How Does an ATM Function?

An ATM functions as a data terminal that connects to a host computer and bank computer through a network connection. A typical ATM has four output and two input devices connected to it. An ATM can function through either a dial-up or leased-line connection.

Leased-line ATMs are connected directly to a host processor machine through a dedicated telephone line. These types of machines cost more to maintain, but are preferable in high-volume locations as they have a higher thru-put capability. ATMs using dial-up connections are typically found at retail locations and are preferred for these locations due to lower set up and monthly operational cost.

Host processor machines that are connected to an ATM can be either owned by an independent provider or a bank. Processors owned by a bank typically only support ATMs under the bank's ownership. Host processors owned by an independent party are typically connected to machines found at retail or merchant locations.

As of 2014, a typical ATM is made up of a card reader and keypad as the two input devices. Four output devices are also connected to the machine, which are the speaker, display screen, cash dispenser and receipt printer. Each part of the machine works together to create an interface that allows a banker to access his money through a debit ATM card or credit card.