How Did the ATM Evolve?

The automatic teller machine is such a common sight nowadays that most people probably take it completely for granted. It might be hard to imagine, then, that there was a time when the only way to withdraw cash from a bank account was to actually go to a bank and speak to a human being.

The ATM was an invention with a long gestation period. The first ATM patent, issued in 1939, was for a version of an ATM that never caught on. A 34-year-old Turkish inventor, photography expert and resident of New York City named Luther Simjian built what he called the “Bankmatic machine” and nicknamed the “hole-in-the-wall machine.” This device was capable of handling a few rudimentary banking transactions. The City Bank of New York, which is now called Citicorp, allowed Simjian to install his invention in one of their branches as an experiment. Very few customers were interested in going near the Bankmatic, however. Simjian observed that only gamblers and prostitutes seemed to want to use the machine. City Bank got rid of the machine six months after it was installed. Simjian went on to develop a number of inventions in a wide variety of fields; he died in 1997.

The late 1960’s were the boom time for ATM inventors. Consider the following developments, all within the span of a few years:

• In 1965, a British engineer at Smiths Industries began working on a machine with a keypad that could read numbers encrypted on cards. This machine could also dispense pieces of paper, including cash.
• In 1966, Scottish inventor James Goodfellow patented an ATM that functioned much as ATM’s today function.
• John Shepherd-Barron, who ran a technology company called De La Rue Instruments, became the primary inventor of an ATM introduced in 1967. This ATM was called the DACS, short for “De La Rue Automatic Cash System.”
• Reg Varney, a comedic television actor, became the first British citizen to use a DACS machine on June 27, 1967.

Of the inventors listed above, Shepherd-Barron is most widely credited with launching the ATM into public consciousness. But how did Shepherd-Barron come up with this idea?

Professionally, Shepherd-Barron was involved in the printing and transporting of cash; the idea of moving cash from one place to another inside an armored vehicle was one he helped to initiate and promote. Anyway, the story goes that one night in the mid-1960’s, Shepherd-Barron wanted to get some money after work, but the banks were closed. He went home and into his bathtub, still feeling angry because he hadn’t been able to withdraw money. Then the idea hit him: What if there were machines people could access any time of the day or night, machines that would dispense cash and automatically subtract the amount of withdrawal from a customer’s account? Shepherd-Barron went to work right away on the details of just such a machine with a team at De La Rue.

Plenty of issues had to be worked out. For example, there was no such thing as an ATM card in the 1960’s, so early versions of the automatic teller machine would have to read something else in order to identify a customer. The DACS machine read checks stained with carbon 14; the carbon 14 stains identified customers with numbers. (The presence of carbon 14 also made checks radioactive, if only to a tiny degree.) Therefore, Shepherd-Barron is not only an ATM innovator, but also the father of the PIN number as it’s now used in banking. He thought PIN’s should contain six digits, but his wife argued that four-digit PIN’s would work better.

Once the DACS prototype had been created, Shepherd-Barron met with a manager at Barclays, and this manager loved the idea of the automatic teller machine. By the way, Shepherd-Barron never earned anywhere near the money he might have from his work on the ATM, because he never patented the machine. He was concerned that if he patented it, he would have to publicly release all of its technological secrets. Thus, he reasoned, criminals would be able to break into these machines and steal money, rendering them useless.

The DACS machine may have delighted British banking customers, but it had yet to make its grand debut in the banking capital of the world: the United States. How the machine hit the big time in the U.S. is a story of its own, one we will share in the next post.