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How Does an Automated Teller Machine (ATM) Work?

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Last editedSep 20212 min read

Cash machines. Holes in the wall. Cashpoints. Automated teller machines (ATMs) go by many different names in the UK, but their function remains the same. They provide quick, easy and secure access to cash. While it’s easier than ever for your customers to make payments in a contactless world, many people still prefer to use cash. Despite the myriad benefits of alternative and online payments. According to This Is Money, over 50% of UK consumers still prefer to use cash for retail transactions, even in the COVID era. 

It’s clear then that having an ATM on-site can remove barriers to sales and provide greater convenience and choice for retail customers. If you’re thinking of having an ATM on-site, you may wonder how they work, and whether they’re safe and appropriate for use during the pandemic.  

Let’s take a closer look.

How does an ATM work?

An ATM allows customers with credit or debit cards to carry out basic banking transactions without the aid of a human bank teller. Customers can use them to withdraw cash, check their bank balance or get a printed balance statement. Some ATMs also allow customers to make cash deposits and move funds between accounts. 

The first ever ATM was used in a London branch of Barclays bank in 1967. Now there are over 50,000 ATMs in use across the UK (although that number is dwindling). Customers can withdraw a maximum of £500 in cash per day at a cash machine. 

Anatomy of an ATM

ATMs have lots of different designs. But they all feature the same parts:

  • Card reader: Reads the chip and magnetic stripe on the card that links the card to the correct bank account

  • Keypad: Enables the customer to enter their PIN and select the amount of cash they wish to withdraw

  • Cash dispenser: The slot through which notes are dispensed, connected to a safe at the bottom of the machine

  • Printer: A printer for balance statements and advice slips

  • Screen: The screen issues prompts that facilitate the user interface. Many ATMs also use a touch-screen interface

While banks often have an ATM outside their branches, ATMs are also often used by businesses. Retailers (especially convenience store franchises), pubs, arcades and casinos all often use ATMs. 

These can be bought or leased by businesses on their own or through ATM franchises. A small fee is usually added to cash withdrawals, which is borne by the customer withdrawing the cash.

What are the benefits of having an ATM on-site?

An ATM can be an effective way to offer choice and convenience for the customer, potentially improving customer service and foot traffic. 

Benefits to having an ATM on the premises include:

  • Potentially increasing basket spend by up to 65%

  • You may improve foot traffic as 80% of users will revisit an ATM site at least once a week

  • You can fill the machine with your business cash, meaning fewer trips to your bank to make cash deposits

  • Allowing you to compete with similar local businesses that also offer ATM use

  • Remove barriers to sales for customers that prefer to use cash

Are ATMs COVID-safe?

Many businesses and customers alike are sensitive about handling cash in the pandemic era. You may wonder how COVID-safe it is to use and install an ATM on-site. Fortunately, fully managed cash machines are guaranteed COVID-safe. The notes they distribute are kept for three days prior to filling. Ample time for any viral cells present on the cash to die off. 

We Can Help

If you’re interested in finding out more about ATMs and the pros and cons of having them on-site, then get in touch with our financial experts. Discover how GoCardless can help you with ad hoc payments or recurring payments.

Over 85,000 businesses use GoCardless to get paid on time. Learn more about how you can improve payment processing at your business today.

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Interested in automating the way you get paid? GoCardless can help
Interested in automating the way you get paid? GoCardless can help

Interested in automating the way you get paid? GoCardless can help

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