AUTOMATED TELLER MACHINE

CHAPTER 1

INTRODUCTION

The world is changing fast. The process of globalization has taken everything

in its fold. New ideas and new economic thinking are taking over the world.

Technology is considered to be the prime factor in leading the change.

Technology is very dynamic force. It is changing the competitive landscape of

the financial services and banking industry. It is influencing the way their

products and services are sold and delivered.

The banking industry has emerged as one of the driving forces behind the

development of information based technologies. It has made significant

progress in recapitalizing systems, in eliminating problem assets from balance

sheet in improving supervisory and regulatory framework day to day

transactions in banks are automated which better service in processing

transactions. Better customer are provided using .IT aided developments such

as introduction of ATM, magnetic Ink Character Recognition (MICR) cheques,

credit cards, debit cards, smart card, digital e-cash and electronic fund transfer.

These developments have helped reduce the transaction processing time and

also have made available the services to the customer at a convenient place. The

advents of online transaction speedy and secure payments settlements have lead

to the globalization of financial services.

The developments in information technology, the advent of the personal

computer and networking technology have brought about partial relief in the

banking industry. The job at each seat was computerized by stand –alone

personal computers initially. There is accuracy as well as speed in the work.

Customers are provided error-free services. They are supplied with printed

account statements. Internet and e-commerce entered the scenario of global

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banking and financial institution. Simultaneously sweeping structural and

functional changes are overtaking the international banking and financial

markets. These changes are as follows:

Deregulation:

Growing deregulation in national financial markets in telecommunication and

data processing technologies resulted in the better integration of financial

markets in the countries as also between the domestic financial system and the

foreign banking non-banking institutions.

Internet banking:

Internet banking is a web-based internet banking which involves a customer

logging onto a banks online banking service via any compatible PC to perform

common banking transactions .The internet bank system allows the customers

to manage and monitor their accounts online and to use the full range of

electronic banking services from anywhere in the world using a personal

computer .A customer needs a connection to the internet and a browser such as

Microsoft Internet Explorer or Netscape Navigator to use the Internet bank

system .Internet is one of the channels of service delivery to a banking

customer .The access to accounts information as well as channels of service

delivery to a banking customer .The access to accounts information as well as

transaction is offered through the world –wide network of computers on the

internet .Every bank has special firewalls and its own security measure to

protect the accounts from non-authentic use from unauthorized users .each

accountholders is provided a PIN similar to that of the ATM. The access to the

account is allowed upon a match of the account details and PIN entered on the

computer system .A higher level of security may be reached by an electronic

fingerprint. Account querying as well as transaction are possible on the Internet

banking platform .The accounting is instantaneous and funds transfer can be

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effected immediately .Financial services companies are using the Internet as the

new distribution channel .

Data Mining for intelligence:

Banks have to deal with proper analysis of financial data to identify business

potential .This help the bank identify cross-sell and up-sell potential .A bank

can easily streamline its delivery channels if it has an operational customer

relationship management .A data warehouse unable the bank get a single view

across disparate system .

The common format provides a single repository from which one can view or

use information when required.

With the help data available in data warehouse, one may not be able to make

sense out of it. It requires data mining for the purpose .data mining can help

recognize pattern in available data.

ATM :(AUTOMATED TELLER MACHINE )

One of the channels of banking service delivery is vide the Automated Teller

Machine (ATM) whose traditional and primary use is to dispense cash upon

insertion of a plastic card and its unique personal identification NUMBER

(PIN). ATM card is a plastic card with magnetic strip with the account number

of the individual. The bank issues ATM

cards to its current and savings accountholders. A typical transaction would be

that of cash withdrawal. The bank generally restrict the maximum amount and

the frequency with which one can withdraw cash .The amount withdrawn is

immediately debited to the concerned account through accounting entries pre-

programmed on the ATM. cash or cheques can be deposited through the ATM –

for the credit to an account. ATMs can be accessed any time .No employee

interface is necessary. ATM offers a cost effective solution alternative to labour

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costs. The scope of frauds, robberies and misappropriation are reduced

considerably if the PIN is maintained diligently.

Tele Banking :

Tele- banking is a banking service provided by banks to enable customers to

access their accounts for information or transactions .A telephone PIN(T-PIN)

is provided to each accountholders .The customer can call the exclusive tele-

banking numbers and provide the details to identify himself to the automated

voice .upon the respective numbers matching the computerized systems ,the

customer is given access to his account to query or transact on his account .cash

withdrawal and deposit are not enabled through this service but many banks

offer a cash delivery or collection service to certain classes of customers.

Electronic Funds Transfer (EFT) :

The Reserve Bank of India has introduced Centralized Funds Management

Systems(CFMS) comprising the Centralized Funds Enquiry System (CFES) and

the Centralized Funds management Systems. This paves the way for banks to

manage their funds with the RBI in a much more efficient manner. It also

provides the Treasury/Fund Departments of banks with latest information on

their balances with the various Deposit Account Department Offices on the

Reserve bank of India. EFT system was started in 1996. The scheme is

available for transfer of funds across 8500 branches of banks at 15 centers in the

country. The facility is available for transfer of funds for individual transaction

up to Rs. 2 corers per transaction with effect from 1st October, 2001. For a flat

fee of Rs. 25 a maximum of Rs.10000 can be transferred.

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Electronic Clearing Services (ECS) :

ECS is a new method of payment whereby the institutions having to make a

large number of payments can directly deposit the amount into the bank

accounts of the customers/investors without having to issue paper instruments

such as cheques, bulk and repetitive payments like interest/dividend are mostly

paper based involving printing of warrants or cheques. Thus, electronic

clearing service is aimed at affecting electronically, repetitive credits or debits

for a large population of customers spread across a large number of branches of

banks. The RBI has also introduced the Electronic Clearing Service(Debit)

scheme to provide a faster method of affecting periodic and repetitive payments

by ‘direct debit to customers’ accounts, thereby minimizing paper transactions

and increasing customer satisfaction. Electronic clearing service envisages a

large number of debits and one credit in the case of collection of electricity

bills, telephone bills, loan installments, insurance premiums and club fees by the

utility service providers.

