How Do ATM Machines Work?

An ATM machine is a self-service banking terminal that allows users to perform basic financial transactions without the need for a human teller. Anyone can own and operate an ATM machine, not just banks. But how do ATM machines work?

Aside from the actual technical functions of an ATM machine, you might be wondering how an ATM can work to make you money. In this article, we’ll not only explain the inner workings of ATM machines but also how they can work for you.

How Do ATM Machines Work: Technical Components

Most ATM machines are composed of 5 main components: card reader, keypad, display screen, cash dispenser, receipt printer. If you’ve ever used an ATM before, you’re probably familiar with most of these parts. However, as the owner and operator of an ATM machine, they can take on a new meaning as it is your responsibility to keep them functioning smoothly. 

Card Reader

The card reader reads the magnetic stripe or chip on a debit/credit card to access the user’s account information. Card readers must meet certain compliance standards, and they change periodically as technology and security measures evolve. 

Keypad

The 3×4 (standard numeric) keypad is where users enter their PIN and select transaction options. There are a few keypad variations to support different security standards, user needs, and regulatory environments. However, most keypads in the United States have standard features. 

For example, metal keypads are common because they are more difficult to tamper with and overlay. Privacy shields help prevent “shoulder surfing”. And ADA compliance requires that the keys have tactile symbols (like a raised dot on the 5 key), high contrast markings, and auditory output.

Finally, Encrypting PIN Pads (EPPs) are the industry standard. EPPs are tamper-resistant keypads that encrypt the PIN internally before sending it to the ATM processor. They are required by PCI PTS standards to maintain compliance. If tampered with, the self-destruct feature automatically erases encryption keys.

Display Screen 

The display screen shows the instructions and transaction details. ATM display screens come in a variety of types and configurations, depending on the machine’s age, purpose, location, and technology level. These screens serve not just as user interfaces but also as a platform for branding, advertising, and accessibility.

Older screens are monochrome LCD screens. They display in black-and-white or grayscale, have low resolution, and do not have touchscreen capability.

Color LCD screens are the most common type in modern ATMs. They range from 7-15 inches in size. They can support simple graphics, animations, and branding. And resolution might vary from basic VGA to high-definition.

Touchscreens allow users to interact directly with the screen without the need for physical navigation buttons. Touchscreens are common in newer ATMs and can only be used for navigation; PIN entry must still go through a certified EPP unless the screen is PCI-certified.

Outdoor ATMs or drive-up terminals might have sunlight-readable or anti-glare screens. They use transflective LCDs, anti-glare coatings, or high-brightness backlights and help ensure visibility in direct sunlight.

Privacy screens are made of integrated filters that narrow the viewing angle. This allows only the user directly in front of the ATM to read it. These are often used at walk-up indoor ATMs in high-traffic areas.

Finally, voice-assisted screen interfaces combine a visual screen with audio prompts via a headphone jack (for ADA compliance). These are used by visually impaired users to navigate via voice and tactile keypad input.

Cash Dispenser 

The cash dispenser presents cash to the user based on their requested amount. It draws from secure containers called cassettes, each of which holds a single denomination of currency (e.g., $20 bills, $50 bills).

Most ATM machines have only one or two cassettes, so they can only offer one or two denominations in withdrawals. This is why you might see withdrawal options on some machines only in $20 increments—those machines have one cassette that only dispenses twenty dollar bills.

The cash dispenser uses rollers, sensors, and error-checking systems to ensure the correct number of bills is dispensed, bills are not stuck together, and counterfeit or damaged notes are rejected. If there’s a jam or error, the transaction is logged, and the cash is typically returned to a reject bin inside the ATM rather than being lost.

Receipt Printer

The receipt printer prints a paper record of the user’s transaction. Details might include the transaction type, date and time, location, account balance, and a confirmation number. ATMs can also be programmed to print custom messages (like a thank you) and/or include location-specific offers, coupon codes, or branded ads to drive customer engagement or encourage repeat transactions.

Most ATM receipt printers use thermal printing technology. No ink is required, just special heat-sensitive paper. This helps reduce maintenance but requires the correct thermal paper rolls. As the owner/operator of an ATM machine, it is your responsibility to purchase the receipt paper and make sure the machine is always stocked and free of paper jams. 

For all of these parts to function, the ATM machine must be plugged into a power source and connected to the internet. The internet connection is how the machine communicates with the user’s bank and the credit card networks to verify user information and approve or deny the transaction.

