How do ATMs work?
You no longer have to worry if you run out of cash because the modem banking system allows you the facility of an automated teller machine (ATM) that permits cash withdrawal at any time.
How do ATMs work? An ATM is simply a data terminal with two inputs and four outputs. The ATM has two input device-the card reader and a keypad. When the ATM card is inserted into the machine the card reads the bank account information stored on the magnetic stripe on the back of the card. The keypad lets the cardholder tell the bank what kind of transaction is required- cash withdrawal, balance inquiry, or deposit and for what amount, Also, the keypad is used to enter the cardholder’s personal identification number (PIN), which is like a password needed to operate the bank account from the ATM.
The ATM has four output devices-display screen, speaker, receipt printer, and cash dispenser. The display screen prompts the cardholder through each step of the transaction process. The speaker provides sounds when a key is pressed. The receipt printer provides the cardholder with a paper receipt of the transaction and the cash dispenser, often described as the heart of an ATM, is the safe and cash-dispensing mechanism.
The entire bottom portion of most small ATMs is a safe that contains cash. The cash-dispensing mechanism has an electric eye that counts each currency note as it exits the dispenser. All information about a particular transaction is recorded in a journal.
The information on the journal is printed periodically and the machine owner maintains a hard copy for some years. The information on the journal plays a vital role in resolving any disputes that might arise between a cardholder and a bank.
Besides the electric eye that counts each note, the cash-dispensing mechanism has a sensor that evaluates the thickness of each note. If two notes are stuck together, instead of being dispensed to the cardholder, they will be diverted to a reject bin.
The same thing happens when a note is excessively worn or torn or is folded.
Like any other data terminal, the ATM is connected to a host processor, which functions just like an Internet Service Provider (ISP). The host processor is the gateway through which all ATM networks become available to a person with an ATM card. Various methods are used to connect ATM machines to the host processor, including a dedicated telephone line a normal phone line using a modern or an Internet connection.
When a cardholder wants to carry out an ATM transaction, he or she provides the necessary information by putting the card in the card reader and typing in the PIN using the keypad.
The ATM forwards this information to the host processor, which routes the transaction request to the cardholder’s bank. It the cardholder is requesting cash, the host processor arranges an electronic fund transfer to take place from the cardholder’s bank account to the host processor’s account.
Once the funds are transferred, the processor sends an approval code to the processor sends an approval code to ATM authorizing it to pay out the cash. So when you request cash, the money moves electronically from your account to the host processor’s account.
The PIN plays a key role in ATM security. Many banks recommend that cardholder should choose their own PIN and that they should not write down their PIN. The ATM card should be kept in an area where it will not get scratched or bent.
There are also some new innovations on the way. Some banks in western countries are currently experimenting with an ATM for the blind. New innovations will include a machine that verbally prompts the customer for their card, their PIN, and what type of transaction they would like.