Real Time Gross Settlement (RTGS):

The Real Time Gross Settlement System is the key critical element and provides

the missing link in the process of the setting up the integrated payment and

settlement system in the country. The world over, the RTGS is now the

preferred mode of the settlement of large-value interbank payments with more

and more countries moving towards it. As a settlement process RTGS ,

minimizes settlement risks by setting individual payment in real time in the

books of account, held at the central bank. The RTGS , practically instant

settlement ensures fast secure, final and irrevocable settlement of payment

transactions. The RTGS System is designed to provide large value funds

transfer and settlement in an on-line real time environment to the banking

industry with settlement on a gross basis.

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A large value of funds transfer system, whereby financial intermediaries can

settle interbank transfers for their own account as well as for their customers,

the RTGS system effects final settlement of interbank funds transfer on a

continuous, transaction by transaction basis throughout the processing day. The

RTGS eliminates settlement risks in the case of interbank and high value

transactions. The banks can use balances maintained under the Cash Reserve

Ratio instead of the Intra-Day liquidity (IDL) to be supplied by the Central

Bank for meeting any eventually arising out of the RTGS. The RBI has fixed

the IDL limit for the banks to three times their Net Owned Funds (NOF). The

IDL is charged at Rs.25 per transaction entered into by the bank on the RTGS

platform.

RTGS is the ultimate in the payment and settlement architecture in any country

primarily for online, real time interbank payment and settlement of large value

funds. RTGS payment system can also be called as one in which payment

instructions between banks are processed and settled individually and

continuously throughout the day.

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CHAPTER 2

MEANING OF ATM

AUTOMATED TELLER MACHINE (ATM)

An automatic teller machine or ATM allows bank customers to conduct their

banking transactions from almost every other ATM machine in the world. On

most modern ATMs, the customers is identified by inserting a plastic ATM card

with a magnetic stripe or a plastic smart card with a chip, that contain a unique

card number and some security information such as an expiration date or CVVC

(CVV). Authentication is provided by the customer can access their bank

account as in order to make cash withdraw, credit card cash advances, and

check their account balances as well as purchase prepaid cell phone credit.

ATMs are electronic machines, which are operated by a customer himself to

deposit or to withdraw cash from bank. For using an ATMs card is a plastic

card, which is obtain or to withdraw cash from bank. The ATMs card is a

plastic card, which is magnetically coded. It can be easily read by the machine.

To operate an ATM word (number). If the authentication or pass word (number)

is correct, the ATM permits customers to make entries for withdrawal or for

deposit. On completion of the transaction, the customer is ejected from the

ATM.

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DEFINITION

Definition of 'Automated Teller Machine - ATM'

“An electronic banking outlet, which allows customers to complete basic

transactions without the aid of a branch representative or teller.

There are two primary types of automated teller machines, or ATMs. The basic

units allow the customer to only withdraw cash and receive a report of

the account's balance. The more complex machines will accept deposits,

facilitate credit card payments and report account information. To access the

advanced features of the complex units, you will usually need to be a member

of the bank that operates the machine. “

ATMs are scattered throughout cities, allowing customers easier access to their

accounts. Anyone with a debit or credit card will be able to access most ATMs.

Using a machine operated by your bank is usually free, but accessing funds

through a unit owned by a competing bank will usually incur a small fee.

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CHAPTER 3

HISTORY of ATM

The history of ATM can be traced back to the 1960s, when the first ATM

machine was invented by Scot John Shepherd-Barron and used by Barclays

Bank in 1967. However, while Shepherd-Barron has the major claim to fame,

there have been many other individuals who have also invented some version of

the ATM. The machine itself has evolved over the years, with the earlier

versions restricted to only one or few banking functions. There has been much

debate, however, on who invented the first early versions of Automated Teller

Machine. But the history of ATM can be visibly traced back to the year of 1967.

In 1939, a rudimentary cash dispenser was invented by Luther George Simijian

and established by the City Bank of New York. However, the machine did not

work much and had to be removed within six months of putting up the machine.

The early versions of the ATM were restricted to cash withdrawal only. In the

1967 model, patented by Shepherd-Barron, the plastic cards did not exist and

instead a voucher with a strip of radioactive substance was used for

withdrawing cash. Consequently, the vouchers were matched with a particular

personal pin code used by the bank to identify the customer. The ATM was

inaugurated by renowned British actor, Reg Varney. The personal identification

number was initially a six numbered password, and was later changed to a four

numbered password. However, this automated teller machine was very different

from the modern day teller machines, which is based on an electronic system

between the different branches of the bank. Thus, the history of ATM has seen

many changes over the span of 25 years since 1939.

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Another co-patent to the invention of the ATM was Don Wetzel, the Vice

President of Product Planning at Docutel. While the conceptualization began in

1968, the patent was issued only in 1973. This cash dispenser was first used by

the New York based bank, namely, the Chemical Bank. As was the case with

the ATMs of during those years, they were hardly a multi-functional unit.

Moreover, they were not based on any electronic system. Hence, the debit cards,

distinct from credit cards, were given to only select clients with good track

records. The first ATM cards, with magnetic strips were developed by three

individuals, namely Don Wetzel, Tom Barnes and George Chastain. While there

were many developments in the history of ATM, the service itself took a

stronghold only in the 1970s. Today, the ATM service has become

indispensable to our modern day lives.

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CHAPTER 4

ADVANTAGES AND DISADVANTAGES OF ATM

ADVANTAGES OF ATM

Almost all banks have ATMs or automated teller machines at their branches.

The primary purpose of an ATM is to provide a customer with a quick method

of withdrawing cash from and checking the balance of their bank account

without having to wait for a teller. The machines also provide access to cash

outside of the bank's business hours. Many banks will not charge their

customers a fee for using the bank's ATM, however if you use your debit card at

an ATM that is not owned and operated by your bank, you may be assessed

additional fees, both by the ATM owner and your bank and sometimes totaling

more than $5 combined.

