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  • How does an ATM work?

    See what is the mechanism and working principle of ATM. Also know the cost of making an ATM for bank.

    We daily use ATM (Automated Teller Machine) but most of us do not know how does it work? What is the working principle by which it work? How satellite and bank cooperate from ATM working point of view? What is the cost of making an ATM for bank?
  • Answers

    3 Answers found.
  • An ATM is actually a data terminal. It acts as an intermediary between you and your bank account. It communicates with your bank via Internet by means of wireless broadband or phone lines.
    The ATM basically consists of an input terminal and four output terminal to carry out various financial transactions. On inserting your debit or credit card, it reads the information contained on the magnetic strip.The magnetic strip is the hard copy of your account info. You are instructed to enter your PIN. Once the PIN is verified, The ATM communicates with your bank to access your account information. Depending on your transaction request, the ATM forwards the transaction request to the hist processor which in turn routes the request to cardholder's account. If the account balance request is placed, the host processor returns a printed receipt of the account info. If cash is requested, the machine goes through the same initial steps of communicating with the host processor. Host processor then creates an electronic funds transfer from the cardholder's account. After the creation of funds transfer the host processor sends approval code to the ATM to dispense cash. The cash dispensing system has an electronic eye that "counts" each note as it exits the dispenser. There is also a sensor that checks the thickness of the notes being dispensed. If two notes are stuck together, they are diverted to reject bin . Even the soiled or mutilated notes are also diverted to reject bin . A record is maintained for all the notes which is called journal .
    This is the basic technology employed in the ATM. The actual functioning depends on individual merchant and the machine. It also is dependent on the software programme.
    Setting up ATM for a financial institute is normally done by the professional firms involved in this business. An approximate cost of setting up an ATM would be between Rs. 5 to 6 lakhs.

    Live....and Let Live!

  • Automatic Teller Machine (ATM) is just a machine which allows you to withdraw cash funds from your bank account or to check the balance of your account by entering the correct PIN number.

    Principle behind the working of ATM or Automatic Teller Machine

    The principle behind the working of an ATM machine is to offer or provide the cash from your account by entering the correct card and PIN number anywhere. We will now discuss the working of ATM's below.

    Working of ATM's

    The points given below will tell you how an ATM machine works:
    • A user visits the ATM and inserts his/her ATM card into the machine.
    • ATM machine read the magnetic strip from the card and then identify the user with his/her bank account.
    • ATM asks the user to enter the PIN code.
    • If the user enters an wrong or incorrect PIN code then the transaction is cancelled and then the user has to enter the card again.
    • And if the user enters the correct PIN code then the machine shows different options to choose such as withdrawal, deposit, balance inquiry etc.
    • Then the user select one option from them mostly for withdrawal cash and fill or enter the amount which the user want to be withdrawal.
    • Then the machine connects to the bank database to check the account of the user for the balance inquiry if the user has the sufficient balance to withdrawal or not.
    • If not then the machine display the message for insufficient balance.
    • If so then the machine withdrawal the cash which the user asked for.
    • Machine gives a slip for the transaction.
    • Users collects the money and card and then leaves the ATM.

    These were the steps explaining the working of ATM.


    • You must collect the money and card before leaving the ATM.

    • You must click to the cancel button before leaving the ATM.

    • You must press some buttons from the ATM machines so as anyone even can't trace your fingerprints.

    These were some steps you must follow while using ATM machine.


    I find that the harder I work, the more luck I seem to have.

  • Aman, the question is about the technology of how an ATM works. Not about how to use an ATM. Read the question carefully. You are expected to provide the technical aspects of how the machine dispenses the cash and performs other things. Your response seems too irrelevant.

    Live....and Let Live!

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