Automated teller machines, better known as ATMs, have been a part of the American landscape since the 1970s—beacons of self-service and convenience, they revolutionized banking in ways we take for granted today. They live to serve; we only really notice them when we can’t seem to locate one.
But in recent years, the ATM no longer does something that no other machine or outlet can do and its days, some say, are numbered. Or is it? Because it looks like at the very moment ATM usage in on the decline, some American banks are doubling-down on their ATM investment.
The “world’s first” ATM landed on a high street in Enfield, a suburb of London, at a branch of Barclays bank; there’s even a blue plaque on the outside of the building, still a Barclays, to memorialize the cash dispenser’s June 27, 1967, debut. The story goes that John Shepherd-Barron, an engineer at printing company De La Rue, came up with what was essentially a cash vending machine one Saturday afternoon after he missed his bank’s open hours. He was, notably, in the bath. Shepherd-Barron he approached Barclays with the idea, a contract was hurriedly drawn up (over a “pink gin”) and soon after, the new cash dispenser – with a £10 maximum withdrawal – sprouted up next to the bank. The machine transformed banking and Shepherd-Barron’s name went down in history: In 2005, he was made an Officer of the Order of the British Empire for his services to banking and the obituaries after his death in 2010 all called him the “inventor of the ATM”.
It’s a good story, although it’s almost certainly not true – “absolutely rubbish,” laughed professor Bernardo Batiz-Lazo, professor of business history and bank management at Bangor University, Wales, and the co-author of a book on the history of the ATM.
Shepherd-Barron was indeed part of the Barclays machine group, though, Batiz-Lazo says, there were several teams working independently to come up with a solution to the same problem: How can you get cash out of your bank after hours without resorting to robbery? It also wasn’t an idea that came from nowhere, eureka moment in the bath aside. Banks had been actively looking for a way to automate the teller process – Batiz-Lazo says that the individual engineers might not have known that anyone else was working on the same ideas, but the banks certainly knew. Moreover, ATM innovation had a number of clear predecessors. Batiz-Lazo pointed to American Luther George Simjian’s invention of the Bankograph in 1960, machine that would allow bank customers to deposit checks and cash into a machine and that spent a short time in the lobby of a New York bank (it didn’t catch on: “The only people using the machines were prostitutes and gamblers who didn’t want to deal with tellers face to face,” Simjian supposedly said). Other progenitors include the application of the magnetic stripe card in things like electronic ticket gates and innovations in self-service gas stations and vending machines.
There were at least two other groups working at the same time as Shepherd-Barron, although there’s some evidence that a cash-dispensing device popped up in Japan briefly even before the Barclays device made its appearance. Just a week after the Barclays cash dispenser was installed, a Swedish cash machine appeared; a month later, Britain’s Westminster Bank rolled out its cash dispenser. Over the next two years, more groups began working on their own machines. 1969 was a big year for ATMs: another British bank, Midland, partnered with tech company Speytech to roll out their machines; Japan’s Omron Tateishi company installed one outside the Sumitomo Bank; and the Chemical Bank in Rockville Centre, New York installed its ATM with the prescient advertising slogan, “On September 2, our banks will open at 9 am and never close again.”
These first devices were not just geographically dispersed, they were technologically all over the place, too. The hurdles in creating an automated cash-dispensing device were pretty substantial, and each machine handled them in different ways. Some machines dispensed cash in plastic cartridges, rather than as individual notes; some had customers use a metal or plastic token that was inserted into the machine and kept, to be mailed back to the customer later; others issued customers stacks of paper, like a check, that were used in the same way.
Omron Tateishi’s machine used a magnetic-stripe card; Barclays machine had customers enter a PIN to identify themselves, and checked that number against what was basically a check inserted into the machine. But security was always an issue – there was no way to really ensure that the user of the token was actually the holder of the account, a fact that proto-hackers in Sweden exploited to great advantage in 1968 when they used a stolen ATM token to withdraw huge amounts of money from different machines. Then there was the fact that ATM electronics were being forced to work in all-weather conditions, resulting in frequent breakdowns. These early ATMs were big, clunky, unreliable, and not incredibly popular.
So why did banks persist in installing them?
The short answer is that despite their limitations, ATMs were at the vanguard of technology and therefore desirable. ATMs emerged in the 1960s and ’70s, out of a brave new world where “self-service” and “automation” were big buzzwords that appealed to a wide swath of people. The longer answer is that each country that worked on developing ATMs had their own reasons and particular social milieu that pushed the dispenser’s innovation. In the U.K., where three of first working ATM prototypes were born, banks were facing unprecedented pressure from banking unions to close on Saturdays. This was around a great period of unionizing in Britain, when workers’ unions had increasing power; at the same time, business leaders were being sold the idea that automation would save labor costs and reduce the influence of the unions. Automating the teller process seemed like a very good idea, one that would satisfy the customers and the banking unions, and even give banks themselves a measure of control.
In the U.S., there was certainly a need for more flexible banking – banks had horrible hours for working people. But at the same time, as much as 30 percent of the American population didn’t bother with banks and why would they? Many American workers received their pay packets at the end of each week in a big wad of cash and after bills were paid, there was either not enough left over to deposit into a bank account or simply no reason to do so. If you were paid in checks, department stores like Sears or J.C. Penney’s would happily cash your check for you – especially if they thought you might spend a bit of it on the way out. However, banks, now increasingly moving into the retail sector, were waking up to the fact that they were losing out on a lot of business. Their interest in rolling out ATMs came from wanting to attract more customers with shiny new gadgetry and then, once they had those customers, up-sell them on things like loans and credit cards. There were also other, bigger reasons banks pushed forward with ATMs, including not having to lengthen banking hours, reducing congestion in bank branches, postponing or even eliminating the need to open new branches while still maintaining a physical presence, and, of course, cutting labor costs. So some banks, like Citibank, pushed ATMs hard.
Ultimately, the ATM was part of a revolution in how banking was seen and saw itself. This shift had to do with what kind of business bankers thought they were in – turns out, it was information processing, not money moving. It also, Batiz-Lazo says, facilitated a shift in the balance of power of banks: People began to identify themselves with the bank’s brand, rather than the individual branch; this was a fundamental change in the role of banks in society. ATMs showed that banking needn’t be tied to a branch or even a human being, prefiguring a world where banking is done 24 hours a day, seven days a week on mobiles and laptops, and definitely not in a branch (more on this later).