Convenience

Many banks have automated teller machines located inside or outside of their

locations. Some banks even have ATMs as a part of one of their drive-thru lanes

so that you can remain in your vehicle while using them. An advantage of

automated teller machines is that you can access your money for free if you use

an ATM at a bank where you have a checking and/or savings account. Many

banks also allow you to withdraw money from credit cards that are not issued

by their institution for a small fee. Some banks also have ATMs in other

locations such as retail and grocery stores and some businesses provide ATMs

for their customers and charge a small processing fee.

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Deposits

Another advantage of an automated teller machine is that you can make deposits

into your bank account through them as well. You can make cash and check

deposits, and some banks do not require submitting a deposit slip with your

transaction. Some ATMs allow you to get the total remaining balance of your

account on the screen or printed on your transaction receipt. ATMs at banks

sometimes provide customers with the ability to transfer funds between

accounts by using the touch-screen system, or you can withdraw money from

one card and then deposit the money into a second account using another card.

24-Hour, 365-Day Access to Your Bank Accounts

An ATM card allows you to access all of your bank accounts 24 hours a day,

365 days per year via any ATM. This means you do not need to walk into a

branch, with its restrictive weekly hours and line-ups, to take care of your

banking needs. Services that you can complete at an ATM include many of the

same services that you would use if you walked into a bank branch, such as

withdrawing cash, transferring funds, paying bills, ordering checks or

depositing funds.

International Access to Funds

If your ATM card is attached with the "Plus" or "Cirrus" names, you will be

able easily to withdraw the local currency at any associated ATM around the

world. Withdrawing local currency from an international ATM can be a more

cost effective way to do a currency exchange abroad compared to exchanging

money at a foreign exchange bureau, which charges high servicing fees. You

may need to pay a nominal fee to use another financial institution's ATM abroad

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although financial institutions in certain countries do not charge extra ATM

fees, such as Canada.

Fraud Protection

Your ATM card is protected with the PIN you have chosen for it. Also, any

fraud activity on your ATM card, should it be lost or stolen, is easily traceable

via the ATM network. Not only can your bank or financial institution quickly

look up the location where any funds may be taken out by someone other than

yourself but every ATM vestibule is equipped with a security camera. Anyone

using your card fraudulently can be traced and identified.

Wider Network of Banking Facilities

You can use the ATM card at any machine within your bank's ATM network

around the country or you can also access your accounts (and use selective

banking services such as withdrawing funds) via domestic ATMs operated by

other banks or credit unions, for a fee. Automated teller machines are not only

located at financial institutions but you can also find stand-alone ATMs at select

stores, malls and airports. This means you are never very far away from a

location where you can access the funds in your bank accounts, rather than

having to locate your closest bank branch.

Extended Hours

While your bank may keep normal business hours, the ATM is available to

process transactions 24 hours a day, 365 days per year. This is very convenient

if you need to make a withdrawal or deposit (available at some ATMs) outside

of business hours, or on the weekend. ATMs ensure that you will always have

access to your funds, night and day, although there may be a withdrawal limit

set by your bank. To increase or remove this limit, contact your bank's customer

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service center using the telephone number on the back of your ATM or debit

card.

Quick Transaction

ATMs allow customers to avoid long lines inside of the bank. Because banks

typically have multiple ATM machines and most transactions conducted at the

ATM machine are simple withdrawals, you can avoid long lines by using one.

No Paperwork

When making a withdrawal from inside of the bank, you must fill out a

withdrawal slip. Often times you will also need to show proof of ID, such as a

driver's license or passport. When using the ATM, all you need is your ATM

card and PIN number to verify your identity and access your account.

Increased Privacy

While not anonymous, you can avoid speaking with or allowing a teller to view

the balance of your account. An overdrawn account can be an embarrassing

scenario, especially if you need to check your balance. Virtually all ATM

machines will allow you to check your balance in private, without the assistance

of a teller.

Drive Through

Many bank's ATM machines are located at a drive-through lane for added

convenience. This is very helpful if you are in a hurry and need to withdraw

cash because not only do you not need go into the bank and wait for a teller to

assist you, you don't even exit your vehicle.

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Available Anywhere

You can access your account and withdraw cash from any ATM regardless if

your bank operates it. This is especially helpful if you are on a trip and are short

on cash. Simply insert your debit card and enter your PIN to make a withdrawal

or check your balance. However, you should always be aware of the fees

charged by the ATM and by your bank for using an ATM not operated by them,

as they can be expensive. ATM machines will typically display the fees

imposed prior to completing the transactions.

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DISADVANTAGES OF ATM

Automated teller machines, or ATMs, are a convenient way to access your

money without having to go into a bank and work with a bank teller. ATMs

give you the opportunity to withdraw and deposit money, as well as check your

balances at the touch of a button. Although ATMs are convenient, there are

disadvantages to using these machines.

In the United States, there are approximately 400,000 automatic (or automated)

teller machines, also known as ATMs. The ATM was perfected by Luther

George Simjian, a New York inventor, who convinced a city bank in the 1930s

that immediate check deposit from local workers would be an advantage to the

bank. The experiment lasted only six months due to disinterest from the general

working population. The modern ATM was used first in London in 1967, before

the use exploded in the 1980s. Economists speculate that the decline in the

number and use of the machines over the past few years is related to increased

ATM fees.

Security

Unlike bank tellers, ATMs do not require the person performing the transaction

to present a picture identification. Rather, the person must only insert a bank

card and enter a personal identification number. If the bank card is stolen and

the number ascertained, an unauthorized person can easily access the account.

Inability To Perform Complex Transactions

ATMs can only perform relatively basic transactions. This means that people

who need to complete these longer transactions will be forced to use the teller,

restricting use of the ATM for people who need to complete simple business. In

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this sense, the ATM Is rather like the express line in a supermarket--faster for

some, but unavailable to others.

Fees

With the advent of ATMs came ATM fees. Not only do banks of which you are

not a member charge fees for the use of their ATMs, but users are often charged

surreptitious fees by their own banks for using other banks' ATMs--meaning the

customer is docked twice for the same transaction.

Privacy

Unlike banks, in which security guards and tellers are present to ensure the

person performing a transaction receives privacy, there is no such guarantee

when using an ATM. People may try to spy on users as delicate information

appears on the screen, without the user being aware.

