What is an ATM? Full Form, Uses, Types, How to Use, and Features

what is an atm
Spread the love

Before ATMs, accessing funds from your bank account means visiting a bank and standing in long queues that too during the limited operation hours. However, the introduction of ATMs made the whole process convenient. The Automated Teller Machine (ATM) became the foundation of modern financial transactions by providing easy access to cash and other banking services. ATMs have enabled 24/7 banking services and also act as a bridge between customers and their banks, making financial management more accessible and efficient. ATMs are usually found at banks, shopping malls, airports, and other public places to make access to banking services easier for the customer. This blog will provide you with a comprehensive guide to ATMs, including the benefits, functionality, features, and the role they play in today’s modern financial world.

What is an ATM?

An ATM, or Automated Teller Machine, is an electronic device that allows customers to perform financial transactions without human interaction. This machine has features like withdrawing and depositing cash, checking balances, and transferring funds. All these features are accessible to customers around the clock.

History:

Barclay’s Bank, located in London, introduced the first ATM with only the feature of withdrawing money. That first ATM’s limited features marked the foundation for today’s highly versatile ATMs.

Why ATMs Are Still Relevant?

Despite modern technology like net banking, cardless banking, and mobile wallets, ATMs remain a crucial banking tool. For people who don’t have access to smartphones or a stable internet connection, ATMs are a reliable and secure backup. Their ability to integrate more features, like cardless transactions and multiple currency transactions, makes them an important tool in this fast-evolving technology.

What is the Full Form of ATM?

The full form of an ATM is an Automated Teller Machine. It is classified as an electronic machine that was designed to work as a bank teller. It allows the customer to do the transactions independently without the need for any human teller. The first ATM, introduced in 1967 by Barclays Bank, was named after its functioning as the automatic machine that allows depositing, withdrawing and other basic banking tasks without any direct interaction with a teller. The name “Automated Teller Machine” itself emphasises the purpose of a self-service banking tool.

In simpler terms that can be understood even by young minds, an ATM is a mini-bank that allows people to withdraw cash, deposit cash, check balance, and transfer funds without visiting the bank and talking to a teller. It is a machine that gives you money when you need it using your ATM card and PIN.

Types of ATMs

There are different types of ATMs that are designed to fulfil various needs. Here are some types of ATMs:

1) On-Site vs. Off-Site ATMs

    1. On-site ATMs:
    • Location: ATMs that are located near or within the bank premises.
    • Pros: It provides you with direct access to the bank if there is an issue.
    • Cons: They are only located in the bank’s area.
    1. Off-site ATMs:
    • Location: ATMs that are located in public places like malls, airports, etc.
    • Pros: These ATMs provide accessibility outside bank premises in high-traffic areas.
    • Cons: These may have fewer functions as compared to on-site ATMs.

2) Cash Dispenser vs. Full-Service ATMs

    1. Cash Dispenser:
    • Function: Offers only limited services like cash withdrawal and balance checking.
    • It is ideal for simple and quick transactions.
    1. Full-Service ATMs:
    • Function: Offers services like cash deposits, balance checks, funds transfers, and many more.
    • It is ideal for many comprehensive baking services without visiting the branch.

3) Specialised ATMs

    1. Green Label ATMs: Used for agricultural transactions such as subsidies, crop insurance payments, payments for farmers, and farming loans.
    2. Orange Label ATMs: Used for financial market transactions like buying and selling of stocks, mutual funds and bonds.
    3. Pink Label ATMs: Designed to keep women’s safety as the top priority by ensuring safe and comfortable access.
    4. Floating ATMs: Installed on boats or ships to provide tourists in remote areas access to banking services.

4) Smart / Advanced ATMs

    • These ATMs have new features like biometric security, face recognition and cardless withdrawals.
    • These features make this type of ATM a secure option. It leads to faster transactions for tech-savvy users.

Uses of Automated Teller Machines

An ATM or Automated Teller Machine is a tool that provides a wide range of financial services to its customers. Here is the list of uses of an ATM:

1.    Cash Withdrawals & Deposits:

ATMs allow customers to withdraw money anytime, directly from their bank account. The full-service model ATMs allow the customers to also deposit the money to their bank account.

2.    Balance Inquiries & Mini Statements:

ATMs have made it convenient for customers to check their account balance instantly without visiting the branch. They also provide mini statements of your recent transactions, which helps you monitor your spending.

