How Do ATMs Work

When you need money from an ATM machine, you insert your credit or debit card into the ATM and enter a pin number assigned to you by your bank via the keypad. After approval of the Personal Identification Number (PIN) and card combination, prompts on the screen give you actions to select such as: withdraw cash, balance inquiry, or transfer. You select withdraw cash and select the amount using the keypad and screen. Upon your bank’s approval, money is dispensed from the ATM machine with an associated receipt. Do you know what happens in the ATM and beyond to make this happen? This page will describe how ATM machines work.

In short, an ATM machine is a computer with a mechanical dispenser for cash that is connected to an ATM transaction processor through the internet or phone line. The ATM Transaction processor is able to connect to the ATM networks and, through these networks, to your bank.

In order to understand how an ATM machine works, it is important to understand the different parts that make up the ATM machine.

The major parts of an ATM include:

Mainboard - This part controls the processing of the ATM. This houses the CPU, memory, and provides connection to all the other ATM parts.

Card Reader - This part reads account information that is stored on an EMV chip or magnetic strip. Most card readers and cards today are EMV-enabled. The EMV acronym stands for  Europay, MasterCard, Visa. It is the global standard for chip-based debit and credit card transactions. The EMV chip creates a unique transaction code for that particular transaction. 

Display screen (LCD) - This part provides instructions on how to use the ATM. 

Keypad - This part allows the customer to input information regarding the transaction that they would like to execute. The information provided by the customer may include the personal identification number (PIN), the type of transaction, and the amount of the transaction.

Cassette - This part holds the ATM cash.

Cash dispenser - This part moves cash from the cassette to the cash tray.

Printer  - This part prints the receipt for the customer.

Power Supply - This part connects the rest of the ATM to external power.

I/O Board - This part controls the communication with the processor through the internet or phone line.

Modem - This part executes the communication to the internet.

How the ATM processes transactions:

The process begins when you insert your card into the ATM card reader. After inserting your card, the mainboard will request that you enter your pin using the display. After you enter your pin using the keypad, the mainboard requests the type of transaction to occur using the display. After the PIN and transaction is entered, the mainboard sends the unique EMV transaction code, PIN, and transaction to the processor through the I/O board and modem. The processor uses this information to route the transaction to an ATM network that is associated with the card. The networks associated with the card are usually printed on the back of the card. By Federal regulation, each card is required to have two networks so that if the transaction cannot be processed with one ATM network it can be processed with the other network. The ATM network then sends this information to the card issuer (i.e. your bank) to determine whether the transaction is approved. This approval or denial is sent back to the ATM through the ATM network and ATM processor. Each further transaction is processed in the same manner. When a withdrawal is selected the transaction is processed and, if approved, your bank debits your account for the amount. This transaction is sent back through the ATM networks and processor to the ATM. The mainboard then initiates the dispensing of the cash. The cash dispenser removes the bills from the cassette one by one. The dispenser is an ultra-sensitive piece of equipment that determines if each bill is of the right size and thickness to ensure that only one bill is dispensed at a time. If a bill is determined not to be correct; which can be caused by numerous factors including: being stuck together, torn, or worn, it is sent to the reject bin. If a bill is sent to the reject bin, another bill is selected to be dispensed until the right number of bills has been dispensed for the transaction.  After the bills have been dispensed, a receipt is printed for the transaction.