Difficulty of Use

The performance of business at an ATM is generally quicker than that at a

human teller. However, the ATM is incapable of providing personalized

instruction to the user in a way that a human teller can. This can result in longer

wait times if the user currently using the machine is struggling to complete a

transaction.

Eating a Card

Occasionally, ATMs will malfunction and swallow a user's ATM card. The

customer will then be directed to contact a service number or their bank and

wait for a repair technician to retrieve this card. While this happens only rarely,

if it occurs on a weekend or at night, the user may be left to wait for several

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days before they can again use their card, something that would not happen with

a human cashier.

Privacy

Privacy is not guaranteed because ATM transactions are completed using a

keypad or touch screen. The people standing nearby may be able to see your

personal identification number, or PIN, and account balance information,

making it easier to steal your identity. However, once you are inside a bank, the

account numbers and other personal information are maintained behind a desk

and the information is more secure.

ATM Card

Having a physical ATM card in your possession is a disadvantage. For one

thing, you have to protect the card. If it is lost or stolen, it can be used by the

finder, which can lead to potential losses for you. Another problem is the

machine taking your card. If you enter the wrong PIN or the machine

malfunctions, your card may disappear into the machine. Then you may have to

order a new card, or wait for the bank to open the next day.

Overspending

There is a risk of overspending because an ATM gives you access to your

money even after bank hours. If you are an impulse buyer, this is a major

disadvantage and it can cause problems with budgeting. If you do not have an

ATM card, you have to stop and think about the necessity of the purchase

before you make it. However, with the ATM card in hand and ATMs on almost

every corner, you can purchase without thinking, thus potentially leading to

overspending.

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Record Keeping Requirements

ATM cards make it possible to overdraft your bank account, so they require that

you keep careful record of your spending. With an ATM card, it is vital to know

what your checking account balance is at all times. The overdraft fees

associated with bank accounts are high enough that the consequences of over-

drafting, even by a small amount, are quite serious.

Hidden Fees

Hidden fees seem to be lurking around every corner of the financial world. If

you are not using an ATM that is affiliated with your bank or credit union, then

you will likely have to pay a fee. Although many banks strive to have

conveniently-located ATM machines, using any ATM machine not associated

with your bank can deplete your bank account balance.

Lost or Stolen Cards

Although there are protections out there for identity theft victims, when an

ATM card is lost or stolen, it can spell disaster for the card owner. ATM cards

can fall into the wrong hands, and be used to rob your account or make

purchases without your knowledge. A thief could use your ATM card as a credit

card by forging your signature, or for online purchases simply by knowing your

card number and expiration date. Banks do not offer the same protections on

ATM cards as credit cards so check your financial institution for its policy on

unauthorized transactions.

Ease of Overspending

While ATM cards make shopping simple by boiling the process down to the

simple swipe of a card, they also promote overspending. When you shop with

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cash, you know instantly where you stand financially and how much money

remains. With a debit or ATM card, it becomes difficult to monitor how much is

being spent and how much money is left until the dreaded card decline or you

are hit with an overdraft charge.

Fraud

The potential for identity theft is a major disadvantage related to automatic

teller machines. Fraudulent card readers, called skimmers, are placed over the

authentic reader to transfer numbers and codes to nearby thieves. Spy cameras

are also used by password voyeurs to collect access codes. Lost access cards are

another potential for fraud. The Federal Trade Commission states that people

are not responsible for unauthorized use of a card, if it is reported immediately.

If the loss is not noticed immediately, consumers may lose all funds in an

account, if notice is not given before money transfers are made. Incorrect

withdrawals noted on monthly statements must be reported, or else consumers

are responsible for the amounts, even when removed by fraudulent means,

according to the U.S. Federal Trade Commission.

Theft

ATMs are a magnet for easy theft. Robbers are guaranteed cash from consumers

visiting the money machines. Although ATM robberies are not common (only

one attack in every 2.5 million transactions), according to the California

Banking Industry, the U.S. Department of Justice (DOJ) reports that

approximately 15 percent of people attacked and robbed at ATM stations are

killed or injured. The DOJ claims the average loss is between $100 and $200.

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Fiscal Planning Issues

As a safety measure, many ATMs list only the deposit or withdrawal amount

and omit the balance from the account. People using an ATM for frequent

banking are not informed of the total amount in the account when funds are

withdrawn or deposited, as opposed to traditional checking which provides a

register to maintain a running account of the balance. This lack of recording

allows some customers to overdraw accounts, adding penalty charges.

Operation Issues

ATMs located in busy locations may not have adequate funds for busy holiday

weekends when large numbers of people are taking out cash. Most machines

require envelopes to deposit checks and cash, and these may also be in short

supply, preventing customers from depositing funds. Damaged machines leave

the bank client with no alternative during non-banking hours.

Bank Fees

As bank consolidation continues, fewer companies own ATMs, and they limit

access to automated banking. U.S. Senator John Kerry states that two banks,

Fleet Bank and BankBoston, operate nearly two thirds of all the ATMs in New

England. This monopoly reduces competition. Kerry warns that "policy makers

should be watchful of the capacity to which ATM surcharges become more

prevalent." Reliance on automatic teller machines for personal banking means

increases in bank fees. Most banks allow an unlimited number of withdrawals

from same system ATMs, but charge a fee between $2 and $5 for withdrawals

from machines outside the system.

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CHAPTER 5

USE OF ATMS

Cash Withdrawal and Balance Enquiry

In spite of a number of innovative services being made available at many

ATMs, cash withdrawal stills remains the most accessed service at ATMs.

However, the migration of routine bank transactions like cash withdrawals

and balance enquiries from teller counters to ATMs significantly raises the

potential for savings in employee costs and greater employee focus on value-

added revenue-enhancing activities such as selling other financial products

and advisory services to customers.

