ATM Business Basics Part I: How ATMs Work

Running an ATM business is a relatively simple endeavor. However, there’s some ground level knowledge that you need to be a successful ATM owner. A big part of that knowledge base is how ATMs work.

While you don’t need to be an ATM technician (you can always pay one to service your ATMs if you need), it’s important to have basic working knowledge of your ATMs. That way you can identify and solve minor problems, and quickly add cash or refill the receipt paper. This makes your ATM business more efficient in terms of both time and expenses.

So, welcome to our two-part guide that will give you a solid foundation of information on which to build your ATM business. We’ll start with the basics of how ATMs work.

How ATMs work

As the name suggests, an ATM (Automatic Teller Machine) a banking terminal where users can perform a variety of banking activities, depending on the capabilities of the ATM machine itself.

Inserting a debit card or credit card that offers cash advances activates the ATM. The ATM authenticates the debit or credit card using a PIN number, electronically debits the cash amount from the user’s account, and dispenses that withdrawal as cash.

On the backend, the bank reimburses the ATM owner for the cash taken from the ATM, plus a transaction fee, which is paid by the ATM user. This is handled electronically by the ATM processor.

That’s the basic process. These are the parts involved in this process.

The parts of an ATM machineThe Parts of an ATM Infographic

We’ll cover these quickly in two groups: the parts that the user sees, and the parts that you, the ATM owner, need to know.

These are the user-facing parts involved in an ATM transaction:

Display (LCD or LED): The display is where the prompts and instructions are shown to the ATM user. ATM machines are equipped with braille and audio devices (speaker or headphone jack) for blind customers.

Keypad: The keypad is simply a grid of buttons that accepts input from the user. Many ATM machines also have buttons on the sides of the screen for making certain selections

Card reader: This accepts the user’s debit or credit card and reads the information on it.

Cash dispenser: This is where the magic happens. The cash dispenser gives customers their cash. The cash dispenser also checks notes for proper size and thickness and ensures that the correct number of bills are given.

Receipt printer: This part prints the receipt that verifies the transaction, and sometimes shows the user’s account balance.

These are the parts of an ATM that the customer interacts with. You as the ATM owner need to be familiar with these parts. However, the ATM owner also needs to know their way around the internals of an ATM machine, even if they’re not an expert in repairing or replacing those parts.

These are the internal parts of an ATM machine:

ATM mainboard: The mainboard is the central “computer” for the ATM. The CPU, RAM, and connection interfaces for the other components live here.

Power supply: Connects to an external power source and provides power for all the ATM machine components.

Modem: The modem performs all the internet communications required for transaction processing. This can be wired or wireless. It depends on how the ATM connects to the internet.

I/O board: The I/O board is in charge of communicating with the ATM processor, and ensuring that the correct information is sent to the correct parties.

Cassette: The cassette is an important part for the ATM owner. The cassette holds the cash. When you stock an ATM with money, this is where the bills go. The cassette can be fixed or removable. Each type of cassette has pros and cons. Which one you use depends on your business and the ATM location.

How Does an ATM Machine Work?With all the parts covered. Here’s a more detailed look at how an ATM works:

  1. The user activates the ATM by inserting their card.
  2. The customer enters their PIN and selects how much cash they want using the keypad and display.
  3. The mainboard collects the information and sends a unique EMV transaction code to the I/O board.
  4. The I/O board packages up the transaction information for the ATM processor and the modem transmits it to the appropriate ATM processing networksYour card’s supported networks are printed on the back. Every card is required by law to have two accessible networks. The transaction is completed through the secondary network if the first network fails.
  5. The ATM processor sends the withdrawal request to the bank. The bank approves or denies the request. If the transaction is approved, the message is sent back through the ATM processor to the ATM. Then, the selected amount gets debited from the customer’s account. Associated transaction fees are usually paid from the customer’s account.
  6. The modem and I/O board receive the approval. And, the mainboard initiates the cash dispensing. The cash dispenser checks each bill to ensure that it’s the proper size and thickness and that the correct number of notes gets dispensed. Notes that are not the proper size or thickness get sent to the reject bin. This happens occasionally with old or torn bills. The cash dispenser automatically dispenses a different bill any time a note is sent to the reject bin.
  7. The customer takes their cash and has a great day!

