Who Invented the Computer? The Rise of ATMs
Who Invented the Computer? This is the twenty-fifth installment in our ongoing series.
Few inventions spring forth fully operational to gain immediate acceptance by their intended market. Rather, innovations are typically the result of numerous people tinkering away on their own. Such is the history of the automated teller machine (ATM) and the individuals who lay claim to being its creator.
The earliest automated banking machine was the Bankograph, built in 1960 by U.S. inventor Luther Simjian. When a customer deposited cash and checks into the machine, a microfilm camera on the inside would snap a photo of the deposit and print a copy of the photo as a receipt. The next morning, bank workers would make the deposit into the customer's account.
The Bankograph failed to connect with customers for two reasons: First of all, most people were uncomfortable leaving their money in a machine overnight. Then there's the fact that the Bankograph's primary users were prostitutes and drug dealers — folks who wanted to avoid interacting with a teller.
While taking a bath in 1965, Scottish inventor John Shepherd-Barron asked himself, "If a machine can dispense candy, why not a machine that dispenses cash? Naming his creation the "Automated Money Dispensing Machine," Shepherd-Barron convinced several banks, many of which were struggling with union demands to close on Saturdays at the time, to install his machines.
Customers withdrew cash from the device by filling out paper vouchers with radioactive ink. The downside to the money dispenser was that client withdrawals were limited to just £10 per day. (An amount, allegedly, that Shepherd-Barron deemed "quite enough for a wild weekend.")
Not to be outdone, Japanese banks briefly got into the game in 1966 with their "Computer Loan Machine" that gave out a three-month loan of cash at 5 percent. This innovation was short-lived, as the machine was connected to customers' credit lines and not to actual bank accounts.
Up to this point, all cash dispensing machines were digitally wired only to the actual branch at which they was installed. That changed in 1969 when Texas-based engineer Donald Wetzel unveiled his model. Wetzel's ATM enabled customers to conduct transactions using plastic bank cards containing magnetic strips.
A prototype was installed on September 2 at the Chemical bank in Rockville Centere, New York. Bank management was excited, advertising the event in print as follows: "On Sept. 2 our bank will open at 9:00 and never close again!"
Wetzel's machines proved a hit and more banks signed up to receive their own ATM. With so many new machines coming online, banks were soon hiring more computer experts to develop and maintain their new interbank ATM networks.
Weather to Withdraw
As the 1970s rolled around banks on both sides of the Atlantic were using ATMs. In the U.S., Citibank invested $100 million installing ATMs in their New York City branches. The machines were now a common fixture, but usage remained low as customers were still not comfortable with them.
Then, practically overnight, ATMs experienced a 20 percent increase in usage when the Great Blizzard of 1978 struck. Considered one of the most severe blizzards in U.S. history, the storm buried the Ohio Valley and New England under more than four feet of snow. With banks unable to open, thousands queued up at their local ATMs to grab needed cash. After that, the ATM was here to stay.
ATM usage peaked around 2010, and usage has declined ever since as people use credit and debit cards more frequently. Nevertheless, there are still around 3.5 million ATMs in operation.
Counterintuitively, ATMs did not cause a reduction in the number of bank tellers. As people increasingly used ATMs, bank managers realized branches could operate with fewer tellers. Their next realization was that now they could open more branches — which in turn led to hiring more tellers. In 1970, 300,000 people worked as bank tellers in the United States. That number today is almost double.
ATMs are durable machines, capable of repetitive use and even operating in extreme weather, -40 to 120 degrees Fahrenheit. Most ATM's will never be called on to endure such extreme weather, but one actually does. It's a solar powered machine located 15,397 feet above sea level at the Khuunjerab Pass in Pakistan.
ATMs also hold a lot of cash, up to $300,000, making them an attractive target for malefactors. The first successful theft from an ATM occurred in Sweden in 1968, when an enterprising engineer discovered a way to decipher customer PIN numbers. He travelled the country withdrawing krona from bank after bank until the police caught up with him.
Early ATMs could be broken open and the money stolen — the 1990s were the high-water mark for such crimes. Because of subsequent advances in security design, however, it is virtually impossible to break open an ATM today.
In addition to bank cameras focused on the ATM — and on the faces of users — the cash drawers are encased in a reinforced steel compartment with walls that are a quarter of an inch thick. It's also impossible to walk away with the whole machine and break it open elsewhere, as ATMs are bolted in place and weigh somewhere between 450 and 800 pounds.
Ambitious criminals do occasionally drag an ATM away using a truck, planning to crack it open at a later time. This is also useless since ATMs have alarms connected to the police and tracking devices inside the steel case. Adding insult to injury, most ATMs are equipped with ink packets rigged to fire off if the machine is excessively shaken — a major disappointment for bad guys who do succeed in cracking it open, only to find stacks of un-spendable, bright blue bills.
Bringing IT All Together
In many ways, the ATM revolution was enabled by advances in computer technology. But the reverse is also true. As ATMs propagated rapidly, the need for one bank's machines to communicate with other machines drove advances in networking and database technology.
PIN numbers, a unique means of identifying individual bank customers, are inextricably linked to the growth and evolution of computer password technology. And while passwords have been a fly in the IT security ointment for years, they are still the simplest way to manage everything from e-mail accounts to computer logon software.
ATMs also played a role in helping many people get comfortable with technology. It's hard to imagine a time when money wasn't almost wholly contained within digital boundaries — to the point where most people in the 2020s rarely if ever have cash on their person. ATMs paved the way for that evolution by helping people get comfortable with money you can't fold up in your wallet.
In a larger sense, of course, ATMs helped the mass of humanity become comfortable interacting with machines. For the generation that came of age in the closing decades of the 20th century, using an ATM served some of the same functions that smartphones and tablets do today, helping individuals become both comfortable with and skilled at navigating digital technology.