Cash /Cheque Deposit

Again, due to the strong cash culture in India, cash deposits are most likely

higher than in other markets, especially cash deposits made by commercial

customers such as retail shopkeepers and those whose work involves

substantial travelling. A high cash withdrawal rate results in higher ATM

servicing costs due to frequent cash replenishment requirements. Recent

developments in ATM technology have made it possible to recycle cash in

ATMs. Currency notes received as cash deposits are counted; soiled notes

separated and deposited cash dispensed to fulfill withdrawal transactions.

However, regulatory concerns relating to identification of counterfeit notes

and its depositors need to be addressed first.

ATM with Cheque deposit facility is not picking up in India, like other

countries. One of the reasons is the delay in collection of the cheque deposited

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in ATMs. Cheque deposited in ATMs is to be collected and deposited in the

designated branch for collection. Another reason is the introduction of cheque

deposit Kiosks by various Banks especially Private sector ones. These are

kept at each some important locations/branches where customers can deposit

there cheques which are collected at intervals which may be difficult in

ATMs.

Bill Payments

Most utilities have inadequate infrastructure for receiving bill payments

resulting in long queues at collection centres. Hence, bill payment at ATMs

has achieved noticeable acceptance by bank customers. Most banks provide

this service through bi-lateral arrangements with bill-payment service

providers. ATM users register their water, electricity and telephone utility

accounts with banks, check their dues at ATMs, approve bill payments that

are debited to their bank accounts and receive printed receipts for the

transactions. This service has the effect of improving customer satisfaction for

both the bank as well as the bill-payment service providers. Some Banks’

ATMs even accept charitable contributions to Temples.

Sale of Paper Based Products

ATMs are ideally suited to sell paper-based products and services such as

tickets, wireless phone recharge cards, financial products, etc. The screen

interface allows browsing and customization, access to bank accounts

facilitate payments and printing capabilities produce the actual

product/service.

A number of banks including ICICI Bank, SBI and PNB have ATMs at

Mumbai’s local railway stations to dispense season tickets to commuters.

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Own-bank customers pay no extra charge while other bank customers pay a

fee of Rs. 50 for this extremely useful service of anytime ticket purchase.

Railway season tickets represent a high-volume mass-appeal product. As

technical standards get established and product/service sellers become aware

of the ATM sales channel, niche-appeal high-margin products like

entertainment tickets will join the fray.

Kiosks

Information Kiosks has been introduced by many Banks and also by PSUs like

Railways, Tourist centers etc. While the revenue-producing capacity of non-

emergency type of information at ATMs as a stand-alone product is doubtful,

many customers may be willing to pay a nominal fee for information having

“impulsive” demand such as cricket scores while they wait for their transactions

to be processed. To be sure, providing information, whether priced or free, will

appeal to some customers and increase customer satisfaction.

Union Bank has used technology to establish Village Knowledge Centers

(VKCs), which have proved to be a success in the 198 centers, where they have

been set up. VKCs empower the local rural population by giving them

information on various vital inputs such as weather, fertilizers, prices of crops,

etc. The bank is also operating financial education centers offering counseling at

51 of these VKCs.

Third party advertising

In India, ATM advertising for third-party products is currently not allowed by

Regulatory authorities. However, the wait time at ATMs can be effectively used

by banks to promote their own brands, product and services. Furthermore, banks

can tailor advertising messages based on customer information easily available

in their accounting and CRM databases. Customer wait-time at ATMs while

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transactions get processed, typically between 10 to 25 seconds, has been

profitably used by many banks for their own advertising.

Money Transfers

Indians, who have migrated abroad or to cities, regularly use money orders and

wire transfers to send money to their families back home. ATM growth,

especially in rural India, will capture substantial business from the expensive

wire transfer agents’ network and the customer-service lacking postal network.

In line with international trends, ATMs can be made capable to dispense printed

money orders or initiate wire transfers against a charge on customers’ bank

accounts. After addressing regulatory hurdles, these services can even be made

available to non-account holders through cash payments using the currency

acceptors built into ATMs. ATMs can also facilitate the encashment of wire

transfer amounts by allowing even non-account holders to withdraw cash based

on PINs or previously mailed special purpose ATMs card.

Recharge mobile via ATMs

ATMs are also used to recharge mobile phones. Initiated in 2004 by ICICI

Bank, now most ATM/Debit Cardholders are able to recharge their pre-paid

subscriptions of most mobile service providers from anywhere in the country

using their bank‘s ATMs or by sending a SMS.

The amount for recharging the mobile phone would be debited from the

subscriber‘s Bank account and the subscription would be directly recharged

accordingly. The mobile top-up facility provides convenience on ATMs and

through mobiles phones through sms.

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CHAPTER 6

SECURITY

Early ATM security focused on making the ATMs invulnerable to physical

attack; they were effectively safes with dispenser mechanisms. A number of

attacks on ATMs resulted, with thieves attempting to steal entire ATMs by ram-

raiding.

Modern ATM physical security concentrates on denying the use of the money

inside the machine to a thief, by means of techniques such as dye markers and

smoke canisters. This change in emphasis has meant that ATMs are now

frequently found free-standing in places like shops, rather than mounted into

walls.

Another trend in ATM security leverages the existing security of a retail

establishment. In this scenario, the fortified cash dispenser is replaced with

nothing more than a paper-tape printer. The customer requests a withdrawal

from the machine, which dispenses no money, but merely prints a receipt. The

customer then takes this receipt to a nearby sales clerk, who then exchanges it

for cash from the till.

ATM transactions are usually encrypted with DES but most transaction

processors will require the use of the more secure Triple DES by 2005.

There are also many "phantom withdrawals" from ATMs, which banks often

claim are the result of fraud by customers. Many experts ascribe phantom

withdrawals to the criminal activity of dishonest insiders. Ross Anderson, a

leading cryptography researcher, has been involved in investigating many cases

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of phantom withdrawals, and has been responsible for exposing several errors in

bank security.

There have also been a number of incidents of fraud where criminals have used

fake machines or have attached fake keypads or card readers to existing

machines. These have then been used to record customers' PINs and bank

account details in order to gain unauthorized access to their accounts.

A bank is always liable when a customer's money is stolen from an ATM, but

there have been complaints that banks have made it difficult to recover money

lost in this way.

