosks, others display advertisements or allow you to top up your mobile account balance. But among the many new features of ATMs, the most important is the quick receipt of cash.
Most citizens have encountered the ubiquitous ATMs. The Fed's Paul Volcker called them "the single most useful innovation in banking." They are often mentioned on TV and in the news because they are what connect people to the usually ephemeral world of financial services.
Despite their cultural significance, ATMs get lost in the shuffle of daily events. Few people think about how they became the basis of modern retail payments.
The cash dispensing machine appeared almost 50 years ago, in 1967. Its appearance marked the dawn of digital banking. Several people attribute the fame of the inventor to themselves. John Shepherd-Barron and James Goodfellow from the UK, Don Wetzel and Luther Simiyan from the USA, engineering companies like De La Rue, Speytec-Burroughs, Asea-Metior and Omron Tateisi. But an ATM is a composite technology. There was not one such moment of insight that would become the moment of its appearance.
In the 50s and 60s, self-service gas stations, supermarkets, and ticket and candy vending machines began to grow in popularity. Apparently, the first ATM appeared in Japan in the mid-1960s, but almost nothing is known about it. The most successful start was in Europe, where bankers, in response to strengthening trade unions and rising wages, ordered engineers to solve the problem of issuing cash outside working hours. In 1967, three such attempts were made: Bankomat in Sweden, Barclaycash and Chubb MD2 in the UK.
They were born through a long chain of innovations. Ranging from more general inventions like steel, video screens, plastic, magnetic tape and (more recently) the Windows OS. And ending with special things - the mechanism for issuing money and the algorithm that associates the PIN with the user’s account. These components were invented through the collaboration of groups of bankers and engineers who were trying to solve various problems in the complex problem of creating an ATM.
It was a good test for automation and electronics. Something could get stuck in them, they could run out of bills. Or they could issue several bills instead of one, and the bank would not know about it. A specific ATM was activated with plastic or paper tokens, which were issued only by one bank, and sometimes even only by a specific branch. Some ATMs did not give out the token - they were then returned to customers by mail. As a result, early ATMs were a thing of the past, clunky, unfriendly, and inflexible. They could only issue cash in exchange for tokens.
Therefore, it took banks more than 10 years to exit the stage of experimental checks. Back then, few people believed that ATMs would change the banking world. Of course, they predate the popularization of credit and debit cards, when most people handled cash. With the exception of the United States and France, only the rich used checkbooks.
Nowadays it is easy to update the record on the central server after every transaction, we have mobile banking and e-commerce. And then ATMs became one of the first devices using real-time network technologies. Back then, creating a system to communicate with a central computer was a very difficult task. Swedish banks, together with IBM, launched such a system in 1968. IBM then partnered with Lloyd's Bank, and network devices arrived in the United Kingdom in 1973. In the 1970s, IBM engineers developed payment ecosystem standards on which future systems would be based.
The ATM freed consumers from long lines at banks that were only open at certain times of the day. As devices proliferated, they changed consumption patterns, making weekend shopping and sudden trips to the restaurant possible. And they allowed banks to grow their customer base at the expense of customers who previously could not use a credit account or card. Bank employees have become less involved in issuing cash and more involved in sales. Highly profitable businesses such as auto insurance, credit cards, mutual funds and mortgages are thriving as part of banking services has moved to ATMs.
Banking regulators constantly monitored the operation of ATMs and specified who could own them, monitored the cost of cash withdrawals and their locations. Ordinary people also influenced this market - how they look, how they work, and their role as a platform for many modern transactions - requests, deposits, transfers and payment for services.
In 1971, shortly after the first machines appeared in England and Sweden, manufacturers were working in Britain, the USA and Japan. Together they developed cars in their own countries and throughout Europe, Canada, Israel, Cyprus and Latin America. In the early 1980s, pioneers such as Chubb, De La Rue, Docutel and Asea-Metior left the industry, unable to cope with the development of computers and electronics. Others, like Burroughs, fell short of their intended goals. Citibank failed to commercialize its CAT-1 and CAT-2 devices, but instead continued to use them in its worldwide proprietary network until the 90s.
But IBM, with their marketing capabilities, experienced engineers and connections, could dominate the market. The company seemed intent on crushing all competitors until they decided to develop a new model, the IBM 4732, which was not backward compatible with previous ones, including the very successful IBM 3624. Many banks refused to buy the new model because it canceled out all the investments in previous models. As a result, IBM encouraged banks to turn to other ATM manufacturers. Subsequently, IBM abandoned work in this industry altogether.
Around this time, two Ohio companies, NCR and Diebold, were working on technology that would allow them to dominate the ATM supply market for the next two decades. Due to the failure of the IBM 4732, NCR relied on software that emulated the popular IBM 3624. Meanwhile, IBM and Diebold formed a joint venture in 1984 called InterBold. The plan was to combine Diebold's self-service technology with IBM's worldwide distribution network. After 7 years, despite the growth in sales, the company ceased operations. Diebold failed to achieve its desired goals, and IBM's revenues were weak, partly due to the rise of local query processing architectures that killed IBM's desire to connect ATMs to its expensive mainframes.
NCR and Diebold have transformed the first cash-dispensing dinosaurs into today's sleek, feature-rich ATMs. Among their innovations were a user-friendly video display, programmable buttons next to the screen, horizontal cash dispensing, money transfers, and balance inquiries.
The growing popularity of ATMs has led to an increase in the number of their manufacturers: Honeywell in the US; Phillips, Olivetti and Siemens-Nixdorf (now Wincor) in Europe; Fujitsu, GRG, Hyosung and Hitachi in Asia. Large European banks developed proprietary networks of hundreds of ATMs, while American banks preferred to use shared networks.
Despite all the innovations, the ATM remained a costly device. The use of dedicated telephone lines limited their use to bank branches or very popular places in cities - train stations, airports. With the advancement of digital telephony and Windows operating systems, these restrictions began to become a thing of the past. These two seemingly simple changes led to major changes, and made it possible to remotely diagnose machines and integrate with credit card processing networks. Independent ATM installers—manufacturers not affiliated with banks—have also emerged.
And yet, not everything is chocolate in this industry. For example, in a cost-cutting move in 2014, Chilean banks reduced the number of their ATMs (and the frequency of refills) and began promoting the use of government-run cash collection networks. This led to public outrage and media campaigns against the banks. The rise of mobile banking in Africa has called into question the need to deploy an ATM network there. Mobile banking reduces the need for cash and the deployment of bank branches in rural areas.
From humble beginnings 50 years ago, ATMs have penetrated almost everywhere. But their success did not become clear until the 80s. Today we are asked for PIN codes in libraries, on the Internet and in every retail store where debit cards have become the default payment method. Almost complete worldwide integration of ATM networks means that you can travel almost anywhere in the world with a piece of plastic in your pocket, and have access to cash in the most remote corners of the planet. Some machines work as Internet kiosks, others display advertisements or allow you to top up your mobile account balance. But among the many new features of ATMs, the most important is the quick receipt of cash.
