Capitalizing on deregulation and the banking industry's growth across retail markets, NCR and Diebold were instrumental in turning the dinosaur cash dispenser into today's sleek, multi-function ATM. The companies' innovations included new, customer-friendly video-display units; programmable buttons alongside the screen; a shift toward dispensing cash horizontally, which reduced jams; and a growing menu of options, including money transfers and balance inquiries.
These advances soon freed staff at retail-banking branches to engage customers in higher-value services, such as insurance, mortgages and stock-market trading. ATMs thus proved to banks that there were alternative distribution channels to brick and mortar branches; became the backbone of the payments system; and opened the door to telephone and Internet banking. In this sense, ATMs enabled the explosive growth of retail finance during the last decades of the 20th century.
ATMs, however, remained expensive to operate. The need for dedicated phone lines still limited them largely to bank branches or high-traffic locations such as train stations and airports. Operating systems and microprocessors had to be custom-made. All this changed with the advent of digital telephony and personal computers, and the introduction of Microsoft software as the core operating system. The ATM then effectively became a terminal of banks' central computers, enabling online verification at the point of transaction.
In the mid-1990s, Triton Systems and Tidel Engineering introduced lighter and cheaper machines that used dial-up communications. Unlike ATMs attached to a bank, these new cash dispensers could send and receive encrypted data over regular phone lines. As a consequence, new organizations called independent ATM deployers (better known as IADs) began installing stand-alone ATMs in grocery stores, bars, universities and casinos that dispensed cash for a fee.
The IADs also introduced the practice of self- replenishment: The owner of a bar, for example, could deposit cash received from customers directly into the ATM, increasing sales while reducing the need to transport cash to and from the bank.
More recently, in what is perhaps the dawn of another new era, some banks have explored the possibility of connecting ATMs to mobile-telephone networks. This level of sophistication isn't bad for a machine that had decidedly humble beginnings almost 50 years ago.
But the ATM has always been more than a convenient way to get cash. It revolutionized the way banks think about customers, the way the financial world thinks about technology, and the way we pay for almost everything we buy.
Bernardo Batiz-Lazo is a professor of business history and bank management at Bangor University in Wales and the author, with Tom Harper, of "Cash Box: The Invention and Globalization of the ATM."