In some cases, bank fraud occurs at ATMs whereby the bank accidentally

stocks the ATM with bills in the wrong denomination, therefore giving the

customer more money than should be dispensed. Individuals who unknowingly

use such ATMs are probably never tried, but those who withdraw a second time

are usually prosecuted.

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FRAUD

As with any device containing objects of value, ATMs and the systems they

depend on to function are the targets of fraud. Fraud against ATMs and people's

attempts to use them takes several forms.

The first known instance of a fake ATM was installed at a shopping mall

in Manchester, Connecticut in 1993. By modifying the inner workings of

a Fujitsu model 7020 ATM, criminal gangs known as The Backlands Boys were

able to steal information from cards inserted into the machine by customers.

WAVY-TV reported an incident in Virginia Beach of September 2006 where a

hacker who had probably obtained a factory-default admin password for a gas

station's white label ATM caused the unit to assume it was loaded with $5 USD

bills instead of $20s, enabling himself—and many subsequent customers—to

walk away with four times the money they wanted to withdraw. This type of

scam was featured on the TV series The Real Hustle.

ATM behavior can change during what is called "stand-in" time, where the

bank's cash dispensing network is unable to access databases that contain

account information (possibly for database maintenance). In order to give

customers access to cash, customers may be allowed to withdraw cash up to a

certain amount that may be less than their usual daily withdrawal limit, but may

still exceed the amount of available money in their accounts, which could result

in fraud if the customers intentionally withdraw more money than what they had

in their accounts.

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Card fraud

In an attempt to prevent criminals from shoulder surfing the customer's Personal

Identification Number (PIN), some banks draw privacy areas on the floor.

For a low-tech form of fraud, the easiest is to simply steal a customer's card

along with its PIN. A later variant of this approach is to trap the card inside of

the ATM's card reader with a device often referred to as a Lebanese loop. When

the customer gets frustrated by not getting the card back and walks away from

the machine, the criminal is able to remove the card and withdraw cash from the

customer's account, using the card and it’s PIN.

This type of ATM fraud has spread globally. Although somewhat replaced in

terms of volume by ATM skimming incidents, a re-emergence of card trapping

has been noticed in regions such as Europe where EMV Chip and PIN cards

have increased in circulation.

Another simple form of fraud involves attempting to get the customer's bank to

issue a new card and its PIN and stealing them from their mail.

By contrast, a newer high-tech method of operating sometimes called card

skimming or card cloning involves the installation of a magnetic card reader

over the real ATM's card slot and the use of a wireless surveillance camera or a

modified digital camera or a false PIN keypad to observe the user's PIN. Card

data is then cloned into a duplicate card and the criminal attempts a standard

cash withdrawal. The availability of low-cost commodity wireless cameras,

keypads, card readers, and card writers has made it a relatively simple form of

fraud, with comparatively low risk to the fraudsters.

In an attempt to stop these practices, countermeasures against card cloning have

been developed by the banking industry, in particular by the use of smart

cards which cannot easily be copied or spoofed by unauthenticated devices, and

by attempting to make the outside of their ATMs tamper evident. Older chip-

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card security systems include the French Carte Bleue, Visa Cash, Mondex, Blue

from American Express and EMV '96 or EMV 3.11. The most actively

developed form of smart card security in the industry today is known as EMV

2000 or EMV 4.x.

EMV is widely used in the UK (Chip and PIN) and other parts of Europe, but

when it is not available in a specific area, ATMs must fallback to using the

easy–to–copy magnetic stripe to perform transactions. This fallback behaviour

can be exploited. However the fallback option has been removed on the ATMs

of a couple of UK banks, meaning if the chip is not read, the transaction will be

declined.

Card cloning and skimming can be detected by the implementation of magnetic

card reader heads and firmware that can read a signature embedded in all

magnetic stripes during the card production process. This signature known as a

"MagnePrint" or "Blueprint" can be used in conjunction with common two

factor authentication schemes utilized in ATM, debit/retail point-of-sale and

prepaid card applications.

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CHAPTER 7

ATM Card Problems

ATM cards can have several problems.

ATM cards are a large part of the modern banking world. These cards provide a

safer way to use money from your personal account without using a check or

carrying around large amounts of cash. However, there are also potential

problems associated with ATM cards. Knowing what they are will help ATM-

card owners avoid problems with their cards.

1. Types

There are three main problems with ATM cards. The first is ATM fraud. This

occurs when someone obtains your ATM card number and personal

identification number, or PIN. Even with the maximum security measures, it is

possible for someone to obtain that information. Dropping your card will also

increase chances of theft.

Another problem that can occur with ATM cards occurs at the ATM machine.

The card can get eaten, or the ATM might give you the wrong amount of cash.

There can also be errors between ATM cards and the banking information, such

as discrepancies between when a transaction was made and when money was

posted to the account.

2. Significance

ATM cards have become a large part of everyday banking for many people.

Because of this, ATM cards present a fairly high risk for fraud. This makes it

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extremely important to keep an eye on your transactions, save receipts, and

notify the bank immediately if there are any fishy transactions on your account.

3. Warning

Keeping your ATM card information safe is largely your responsibility.

Although most banks will refund fraudulent charges, some might charge a fee

for reports made after a certain time period. It is important to check your ATM

balance at least once a week.

At some ATM machines, fake card readers or number pads have been placed

over the real ATM machine. When you slide your card through one of these

machines, the information is sent to someone who reads it and can steal your

card information. It can be nearly impossible to spot these readers. If you

suspect that an ATM has a fake number pad or fake card reader, do not use it,

and notify your bank and the ATM's bank immediately.

4. Time Frame

Most ATM problems will be identifiable within 24 hours. Most banks keep

account updates in real time. If you have an online account it is easy to check

the balance of the card every day. Resolution of a problem takes much longer.

However, most problems should be resolved in one month or less.

5. Solution

Use your ATM card at ATM locations for your bank only. Do not give your

ATM card number to anyone, and never give out your PIN--even to family

members. Check your card balance frequently, and notify your bank as soon as

possible if you have any problems with the card

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FINANCIAL NETWORK

Most ATMs are connected to interbank networks, enabling people to withdraw

and deposit money from machines not belonging to the bank where they have

their accounts or in the countries where their accounts are held (enabling cash

withdrawals in local currency). Some examples

include NYCE, PULSE, PLUS, Cirrus, AFFN, Interac,Interswitch, STA

R,LINK, MegaLink and Banc Net.