3.     Fund Transfers & Bill Payments:

ATMs allow customers to transfer money from one account to another within the same bank, or some ATMs even allow transfers to another bank. The full-service ATM models even allow you to pay utility bills and make routine payments easier for you.

4.    Other Services:

    • Mobile Recharge: ATMs provide the facility of top-up on your prepaid mobile accounts.
    • Ticket booking: One of the features of ATMs is the ticket booking service. It allows you to book tickets for travel, concerts, movies, etc.
    • Cardless Transactions: ATMs with advanced facilities eliminate the need for physical cards and allow transactions directly using mobile apps, QR codes and biometric authentication.

ATMs now offer a wide range of services as they have evolved to become more than just cash dispensers, making banking services more convenient and accessible.

Benefits of Using ATMs

Automated teller machines (ATMs) provide various benefits that completely change how people view banking services. Here are the benefits of ATMs in detail:

1. 24/7 Availability:

ATMs allow customers to operate at any time, even after the traditional bank times. ATM services are available for the customer around the clock.

2. Convenience and Speed:

ATMs are mostly available at all accessible locations, providing the convenience of quick cash in your hand anywhere. Also, it provides a quick and easy way to withdraw cash and many other services like depositing, bank inquiries, and ticket booking without any lengthy procedures.

3. Reduced Bank Queues:

ATMs help to reduce the queues at banks by handling routine transactions. It speeds up services like withdrawal and deposit and ensures faster services for customers who need in-personal assistance at the bank.

4. Enhanced Financial Inclusion:

ATM provides banking services and access to cash even in rural areas where bank branches have not reached. This enhances the financial inclusion and independence of these communities.

How to Use ATMs (Step-by-Step)

Operating an ATM to withdraw or deposit cash is a simple process. Here is the guide to using an ATM in a correct and secure way.

1. Preparation:

    • Have your card ready: Ensure that you have your debit/credit card ready and recall your Personal Identification Number (PIN) for secure access.
    • Check Surroundings for Safety: Stay alert to your surroundings while using an ATM. Avoid using the ATM if the condition looks suspicious to you. If you suspect something is wrong, cancel the transaction and report the incident to your bank immediately.

2. Transaction Process:

    • Insert Card: Look for the card slot in the ATM and insert the card as instructed. Some ATMs may require swiping or tapping the card instead.
    • Enter PIN: Enter your Personal Identification Number (PIN) through the keypad. Hide the keypad to prevent others from seeing your PIN.
    • Select Transaction: A selection of transactions will be displayed on the screen. Choose the desired transaction. (Eg. Cash withdrawal, deposit, balance inquiry)
    • Enter Amount: Enter the amount of cash you want to withdraw or deposit.
    • Collect Cash/Receipt: Once you confirm the transaction, the ATM will dispense your cash or receipt from the designated slot. Ensure to collect your card.

3. Security Best Practices:

    • Hide your PIN: Cover the keypad while entering your PIN.
    • Examine the ATM: Avoid card skimmers by checking for any tampering such as loose card slots or unusual attachments.
    • Stay Alert: If you face any issue avoid asking any stranger for help.

4. Common Errors & How to Troubleshoot:

    • Card Retained: This can be a result of entering the wrong password multiple times or a technical issue in the machine. In this case, contact the bank immediately.
    • Insufficient Funds: Check your account balance and the amount you want to withdraw before initiating the transaction.
    • Incorrect PIN: Ensure that you enter the PIN correctly, and if you have forgotten the PIN, then contact your bank for a PIN reset.
    • Machine Malfunctions: If the ATM fails to complete the transaction or does not dispense the cash, keep the receipt if available and inform the bank about the malfunction immediately.

ATM Cards: Function & Importance

ATM card is an important tool in banking services which enables users to access their accounts using the Automated teller machine. Here is a detailed overview of ATM card functions, types and significance.

1. Types of ATM Cards

    • Debit Cards: This card is linked directly to the user’s bank account and enables to withdraw cash, make purchases, and online payments.
    • Prepaid Cards: This card is not linked to the bank. The user can load a fixed amount for controlled spending. This card is a good gift or travel option.
    • Credit Cards with ATM Access: This provides the used to withdraw cash as a loan from their credit line. However, this benefit mostly comes with higher fees.
    • International Cards: This card allows you to make transactions in foreign currencies and to operate ATMs all over the world.

