Thursday, January 20, 2011

ATM- Automated Teller Machine

Science and technology are making rapid progress in the world we live in – the pace at which new inventions are made is almost mind boggling. So are the changes that they bring in their wake. Technology has certainly made life easier for man. Of course we also hear the constant debate on the pros and cons of these inventions –whether they are all indeed beneficial to mankind, or are fraught with inherent dangers. But the fact is that we cannot imagine life in the world today without computers, the Internet, mobile phones, satellites and of course the ubiquitous ATMs –automated teller machines. These friendly neighbourhood fixtures have become a mandatory convenience for millions of users and brought in a revolution in the sector of banking.

The Automated Teller Machine, also known as the Automated Banking Machine is a computerised telecommunication device providing access to all banking transactions, in public spaces such as shopping centres, airports, malls, railway stations, grocery stores, petrol/gas stations, and in or near banks, everywhere in the world. It eliminates the need to travel to a bank and seek the services of a cashier, clerk or teller. Most ATMs are connected to interbank networks. They are client-friendly devices, easy to operate using a keypad and touch-screen. Bank accounts can be accessed, cash withdrawals made, and account balances checked at an ATM. The customer is identified by the machine when he or she inserts a plastic ATM card with a magnetic stripe or chip which contains a unique card number. Authentication is provided by the customer by typing a Personal Identification Number.

The first ATM or ‘’hole-in-the wall’’ machine was invented and patented in 1939 by an American Luther Simjian. James Goodfellow of Scotland created and patented the first modern ATM in 1966. The first ATM to use a card with a magnetic strip was patented in 1977. Even though the machines came into existence rather early, they became commonplace and a part of mainstream banking only in the mid to late 1980s.
ATMs are no doubt immensely popular with the public because of the convenience they offer- easy accessibility for making cash withdrawals for everyday requirements, in emergencies or at odd hours and on holidays. It is also a time- saving facility, doing away with the need to physically make a trip to a bank. However it is not without its share of security risks. It’s very purpose of providing easy access to cash also makes it vulnerable to attacks of different sorts. The three basic types of such attacks are –
1] Attempt to steal a customer’s ATM card
2] Attempt to gather confidential information of the customer from the computer and network.
3] Physical break- in or attacks on the ATM.

ATM cards are often lost or misplaced by customers, sometimes even left behind at the location of the ATM. This definitely poses a big security risk if the card falls into the wrong hands. To gather confidential information, thieves set up ‘skimmers’ in the cash machine that captures the magnetic stripe and keypad information of customers. ‘Lebanese loop’- so called because it was first used by Lebanese criminals, is a common cash dispenser fraud. The cash machine is tampered with and the card is often not returned to the customer. It is later removed by the thieves. Such ‘skimmer’ devices have replaced the traditional, physical robbery attempts which posed the biggest security challenge in the earlier decades of the twentieth century. Security guards at ATMs and hidden security cameras have proved to be effective in countering the menace.

However, as these machines have grown to become an integral part of our daily lives, banks have started taking advantage of this by indulging in demand-based price discrimination — the banks realize that people have fewer alternatives (no bank tellers available) at certain times of the day, and price accordingly. For example,in Japan, there is an extra charge of ¥100 (about $1.20) if you withdraw cash from an ATM during evenings or on weekends.The only possible cost-based justification for this price discrimination in ATM usage is that workers might have to make sure the machines don’t run out of cash at those times, and their labor requires overtime pay. But surely the same thing is true in the U.S. and Europe, and yet we don’t see this ATM surcharge there.

ATMs also depersonalise service, doing away with all human contact. In the past banking was a personalised, relationship oriented service and depended on person-to-person contact. The human element has been lost in such transactions which has probably had a negative impact on customer-satisfaction levels, especially when things go wrong.

Recent research in the United Kingdom has also brought to light the fact that ATMs are a health hazard as well, the keypads and touch screens teeming with dangerous bacteria, contaminated by the fingers of several hundred users on any given day. The machines reportedly carry the same germs as public toilets.

Like all the products of modern technology, the ATM too poses challenges. Man will find solutions to them, again with the help of science and technology.

Govind Menon

2.The Daily Mail Website
3.The New York Times Website

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