The ATM industry is a sensitive and complicated business. There are so many different parties and networks that have to work together in order for customers to conveniently withdraw cash or make basic financial transactions.

 

Because ATMs dispense money, they are subject to stringent regulations that protect customers, suppliers of cash, merchants and ATM operators from potential abuse. Australian ATM industry regulations require that every ATM operator has to have a sponsoring agreement with a switching company and a financial institution. Most switching companies and financial institutions perform probity and credit rating checks on every new potential entrant to their networks. This is a costly and time consuming process with no guarantees that one will be accepted.  

 

This means, that quite unlike any other product, owners of retail locations cannot directly operate their ATMs without a sponsoring agreement with an ATM deployer, who in turns needs sponsoring agreements with a switching company and a financial institution (a bank or a credit union).

 

Here, we will attempt to explain as simply as possible how ATMs work, so merchants and ATM users can fully appreciate how an automated teller machine operates.

 

ATMs are simply very basic computers or data terminals. They have two input (keypad and card reader) and four output (cash dispenser, receipt printer, speaker, and screen) devices. Like any other data terminals, ATMs have to connect and talk to various networks via a switch (also known as a switching company, payment clearing house or a host processor).

 

The switch is like an internet service provider, which acts as a portal through which all the various ATM networks become available to the cardholder (the ATM user wanting to withdraw cash).

 

Most switching companies support either leased-line, wireless or dial-up ATMs. Leased-line ATMs connect directly to the switching company through a dedicated phone line. Dial-up ATMs communicate with the switching company via a normal phone line using a modem and a phone number, or through an internet service provider using a local access number dialed by a modem. Wireless ATMs connect to the switch wirelessly either via a satellite or through the mobile telephone network. We operate ATMs that use all three modes of communication.

 

Leased-line ATMs are very reliable, but very expensive and they are only good for very high-volume transaction locations (at least over 3000 transactions a month). Dial-up ATMs a reliable and cost-effective alternative to leased-line ATMs and they are perfect for lower-volume retail sites (up to 3000 transactions a month). The monthly operating costs for dial-up and wireless ATMs are only a tiny fraction of the costs for leased-line ATMs.