The Story of the First ATM
The first ATM debuted in the London suburb of Enfield at a branch of Barclays on June 27, 1967. The British engineer John Shepherd-Barron is credited with its invention. A popular story holds that Shepherd-Barron was in the bath when he came up with the idea that a machine could be used to dispense cash in the same way that vending machines were used to dispense chocolate bars. Supposedly, he approached Barclays with the idea and a contract was immediately drawn up. However, historian Bernardo Batiz-Lazo, a professor of business history and bank management at Bangor University, Wales, says that this popular story just isn’t true. While Shepherd-Barron did work on the first ATM, he did so as part of one of many teams working for Barclays. While banks had been actively searching for an automated teller process for years, Batiz-Lazo notes that the engineers working on each team may not have known about these initiatives or one another’s work.
Also in contrast to the popular story, the ATM did not come out of nowhere. An American named Luther George Simjian invented the Bankograph in 1960. The Bankograph was a machine that allowed customers to deposit checks or cash into it and was installed in the lobby of a New York bank for a short time. However, the Bankograph did not catch on. Before Shepherd-Barron’s ATM was installed outside Barclays in London, there is some evidence that a cash-dispensing machine was seen in Japan, and a week after the device was installed, a cash machine showed up in Sweden. One month after the first ATM was installed outside Barclays, Britain’s Westminster Bank rolled out its first cash dispenser. In the following years, additional groups created their own machines.
Early ATMs varied widely in their technology and methodology. Some of the first ATMs dispensed cash in plastic cartridges. Some issued stacks of paper that could be used like a check. Some ATMs required customers to insert a metal or plastic token that would later be mailed back to them. Some used magnetic-stripe cards and still others used a primitive PIN system. But regardless of the methods and technologies used, security remained an issue because there was no way to ensure that the user of the token was the account holder. In 1968, Swedish hackers exploited this flaw to great profit when they used a stolen ATM token to withdraw large amounts of money from different ATMs.
Despite the security concerns and frequent breakdowns of these early ATMs, banks continued to invest in the new technology. While early models were not popular with consumers due to unreliability and security risks, there was a cultural desire in the 1960s and 1970s for automation and convenience. Additionally, banks in each country had their own reasons for investing in the new ATMs. For example, at the time, banks in the United Kingdom were facing union pressure to close on Saturdays, so ATMs held a distinct appeal.
Invention of the PIN
In 1970, British engineer James Goodfellow was granted a patent for the concept of a personal identification number (PIN) that could be stored on bank cards. His PIN system was later licensed by NCR, a major player in ATMs in the 1980s. Goodfellow’s invention addressed many of the security concerns associated with early ATMs as it provided a reliable way for the machines to verify a customer’s identity. In fact, the PIN system Goodfellow created made ATM banking feasible and is still in use today!
ATMs in America
In America, banking overall was inflexible and unpopular. Because the hours were so inconvenient, many workers avoided banks entirely. Instead, they had department stores like Sears or J.C. Penney cash their paychecks for them. American banks hoped that rolling out ATMs would attract more customers who they could later upsell on things like loans and credit cards without having to increase their hours of operation.
The first ATM in America was developed by a Dallas-based engineer named Donald Wetzel and installed at the Chemical Bank branch in Rockville Center, New York, in September 1969. However, ATMs were adopted very slowly in America due to consumer distrust. Americans were so skeptical that some banks even tried to soothe consumer unease by personifying their ATMs! Notable examples include Miss X, the “Sleepless Teller” in clown makeup, who was used by a Florida bank and Buttons, the Personal Touch Teller, who was an anthropomorphized cartoon cash machine used by First National Bank. Other institutions tried incentivizing consumers by including coupons for ice cream and hamburgers with ATM cards.
Improvements & Innovations
However, public unease spurred on by card-eating and machine breakdowns persisted. It wasn’t until IBM pioneered the online interconnective software that ATMs came to run on that things began to change. The technology allowed ATM terminals to connect to a bank’s larger computerized network using dedicated phone lines. This allowed for a much better and more secure experience. Additional technological and usability improvements were continually added as ATMs became prevalent during the 1980s and 1990s.
Today, ATMs can be found in corner stores, on cruise ships, and on street corners all over the world. There are even two ATMs installed on Antarctica! With over 3 million ATMs operating around the world, it is safe to say that ATMs have changed how the banking industry works and how we relate to our banks. Since the advent of the ATM just over 50 years ago, banks have shifted their focus from moving money to processing information. What’s more, most of us now identify with a bank’s brand rather than a specific branch. And there are plenty of ATMs that are not associated with a bank at all! Today, customers can complete transactions anytime, anywhere. In many ways, the ATM prefigured the dawn of the digital banking age we find ourselves in today.