Those are the nitty-gritty details of how ATMs work.

It’s helpful to know these fine details as an ATM owner. Being more familiar with the machine helps with basic troubleshooting, and makes life easier if you get technical support over the phone.

However, you should be very familiar with the cassette and user interface. Inspect these each time you restock your ATM. You need to fix your machine ASAP if the user interface is malfunctioning or cash is being dispensed incorrectly. You lose money whenever your ATM isn’t working.

Whenever you fill your ATM with cash, it’s best to perform a transaction to verify that your machine is working correctly.

Front to back

That’s the frontend of an ATM business. In the next part, we’ll talk about what happens on the backend and where all the transaction fees go. Stay tuned. Or learn more about building your own ATM business (and how you make money).


1 Passive Income Idea That Will Get You Out of the Rat Race for Good

Let’s start by setting the record straight on passive income: no form of income is truly 100% passive. Any income stream requires that you invest some time, effort, and energy.

Even income earned from interest on money sitting in the bank requires you to check the balance occasionally.

What we really mean when we say “passive income” is “low effort income.”

Fortunately, there are many low effort income generators. But, some are better than others. And, there’s one that beats the rest in the most important areas:

  • Initial investment (time and money).
  • Time to start generating income.
  • Maintenance requirements.

As you may have guessed, the best passive income idea is the ATM business. Here’s why an ATM business beats other passive income investments in the short term and the long run.

Low Upfront Investment

We have to be honest here: the most popular passive income ideas work. Investing, real estate, building a successful blog, and other methods will indeed generate passive income in the long run.

Grow Your Money with Passive Income

However, these passive income methods require a large investment before you get any money back.

In his book, The Intelligent Investor, Benjamin Graham talks about generating income from stocks and bonds. He gives good advice.

But, by Graham’s figures, one can expect between 4% and 7% return on their stock market investments. So, you’re not really generating meaningful cash flow until you’ve got tens of thousands invested. And, the required investment is closer to 100,000 if you happen to get 4% returns.

Real estate is another common passive income investment. But, it doesn’t take much searching to discover that buying a house might cost far more than 100,000.

There are ways to purchase real estate properties with no money down. But, you’re still spending money. The investment comes in the form of thousands, maybe hundreds of thousands of dollars in debt liability. And, you’ll most likely need to spend some time working on the property you purchase before it will be profitable.

Then there’s blogging, or becoming an online influencer or creator. The monetary investment here can be very small. But, the time investment is huge. It can take years to build a blog or YouTube channel that gets enough traffic to turn a profit.

An ATM machine, on the other hand, costs a few thousand to set up. That includes the cash to fill the machine. And, that’s the average cost of buying and placing an ATM. There are ways to get started for less, such as buying a refurbished or used ATM machine.

So, yes, there is an upfront cost to starting an ATM business. However, it’s a fraction of the cost of most other passive income methods, both in time and money.

Time to Return

In his financial classic, Rich Dad Poor Dad, Robert Kiyosaki says the most important question to ask before you make an investment purchase is, “How long will it take to get my money back?”

He means that you need to consider how long it will take to recoup the initial cost of the investment. Any money you make after you’ve recovered your initial investment is profit. So, the faster you recoup your initial investment costs, the faster you start truly making money.

In that same book, Kiyosaki gives an example of a real estate investor who purchases a rental property. The property generates $125 a month in cash flow, which the investor reinvests into the property (so that money does not go into his bank account). Several years later, the property sells for more than he paid, and he makes a solid profit.

Making Money from Your Bank

All well and good. The key phrase here is, “several years later.” Yes, he made good money on the deal. But, it took years of renting. That’s a long time to recover your investment and start making money.

Stock market investing suffers from a similar issue. There are case studies that show how you could have invested $5 in the stock market in 1929, then by 1954 that $5 would have turned into several thousand or more.

There are other examples that start at different dates. But, all these case studies have the same thing in common: the timeline is very long. It always takes decades for that money to grow. The reality of investing is that you either need a lot of time or a lot of money to generate real profits.

