The world’s first ATM

Today we take ATM’s for granted. Fifty years ago that was not quite so. Today there are around three and a half million ATMs worldwide and they are found in nearly every nation in the world. In many cases for foreign visitors they can also handle the exchange rate as well bypassing expensive exchange rate fees. We can’t live without them, so in honor of the fiftieth anniversary of the ATM we detail a little bit about them.

The idea for an after-hours cash dispenser began in Japan in 1966 in what was known as the Computer Loan Machine, which would dispense cash as a three month loan at 5% after a customer inserted their bank card. An American machine had been developed in 1961 but it only accepted money (to be deposited in the customer’s account) and did not dispense anything and was found that it was only used by “prostitutes and gamblers who did not want to meet tellers face to face.” To no one’s shock it proved to be a failure.

That changed in 1967 in North London, England. Barclay’s installed the world’s first ATM at its Enfield Town branch on June 27. Why this particular location? It was the only location with windows high enough to accommodate an exterior installation. With much pomp and ceremony, British comedian Reg Varney was the first person to use it. Paper checks marked with carbon-14 (for the machine to read and for security) would be inserted and cash would be dispensed.

This technology was the brainchild of an engineering team from De La Rue printing led by John Shepherd-Barron. It seems he originally had the idea of making a chocolate bar dispenser and just simply changed chocolate to cash. They were not the only group working on a project like this. Just nine days later the Uppsala Sparbank installed the Bankomat in Stockholm and Westminster Bank installed their Chubb MD2 a month later in Charing Cross. The Swedes had the world’s first automated pump at an ESSO station in Tumba that was installed in 1965 and the ATM simply improved on that technology.

Eventually the carbon-14 was changed to a magnetic strip to improve security and crack down on fraud. A PIN system had been developed in 1965 and was patented in 1970. Customers were given a personal code to activate the machine and customers in the United Kingdom were given ten pound vouchers to use. In 1969 the first ATM appeared in Australia. A Sydney-based machine would only dispense $25 at a time and a customer had to anticipate that withdraw since the bank would mail the card to use after the customer requested it.

The US was a bit slower in bringing the ATM here. An American engineer, Donald Wetzel, was traveling in Europe and saw the new ATMs there. He worked for a company called Docutel, which was a part of Recognition Equipment Inc in Dallas, Texas which produced optical scanning equipment. Docutel was tasked with making an automated gas pump but the technology used with an ATM seemed to be a perfect fit and they began to manufacture their own. By 1974 their ATM was used by 70% of the US market but market dominance was short lived as Docutel was forced to merge during the worldwide recession of the 1970s. The Chemical Bank in Rockville Centre, New York was the first ATM to be put into service on September 2, 1969 advertising that their bank would open that day at 9:00 AM and would never close. No one knew what to expect, the machines were expensive and public acceptance was not guaranteed. They believed that they were taking a huge risk.

They needn’t have worried. Despite the $145,000 price tag for each unit by 1973 two hundred of them were installed. Citibank spent $100 million to install ATMs all over New York City in 1977. In January of 1978, following a blizzard which brought the city to a halt, the ATMs proved their worth giving their customers access to their money. There was now no more doubt about whether they would be accepted. Today in the US there is a new ATM installed every 5 minutes and there are about 370,000 in use in the United States alone and the pricetag is down to about $3,000 each. The ATM also faced resistance from bank tellers who believed that their jobs would be threatened. They weren’t and today there are over 100,000 more bank tellers employed then when the ATM was introduced.

Of course with any new technology that dealt with money it became involved in crime. What started as just standing behind someone and stealing their PIN (shoulder surfing) turned into skimming. The first fake ATM was installed in 1993 in Manchester, Connecticut and would take the victim’s information without dispensing any money. The thieves made off with $100,000 before being caught. In 1996 an Englishman was convicted of using a camera to steal customer’s card information and PINs by using a high-definition camera to zoom in on the ATM. He used cloned cards to withdraw at times $10,000 a day but he was caught and spent over five years in prison. Another early popular way to steal a customer’s information was the Lebanese Loop, where the ATM would be programmed to keep the card forcing the customer to get frustrated and walk away allowing the thief to get the card’s information. This has come back in popularity with the introduction of EMV cards. More on that later.