2. Card Security Features:

    • EMV Chip Technology: It generates unique transaction codes thus, it improves the protection as compared to magnetic stripes.
    • Contactless Payments: It allows you to make payments just through tap and go. This is possible through RFID and NFC technology.
    • PIN and Biometric Verification: To complete the transaction, you have to enter a PIN for security purposes. Some banks offer biometric authentication for added security.
    • Fraud Detection and Alerts: Banks provide transaction notification alerts to keep the customer informed. It also provides real-time alerts for suspicious activities.

3. How to Report Lost/Stolen Cards:

    • Immediate actions: As soon as you realise that you have lost your card, block the card by using the bank’s customer service hotline number or the mobile banking app.

Provide necessary details about the account and the card like the card number.

    • Follow Bank Protocols: Request a replacement card from your bank. It usually arrives within a few days. Also, check for any unauthorised transactions and inform your bank about it.

4. Function of Cards:

    • Cash Access: It provides quick access to cash as we can withdraw the cash anytime using the card.
    • Banking on the go: It provides all the banking facilities like deposit, balance inquiry, and fund transfer with the use of just a card.
    • Online and In-Store Payments: Cards help to facilitate seamless transactions.
    • Control and Convenience: Cards help to manage finances without even visiting a bank.

Importance of ATM Cards

ATM cards have many importance as they have completely revolutionised financial services by providing:

  • Convenience: It provides the convenience of instant access to many banking services. It eliminates the need for visiting bank branches.
  • Security: Advanced features of the card ensure the safety of transactions and the personal information of the customer.
  • Global Reach: Cards provide banking services across the border, providing benefits to travellers.

How is an ATM Useful for Students?

Automated Teller Machine provides numerous benefits to students, such as convenience, independence, and learning opportunities. Here are some aspects in which ATM is useful for students:

1. Access to Funds Quickly:

During the time of emergencies, students can access the cash immediately without depending on others to visit the bank branch. Also, the 24/7 availability of ATMs makes them more convenient as they allow students to withdraw money even outside banking hours.

2. Budgeting & Savings:

It allows the students to view real-time balances in their accounts, which helps them to keep an eye on their spending and manage their finances. Keeping their savings in the bank account and only withdrawing a limited amount of money helps the students to stick to their budget.

3. Building Financial Responsibility:

Using ATM helps the students understand the basics of banking. It creates a responsibility on the students to manage their finances, and PIN and avoid overdrafts. Operating an ATM regularly teaches them a life skill and encourages them to manage their finances regularly.

Fees & Hidden Charges in ATM Transactions

According to the type of transaction and the bank’s policies, the bank can apply some additional charges to your transaction:

1. Different Types of Charges:

    • Interbank ATM fees: Many banks allow only some free transactions using another bank’s ATM. After the number of free transactions is exceeded, the bank applies some charges. These charges vary from bank to bank.
    • International Withdrawal Fees: Banks apply currency conversion charges and transaction fees when you withdraw money from a foreign ATM.
    • Additional Service Charges: Services like balance enquiry and mini-statement from a non-home bank ATM can attract charges.

2. Fee Waiver Scenarios:

    • Many banks offer limited transactions in a month, e.g., 3–5 transactions monthly.
    • Some special accounts, like salary account holders or premium account holders, enjoy fee waivers on their ATM transactions.

3. How to Minimize Fees:

    • Use Home Bank ATMs: Avoid interbank fees by using your home bank’s ATM.
    • Withdraw Larger Amounts Less Frequently: You can minimize the transaction fees and stay within the withdrawal limit by withdrawing a large amount and reducing the frequency.
    • Opt for Fee-Waived Accounts: Explore while applying for an account and go for one which offers unlimited free ATM transactions or whose fees are low.
    • Monitor International Usage: While travelling internationally, try using global cards that charge minimum international transaction fees or withdraw money in bulk to avoid frequent transactions.

Who Owns ATMs? (Bank-Owned vs. White-Label ATMs)

ATMs are owned and operated by different entities according to their specific purpose and customers. When you learn about ATM ownership, you can understand the service quality, security measures, and additional fees.

1. Bank-Owned ATMs:

    • These are the ATMs owned by banks or financial institutes. These are located at the branch itself or standalone sites.
    • These ATMs provide a full range of banking services, including withdrawals, deposits, balance inquiries, fund transfers, and mini-statements.
    • No additional charges are implied for the services within the limit on account holders of the same bank.
    • These ATMs are found in urban, suburban, and rural areas.