Then, other passive income models like blogging have an undefined timeline. Some people get lucky. Their content becomes famous overnight, and they’re off. But, the majority of people who go this route spend years creating content before they ever see a dime.

Now, here’s a brief explanation of how an ATM makes money for you:

You buy the ATM machine, place it in a retail store, restaurant, coffee shop, gas station, or anywhere else where people may need to get cash.

You charge the customer $2.50 to get money from your ATM. That $2.50 is your revenue. Some of it will usually go to the business owner for allowing you to place an ATM in their business space. And, a little bit gets used to pay operating expenses.

But, even after all that, you’re still making a couple bucks per transaction. Even a slow location will get 3 or 4 transactions a day.

Regardless of the transaction volume, the ATM machine starts recovering your initial investment immediately. And, in a decent location, you could recover the cost of the ATM machine in a matter of months.

The bottom line is that the time to return on investing in ATM machines is far lower than any other passive income investment we know of. Which means you’ll start generating profit much faster.


Of course, we can’t talk about real estate and stock market investing without talking about risk. Even blogging and content creation carries some risk. Though, you can overcome the risk by making smart adjustments and putting in persistent work.

But, the risks in real estate and stock market investing are very real. And, if you’re not careful, they can be financially devastating, at least temporarily. The only thing we know for sure about stock and real estate markets is that they reliably go up and down.

At some point, your investments are going to lose value. And, it may come at a time when you’re not in a good position to absorb that loss. Any experienced investor will tell you that’s just the way it goes.

However, cash never goes out of style. And, ATM machines offer convenience. The demand for that convenience is actually going up as more and more banks move to providing digital services.

But, that’s only part of the point here. The main point is that an ATM machine will reliably get transactions. If you put an ATM where people can see it and use it, somebody will use it.

Everyone Loves Cash


Unlike other passive income investments, it’s not a question of if you make money, it’s when. And, you can control that by placing your ATM machines in good locations.

It’s one of the few low risks, high potential reward investments in the world.


For some people, this is the most important thing. How much work does it take to maintain your passive income?

As we mentioned earlier, there’s no such thing as 100% passive income. You have to put in some effort. It’s just a matter of how much effort is required.

Some “passive income ideas” are actually not passive at all. How passive is running a blog and selling ad space on your blog? It’s not. Running a successful blog is nearly a full-time job.

Investing can be super low effort. But, the less effort you put in, the less money you make. It takes a lot of education, time, effort, and energy to be a successful aggressive investor. Look at Warren Buffet. His job title is “investor” because that’s what he spends most of his time doing.

Real estate is the same way. It takes a lot of time, effort, and energy to consistently find good real estate investments and close the deals.

All this isn’t to say that operating ATM machines takes no effort. It does. Here’s what you have to do:

  1. Monitor the cash level in your ATM.
  2. Go to your ATM machine.
  3. Open it with your key.
  4. Add a fat stack of $20 bills to the cassette.
  5. Close it.
  6. Make sure it’s locked.
  7. Withdraw $20 to make sure it’s working correctly.

Making Passive Income

That’s it. Have you ever seen someone restock a vending machine? It’s less complex than that.

This takes a few minutes. And, depending on how much cash you keep in the machine, you may only have to do this once a week. You can easily keep your full-time job and operate ATM machines.

Sure, you’ll have to do it more often if you have multiple ATM machines. But, multiple ATM machines also means more ATM income. Your passive income scales directly with the required effort. So, you may not need to keep your full-time job if you’re filling a lot of ATM machines.


The passive income machine

That’s it. The one passive income idea that will get you off the hamster wheel. It’s not hard. And, the barrier to entry is so low that almost anyone can afford it (both in terms of time and money).

Since we’ve mentioned him already, Robert Kiyosaki says that the difference between a rich person and a poor person is how they spend their money.

A rich person buys things that will make him more money. A poor person buys things that end up costing him money.

An ATM machine is probably the most affordable thing you can buy that will actually make you money.

So, you can spend your next few thousand dollars reaching the next rung on the hamster wheel. Or, you can spend those dollars like a rich person, and buy something that will make you money, and break that hamster wheel.