How ATMs Work?


The automatic teller machine (ATM) is an automatic banking machine (ABM) which allows customer to complete basic transactions without any help of bank representatives. There are two types of automatic teller machines (ATMs). The basic one allows the customer to only draw cash and receive a report of the account balance. Another one is a more complex machine which accepts the deposit, provides credit card payment facilities and reports account information.

It is an electronic device which is used by only bank customers to process account transactions. The users access their account through special type of plastic card that is encoded with user information on a magnetic strip. The strip contains an identification code that is transmitted to the bank’s central computer by modem. The users insert the card into ATMs to access the account and process their account transactions. The automatic teller machine was invented by john shepherd-Barron in year of 1960.

Automatic Teller Machine
Automatic Teller Machine

Automatic Telling Machine Block Diagram:

The Automatic telling machine consists of mainly two input devices and four output devices that are;

Input Devices:

  •       Card reader
  •       Keypad

Output Devices:

  • Speaker
  • Display Screen
  • Receipt Printer
  • Cash Depositor
Automatic Teller Machine Block Diagram
Automatic Teller Machine Block Diagram

Input Devices:

  • Card Reader:

The card reader is an input device that reads data from a card .The card reader is part of the identification of your particular account number and the magnetic strip on the back side of the ATM card is used for connection with the card reader. The card is swiped or pressed on the card reader which captures your account information i.e. the data from the card is passed on the host processor (server). The host processor thus uses this data to get the information from the card holders.

Automatic Teller Machine Card Reader
Automatic Teller Machine Card Reader
  • Keypad:

The card is recognized after the machine asks further details like your personal identification number, withdrawal and your balance enquiry Each card has a unique PIN number so that there is little chance for some else to withdraw money from your account. There are separate laws to protect the PIN code while sending it to host processor. The PIN number is mostly sent in encrypted from. The key board contains 48 keys and is interfaced to the processor.

Automatic Teller Machine keypad
Automatic Teller Machine keypad

Output Devices:

  • Speaker:

The speaker provides the audio feedback when the particular key is pressed.

  • Display Screen:

The display screen displays the transaction information. Each steps of withdrawal is shown by the display screen. A CRT screen or LCD screen is used by most of ATMs.

Automatic Teller Machine LCD Display
Automatic Teller Machine LCD Display
  • Receipt Printer:

The receipt printer print all the details recording your withdrawal, date and time and the amount of withdrawn and also shows balance of your account in the receipt.

  • Cash Dispenser:

The cash dispenser is a heart of the ATM. This is a central system of the ATM machine from where the required money is obtained. From this portion the user can collect the money. The duty of the cash dispenser is to count each bill and give the required amount. If in some cases the money is folded, it will be moved another section and becomes the reject bit. All these actions are carried out by high precision sensors. A complete record of each transaction is kept by the ATM machine with help of an RTC device.

Automatic Teller Machine Cash dispenser
Automatic Teller Machine Cash Dispenser

ATM Networking:

The internet service provider (ISP) also plays an important role in the ATMs. This provides communication between ATM and host processors. When the transaction is made, the details are input by the card holder. This information is passed on to the host processor by the ATM machine. The host processor checks these details with authorized bank. If the details are matched, the host processor sends the approval code to the ATM machine so that the cash can be transferred.

Automatic Teller Machine Networking
Automatic Teller Machine Networking

2 Types of ATM Machines

Most of the host processors can support either leased line or dial up machines

  • Leased line ATM machines
  • Dial up ATM machines

Leased Line ATM Machines:

The leased line machines connect direct to the host processor through a four wire point to point dedicated telephone line. These types of machines are preferred in place. The operating cost of these machines is very high.

Dial Up ATM Machines:

The dial up ATMs connects to the host processor through a normal phone line using a modem. These require a normal connections their and their initial installation cost is very less. The operating cost of these machines is low compared with leased line machines.

ATM Security:

The ATM card is secured with PIN number which is kept secret. There is no way to get the PIN number from your card. It is encrypted by the strong software like Triple data Encryption Slandered.

Automatic Teller Machine Working Principle:

Automatic Teller Machine Circuit Diagram
Automatic Teller Machine Circuit Diagram

The Automatic teller machine is simply a data terminal with two input and four output devices. These devices are interfaced to the processor. The processor is heart of the ATM machine. All the ATM machines working around the world are based on centralized database system. The ATM has to connect and communicate with the host processor (server).  The host processor is communicating with the internet service provider (ISP). It is the gateway through all the ATM networks available to the card holder.