How Do ATM Machines Work: Compliance Requirements

ATM card readers must follow a set of standards and regulations to ensure security, interoperability, and fraud prevention. It’s especially important for both bank-owned ATMs and Independent ATM Deployers (IADs) to meet certain industry standards to protect users and participate in card networks (like Visa, Mastercard, etc.).

EMV Compliance

Card readers must be EMV compliant. EMV stands for Europay, Mastercard, and Visa. Basically, this is the term applied to cards with chips. Chip-enabled cards are more secure than cards with only a magnetic stripe and are therefore required in most regions to reduce card-present fraud. All ATM machines have to be able to accept and read chip cards. 

PCI DSS Compliance

PCI DSS stands for Payment Card Industry Data Security Standard. This applies to any system that handles cardholder data, which includes ATM machines. ATMs must encrypt card data during and after reading it and therefore must maintain compliance.

PCI PTS

PCI PTS refers to PIN Transaction Security. This compliance regulation focuses specifically on secure PIN entry and encryption. ATMs must use approved PIN entry devices (PEDs) that protect against skimming and PIN compromise. Hardware must be certified to resist tampering or keylogging to be compliant.

ADA and Accessibility Compliance

The Americans with Disabilities Act (ADA) is a United States law that requires certain accommodations for citizens who would not otherwise be able to benefit from services. To comply, ATMs must include Braille instructions, voice guidance via headphone jack, and specific wheelchair reach height requirements for all keys and functions. ADA compliance is a legal compliance requirement for ATMs that handle cards.

It is important to understand that there are penalties for non-compliant ATM machines. For example, the machine could be excluded from card networks like Visa, Mastercard, and Discover. The ATM owner could be held liable for any fraudulent transactions made on a non-compliant machine. And the machine can be fined and/or shut down altogether. Penalties aside, failure to comply with regulations exposes users to a higher risk of card skimming or data theft.

How Do ATM Machines Work: The Process

The process of using an ATM machine is very simple. The whole point of ATM machines is convenience, so any cardholder has to be able to use it easily. Here is how it typically works:

First, the user inserts the debit or credit card into the machine. The ATM reads the account number from the card’s chip. The user enters the card’s 4-digit PIN using the keypad. Then, the ATM encrypts this information and sends it to the user’s bank for verification. 

Once the information is verified, the user can select the desired transaction (withdraw cash, check balance, etc.). The ATM then sends a request to the bank through a secure network like Visa or Mastercard networks. At this point, the bank approves or denies the transaction based on the user’s account status and balance. If approved, the ATM performs the transaction (dispenses the withdrawal amount or prints a balance receipt).

The machine keeps a record, and the transaction updates the user’s account in real time. Finally, the machine prints a receipt and ejects the card.

How Do ATM Machines Work: Security Measures

ATMs would not be successful if consumers did not absolutely trust them with their sensitive financial data and access to their accounts. So there are a number of measures ATMs take to uphold the utmost security.

First, all PINs and data are encrypted during transmission. There are also anti-skimming tools that many machines use to protect against devices that are designed to steal card data. Timeouts also help protect users by automatically ending sessions after a certain period of inactivity. 

The cash inside the ATM machine is secured with a lock and key or an eLock with an electronic passcode. Some machines might be equipped with a GPS tracker to protect against the removal of the machine. Finally, most ATM machines are under camera surveillance and monitored to help prevent fraud, theft, tampering, and vandalism.

How to Make Money with ATM Machines

Knowing how ATM machines technically work makes it easier to understand how to make money with one. You can charge users a surcharge fee in exchange for the service your ATM provides. If a user needs cash and doesn’t want to travel to their nearest bank ATM, they can conveniently access their account from your machine for a mere 3 or 4 dollars (or whatever surcharge amount you set). 

But keep in mind, you can only make money with an ATM machine if it’s compliant and functioning properly. It is your responsibility as the owner/operator to ensure it is always stocked with cash, powered, connected to the internet, and free of any technical issues.  

How Do ATM Machines Work? Now You Know

In conclusion, for ATM machines to work seamlessly, there are a number of working parts and conditions that must all be properly in place. Furthermore, as an ATM owner/operator, the better your ATM machine works and the more often, the more money you stand to make. 

It’s important to understand at least generally how ATM machines work before you get into business with one. However, compared to many other businesses, understanding ATMs is relatively simple. Plus, if you work with a company dedicated to customer service like ATMDepot, you are never at a loss for support and resources. 

If you are interested in making semi-passive income with ATM machines, it’s easy to get started today! Still have questions? Don’t hesitate to contact us. We know all there is to know about how ATMs work!