2. White-Label / Independent ATMs:

    • These ATMs are owned by non-banking entities but are approved by banking regulators.
    • These independent ATMs are designed to expand them to the areas where the bank-owned ATMs are not there. This is the case, especially in rural and remote areas.
    • These ATMs usually provide only basic services like cash withdrawal and balance inquiries. It charges fees for transactions even from the account holders.
    • These ATMs are owned by private companies in partnership with banks. The sole purpose of stating these ATMs is to earn profit.

3. Importance of Knowing Ownership:

    • Bank-owned ATMs mostly waive the fees for account holders. Whereas, white-label ATMs charge fees for all the transactions.
    • Bank-owned ATMs provide faster service and are more reliable as they are directly linked to their bank network.
    • Bank-owned ATMs follow the strict security protocol of the bank, whereas white-label ATMs rely on independent operators.

When you know about the ownership of the ATM, you can make an informed decision about which ATM should be used for transactions. While bank-owned ATMs provide more services, are user-friendly for account holders, and are more secure, white-label ATMs provide more accessibility to financial services in underserved areas.

Security Measures and Best Practices

Safety is very important while you are using ATMs to protect your personal and financial information. Here are some measures you should follow to ensure your security:

1. Physical Security:

    • CCTV cameras are installed in all the ATMs to monitor all the activities and detect any fraudulent behaviour.
    • An anti-tampering feature is also installed in most ATMs which alerts the authorities or shuts itself down if tampered with.
    • You should use ATMs in a well-lit area with a population to minimise risk.

2. Digital Security:

    • Strong encryption protocols are used by the bank in ATMs to protect the communication between the customer and the machine.
    • Unique transaction codes are generated by EVM chip cards which reduces the risk of cloning or skimming.
    • Some ATMs use advanced two-factor authentication with biometric verification or OTP-based authentication.

3. User Responsibility:

    • Cover the keypad while entering your PIN to prevent others from viewing it. Also, avoid using an easy-to-guess PIN for good security.
    • Never share your PIN or card details with others, even if they claim to be from your bank.
    • Always check for anything suspicious around the card slot or keypad, like an attachment. If you find anything suspicious, don’t use that ATM and inform the bank.
    • Avoid taking any help from strangers if you face an issue.
    • Frequently check your bank statement and transactions to identify any unauthorised activity.

Frequently Asked Questions (FAQs)

  1. What are the two uses of an ATM?

The two main uses of an ATM are cash withdrawal and cash deposit, through which the customer has access to money from their bank anytime.

  1. What is the function of an ATM card?

ATM cards are important tools that enable cash withdrawals, balance inquiries, and other basic banking services through ATMs. They are different from credit cards as they are linked to savings in a bank account, whereas credit cards allow users to borrow money up to a set limit.

  1. Are there any hidden charges in transactions through ATMs?

Yes, there are some fees charged by the bank such as interbank fees, international fees, and exceeding free transactions. These fees depend on the type of transaction and the ATM used.

  1. Yashi Das asked about what must she do if the ATM retains her card.

First, don’t panic and contact your bank immediately. If the ATM is at your bank branch, then visit the bank and inform someone. If you suspect fraud and are not able to retrieve the card immediately, then ask the bank to block your card and issue a replacement.

  1. What is a Floating ATM?

A floating ATM is a special ATM that is installed on a ship or boat to provide people with basic financial facilities in remote or water-logged areas. For eg. in India there is a floating ATM on Dal Lake in Srinagar.

Conclusion

ATMs are the primary support for banking in today’s world providing convenience and accessibility for basic financial services like withdrawal and deposit of cash, balance enquiry, and financial transactions, eliminating the need for standing in long bank queues. ATMs have increased financial independence in rural and remote areas by serving in these areas and enhancing financial inclusion.

While ATMs provide convenience through their 24/7 availability and fast service, people should prioritise their financial security, which can be done by using a strong PIN and avoiding using ATMs in tampered-with and suspicious conditions. Understanding the fees and charges involved helps you make a wise decision. For a secure and efficient banking experience, ATMs should be used responsibly. All these factors about ATM makes it a vital tool for managing personal finances.

Explore more:

This post is also available in: हिन्दी (Hindi)