Finance & Economics

Inside and outside: how does ATM work?

 Wondering how does ATM work?

ATM work

Inside and outside: how does ATM work? Source:

Almost all of us have seen АТМs and used them but who knows how does ATM work? Where does it keep the banknotes, how does it count the money, how do banknotes get outside? Continue reading to learn the answers.

ATM from the inside

An ATM consists of two input devices and four output devices.

Input devices — Card reader and Keypad;
Output devices – Speaker, Display screen, Receipt printer, Cash dispenser;

ATM work

Input devices

  • Card reader

This device reads data from the magnetic stripe on the back of the card. Once the card is put into the card reader this device reads the account information and passes it to the server (host processor). The server uses this data to route the transaction to the cardholder’s bank.

  • Keypad

When the system recognizes a card it asks the customer to enter the Personal identification number (or just PIN). If the user fills in a valid PIN, the system proposes further options, like withdrawal, balance inquiry, etc (names of the functions can be different and depend on the ATM model). Cardholders use the keypad to enter a PIN, the type of transaction, and the amount of cash they would like to withdraw. Also, the cardholder can cancel a transaction or correct it with the help of the keypad.

VIDEO: How it’s made

Output devices

  • Speaker

The speaker provides the cardholder with audio feedback when the key is pressed or alerts about operation success/failure.

  • Display screen

The screen displays every step of the transaction process to the cardholder. Most ATMs are endowed with CRT or LCD screen.

  • Receipt printer

This device prints a paper receipt with all the transaction details.

  • Cash dispenser

The cash dispenser has a special “electric eye” that counts each banknote. The cash-dispensing mechanism “grabs” the specified number of the bills (number, entered by cardholder) and passes bills to special sensors. These sensors verify banknote authenticity and check whether or not banknotes are stuck together. All the activity information is recorded in a special journal.

ATM working principle

Every time the user wants to perform a transaction, they need to provide the ATM system with all the necessary information. The ATM system sends the data to the host processor, which transmits the operation request to the user’s bank. Where a cardholder requests cash, the host processor submits an electronic funds transfer from the user’s bank account to the host processor’s account.

The processor transmits an approval code to the ATM system allowing cash dispensing if the money had been successfully transferred from the user’s bank account to the processor’s account.


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