Automatic Teller Machine Architecture
Automatic Teller Machine Architecture

When a card holder wants does an ATM transaction, user provides necessary information through card reader and keypad. The ATM forwards this information to the host processor. The host processor enters the transaction request to the cardholder bank. If the card holder requests the cash, the host processor takes the cash from the card holder account. Once the funds are transferred from the customer account to host processor bank account, the processor sends approval code to the ATM and the authorized machine to dispense the cash. This is the way to get the amount on ATMs. The ATM network is fully based on centralized database environment. This will make life easer and secured the cash.

Advantages of Automatic Teller Machine:

  •  The ATM provides 24 hours service
  •  The ATM provides privacy in banking communications
  •  The ATMs reduce the work load banks staff
  •  The ATM may give customer new currency notes
  •  The ATMs are convenient to banks customers
  •  The ATM is very beneficial for travelers
  •  The ATM provide services without any error

Features of Automatic Teller Machine:

  • Transfer funds between linked bank accounts
  • Receive account balance
  • Prints recent transactions list
  • Change your pin
  • Deposit your cash
  • Prepaid mobile recharge
  • Bill payments
  • Cash withdrawal
  • Perform a range of feature in your foreign language.

Now you have got an idea about the how ATM works so if any queries on this topic or on the electrical and electronic projects leave the comments below.

Photo Credit

  • Automatic Teller Machine by Renome
  • Automatic Teller Machine Block Diagram by st
  • Automatic Teller Machine Card Reader by kicteam
  • Automatic Teller Machine keypad by bigcommerce
  • Automatic Teller Machine LCD Display by zesty
  • Automatic Teller Machine Cash Dispenser by 4.bp.blogspot
  • Automatic Teller Machine Networking by media.developeriq
  • Automatic Teller Machine Circuit Diagram by semicon.njr
  • Automatic Teller Machine Architecture by static.ddmcdn



  2. How does triple data encryption works?

    1. Hi Hitesh,
      a good question from you. I sincerely appreciate your kind response regarding my article.
      Data Encryption Standard, or DES, is a block cipher where a string of bits is transformed into an encrypted string of bits of equal length using a key of a specific size. It is a symmetric-key cipher, so anyone with the key can decrypt the text. Hardware was created to support DES as well as software, but as computing machines got more powerful, DES encryption fell to brute force attacks on the key space.

      Rather than make an all new encryption standard (which eventually happened in 2001 with the Advanced Encryption Standard) or trying to build hardware with a larger key size, the core DES hardware and algorithms were expanded into the Triple DES or 3DES standard, which used the same DES algorithm but ran it on data blocks three times with three different keys, running an encrypt with key 1, a decrypt with key 2 and another encrypt with key 3. Functionally, there three keys were implemented as a single key 3 times as long as the regular DES key. By implementing the enciphering as an encrypt-decrypt-encrypt cycle with three different keys, this same hardware could also be backward compatible with DES when all 3 keys were set to the same key. The longer key and multiple encryption steps made the resulting ciphertext much harder to crack with brute force methods.
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  3. Why cash dispensor is called an heart of ATM

    1. Hi Sharan
      I sincerely appreciate your kind response regarding my article
      actually, the cash dispenser contains money. The cash-dispensing mechanism has an electric eye that counts each bill as it exits the dispenser. The bill count and all of the information pertaining to a particular transaction is recorded in a journal.
      please visit our domestic website
      For more details please contact to Mr. Sathish on +91 8885507011 or you can email us on

  4. Naushad Malik says:

    nice information

  5. pls send me pdf to my mail

  6. chukwuma joshua says:

    i am given a project topic on atm machine,is a research work to correct d issue of bank debiting a customer tru atm transactions witout disperssing cash.the ploblem to solve here is to fink of instants fieldbck to our various banks of such issues witout allowing d customer to bck to d bank to mk report.

  7. Thank you for the useful knowledge. I want to acquire the skill to install and maintain ATMs, I will appreciate any further information in this area.

  8. Excellent l received the required information in a well defined manner henceforth if l require any latest information l would be contacting you only thanks.

    1. Hi Ramesh,
      Really Very Very thanks for sharing your happiness with the Edgefx.
      And also,Just can we know the title of your project for which you have been received the required information?
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