Over the last half century, automated teller machines – or ATMs as they’re more commonly known – have revolutionised the way we bank. Initially created simply to dispense cash, today’s ATMs perform a range of functions. In the 21st century, you can use an ATM to deposit cash as well as withdraw it from your account, check your balance and to top up your mobile phone. Many ATMs also have multi-lingual capabilities and touch screen functionality, making them more relevant and useful in today’s globalised world.

But how exactly do ATMs work? Read on to find out more about this ground-breaking machine and how it gets your money from your account to your purse.

How ATMs work

If you’ve just opened a bank account, or you’re simply new to ATMs, it’s important to distinguish between their various components and buttons. The first step is to insert your bank card into the machine. It will then prompt you to enter your four-digit PIN – which will have been given to you by your bank. Provided you have entered your PIN correctly, you’ll then be asked which function you’d like to complete: for instance, a cash withdrawal, a balance check or a mobile top up. If you’re withdrawing cash – the most common use of an ATM – you must specify how much you need. You’ll hear the faint whooshing sound of notes being counted before your cash is dispensed. You can also opt to print a receipt, or sometimes a mini balance statement of your last few transactions.

Of course, the money doesn’t magically fly from your bank account to the ATM. Essentially, each ATM is connected to a host processor. When you insert your card and PIN to request cash, the host routes the request to your bank or building society. Provided you have enough money, this triggers an electronic funds transfer from your bank account to the host’s account. When the funds have been transferred, an approval code is sent to the ATM asking it to release the cash. The merchant running the machine will then be reimbursed by the host account soon after the transaction. It sounds like a complex process, but to the customer using the ATM it takes place in a matter of seconds.

Advantages of using ATMs

Whether or not you use an ATM to obtain cash from your account is usually a personal preference, but there are many advantages to the technology. Its primary benefit is convenience. Previously, people could only obtain money when bank branches were open. With ATMs, you have access to your money 24 hours a day. And although there may be queues at some ATMs they are usually cleared much faster than they would be in a bank, since there is no need to fill out withdrawal forms or sign receipts.

Often, you can withdraw money from any bank’s ATM at no extra charge too, though it’s important to remember that some ATMs may charge you to take out money. And with significant improvements to global ATM management software in recent years, it’s now easier than ever to withdraw money from an ATM wherever you might be in the world.