ATMs rely on authorization of a financial transaction by the card issuer or other

authorizing institution via the communications network. This is often performed

through an ISO 8583 messaging system.

Many banks charge ATM usage fees. In some cases, these fees are charged

solely to users who are not customers of the bank where the ATM is installed;

in other cases, they apply to all users.

In order to allow a more diverse range of devices to attach to their networks,

some interbank networks have passed rules expanding the definition of an ATM

to be a terminal that either has the vault within its footprint or utilizes the vault

or cash drawer within the merchant establishment, which allows for the use of

a scrip cash dispenser.

ATMs typically connect directly to their host or ATM Controller via

either ADSL or dial-up modem over a telephone line or directly via a leased

line. Leased lines are preferable to plain old telephone service (POTS) lines

because they require less time to establish a connection. Less-trafficked

machines will usually rely on a dial-up modem on a POTS line rather using a

leased line, since a leased line may be comparatively more expensive to operate

versus a POTS line. That dilemma may be solved as high-speed

Internet VPN connections become more ubiquitous. Common lower-level layer

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communication protocols used by ATMs to communicate back to the bank

include SNA over SDLC, TC500 over Async, X.25, and TCP/IP  over Ethernet.

In addition to methods employed for transaction security and secrecy, all

communications traffic between the ATM and the Transaction Processor may

also be encrypted via methods such as SSL.

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CHAPTER 8

GLOBAL USE OF ATM

There are no hard international or government-compiled numbers totaling the

complete number of ATMs in use worldwide. Estimates developed

by ATMIA place the number of ATMs in use currently at over 2.2 million, or 1

ATM per around over 3000 people in the world.

For the purpose of analyzing ATM usage around the world, financial

institutions generally divide the world into seven regions, due to the penetration

rates, usage statistics, and features deployed. Four regions (USA, Canada,

Europe, and Japan) have high numbers of ATMs per million people. Despite the

large number of ATMs, there is additional demand for machines in the

Asia/Pacific area as well as in Latin America. ATMs have yet to reach high

numbers in the Near East and Africa.

One of The world's most northerly installed ATMs is located

at Longyearbyen, Svalbard, Norway.

The world's most southerly installed ATM is located at McMurdo

Station, Antarctica.

While India claims to have the world's highest installed ATM at Nathu La

Pass, India installed by the Union Bank of India at 4310 metres, there are higher

ATMs installed in Nagchu County, Tibet at 4500 metres by the Agricultural

Bank of China.

Israel has the world's lowest installed ATM at Ein Bokek at the Dead Sea,

installed independently by a grocery store at 421 meters below sea level.

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While ATMs are ubiquitous on modern cruise ships, ATMs can also be found

on some US Navy ships.

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CHAPTER 9

HARDWARE AND SOFTWARE

HARDWARE

a record of their transaction)

Vault (to store the parts of the machinery requiring restricted access)

Housing (for aesthetics and to attach signage to)

Due to heavier computing demands and the falling price of Personal Computer-

like architectures, ATMs have moved away from custom hardware architectures

using microcontrollers and/or application-specific integrated circuits to adopting

the hardware An ATM is typically made up of the following devices:

CPU (to control the user interface and transaction devices)

Magnetic and/or Chip card reader (to identify the customer)

PIN Pad (similar in layout to a Touch tone or Calculator keypad), often

manufactured as part of a secure enclosure.

Secure crypto processor, generally within a secure enclosure.

Display (used by the customer for performing the transaction)

Function key buttons (usually close to the display) or a Touch screen (used

to select the various aspects of the transaction)

Record Printer (to provide the customer with architecture of a Personal

Computer, such as, USB connections for peripherals, Ethernet and IP

communications, and use personal computer operating systems. Although it is

undoubtedly cheaper to use commercial off-the-shelf hardware, it does make

ATMs potentially vulnerable to the same sort of problems exhibited by

conventional Personal Computers.

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Business owners often lease ATM terminals from ATM service providers.

The vault of an ATM is within the footprint of the device itself and is where

items of value are kept. Scrip cash dispensers do not incorporate a vault.

Mechanisms found inside the vault may include:

Dispensing mechanism (to provide cash or other items of value)

Deposit mechanism including a Check Processing Module and Bulk Note

Acceptor (to allow the customer to make deposits)

Security sensors (Magnetic, Thermal, Seismic, gas)

Locks: (to ensure controlled access to the contents of the vault)

Journaling systems; many are electronic (a sealed flash memory device

based on in-house standards) or a solid-state device (an actual printer) which

accrues all records of activity including access timestamps, number of notes

dispensed, etc. - This is considered sensitive data and is secured in similar

fashion to the cash as it is a similar liability.

ATM vaults are supplied by manufacture, regulatory requirements, ATM type,

operator risk avoidance practices and internal volume requirements. Industry

standard vault configurations include Underwriters Laboratories UL-

291 "Business Hours" and Level 1 Safes, RAL TL-30 derivatives, and CEN EN

1143-1 - CEN III and CEN IV.

ATM manufacturers recommend that an ATM vault be attached to the floor to

prevent theft. Though there is a record of a theft conducted by tunneling into an

ATM floor.

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SOFTWARE

With the migration to commodity Personal Computer hardware, standard

commercial "off-the-shelf" operating systems, and programming environments

can be used inside of ATMs. Typical platforms previously used in ATM

development include RMX or OS/2.

Today the vast majority of ATMs worldwide use a Microsoft Windows OS,

primarily Windows XP Professional or Windows XP Embedded. A small

number of deployments may still be running older versions of Windows OS

such as Windows NT, Windows CE, or Windows 2000.

There is a computer industry security view that general public desktop operating

systems have greater risks as operating systems for cash dispensing machines

than other types of operating systems like (secure) real-time operating

systems (RTOS). RISKS Digest has many articles about cash machine operating

system vulnerabilities.

Linux is also finding some reception in the ATM marketplace. An example of

this is Banrisul, the largest bank in the south of Brazil, which has replaced

the MS-DOS operating systems in its ATMs with Linux. Banco do Brasil is also

migrating ATMs to Linux.

Common application layer transaction protocols, such as Diebold 91x (911 or

912) and NCR NDC or NDC+ provide emulation of older generations of

hardware on newer platforms with incremental extensions made over time to

address new capabilities, although companies like NCR continuously improve

these protocols issuing newer versions (e.g. NCR's AANDC v3.x.y, where x. y

are subversions). Most major ATM manufacturers provide software packages

that implement these protocols. Newer protocols such as IFX have yet to find

wide acceptance by transaction processors.

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With the move to a more standardized software base, financial institutions have

been increasingly interested in the ability to pick and choose the application

programs that drive their equipment.WOSA/XFS, now known as CEN XFS (or

simply XFS), provides a common API for accessing and manipulating the

various devices of an ATM. J/XFS is a Java implementation of the CEN XFS

API.

While the perceived benefit of XFS is similar to the Java's "Write once, run

anywhere" mantra, often different ATM hardware vendors have different

interpretations of the XFS standard. The result of these differences in

interpretation means that ATM applications typically use a middleware to even

out the differences between various platforms.

With the onset of Windows operating systems and XFS on ATM's, the software

applications have the ability to become more intelligent. This has created a new

breed of ATM applications commonly referred to as programmable

applications. These types of applications allows for an entirely new host of

applications in which the ATM terminal can do more than only communicate

with the ATM switch. It is now empowered to connect to other content servers

and video banking systems.

Notable ATM software that operates on XFS platforms include Triton

PRISM, Diebold AngelisEmpower, NCR APTRAEdge, Absolute

Systems Absolute INTERACT, KAL Kainite, Phoenix Interactive VISTAatm,

and Wincor Nixdorf ProTopas .

With the move of ATMs to industry-standard computing environments, concern

has risen about the integrity of the ATM's software stack.

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Transactional secrecy and integrity

The security of ATM transactions relies mostly on the integrity of the

secure crypto processor: the ATM often uses general commodity components

that sometimes are not considered to be "trusted systems".

Encryption of personal information, required by law in many jurisdictions, is

used to prevent fraud. Sensitive data in ATM transactions are

usually encrypted with DES, but transaction processors now usually require the

use of Triple DES. Remote Key Loading techniques may be used to ensure the

secrecy of the initialization of the encryption keys in the ATM. Message

Authentication Code (MAC) or Partial MAC may also be used to ensure

messages have not been tampered with while in transit between the ATM and

the financial network.

Alternative uses

Although ATMs were originally developed as just cash dispensers, they have

evolved to include many other bank-related functions. In some countries,

especially those which benefit from a fully integrated cross-bank ATM network

(e.g.: Multibanco in Portugal), ATMs include many functions which are not

directly related to the management of one's own bank account, such as:

Deposit currency recognition, acceptance, and recycling

Paying routine bills, fees, and taxes (utilities, phone bills, social security,

legal fees, taxes, etc.)

Printing bank statements

Updating passbooks

Loading monetary value into stored value cards

Adding pre-paid cell phone / mobile phone credit.

Purchasing

Postage stamps.

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Lottery tickets

Train tickets

Concert tickets

Movie tickets

Shopping mall gift certificates.

Gold - "In London last week [in 2011] some smart businessmen

launched the country’s first gold ATM. Stick in your debit card or some

cash, and the machine will swap your plastic or paper money for a small

bar of the real stuff."

Games and promotional features

Fast loans

CRM at the ATM

Donating to charities

Cheque Processing Module

Paying (in full or partially) the credit balance on a card linked to a

specific current account.

Transferring money between linked accounts (such as transferring between

checking and savings accounts)

Increasingly banks are seeking to use the ATM as a sales device to deliver pre

approved loans and targeted advertising using products such as ITM (the

Intelligent Teller Machine) from Aptra Relate from NCR. ATMs can also act as

an advertising channel for companies to advertise their own products or third-

party products and services.

In Canada, ATMs are called guichets automatiques in French and sometimes

"Bank Machines" in English. The Interact shared cash network does not allow

for the selling of goods from ATMs due to specific security requirements for

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PIN entry when buying goods. CIBC machines in Canada are able to top-up the

minutes on certain pay as you go phones.

Manufacturers have demonstrated and have deployed several different

technologies on ATMs that have not yet reached worldwide acceptance, such

as:

Biometrics, where authorization of transactions is based on the scanning of a

customer's fingerprint, iris, face, etc. Biometrics on ATMs can be found in

Asia.

Cheque/Cash Acceptance, where the ATM accepts and recognize cheques

and/or currency without using envelopes Expected to grow in importance in

the US through Check 21legislation.

Bar code scanning

On-demand printing of "items of value" (such as movie tickets, traveler's

cheques, etc.)

Dispensing additional media (such as phone cards)

Co-ordination of ATMs with mobile phones

Customer-specific advertising

Integration with non-banking equipment

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CHAPTER 10

RELIABILITY

Before an ATM is placed in a public place, it typically has undergone extensive

testing with both test money and the backend computer systems that allow it to

perform transactions. Banking customers also have come to expect high

reliability in their ATMs, which provides incentives to ATM providers to

minimize machine and network failures. Financial consequences of incorrect

machine operation also provide high degrees of incentive to minimize

malfunctions.

ATMs and the supporting electronic financial networks are generally very

reliable, with industry benchmarks typically producing 98.25% customer

availability for ATMs and up to 99.999% availability for host systems that

manage the networks of ATMs. If ATM networks do go out of service,

customers could be left without the ability to make transactions until the

beginning of their bank's next time of opening hours.

This said, not all errors are to the detriment of customers; there have been cases

of machines giving out money without debiting the account, or giving out

higher value notes as a result of incorrect denomination of banknote being

loaded in the money cassettes. The result of receiving too much money may be

influenced by the card holder agreement in place between the customer and the

bank.

Errors that can occur may be mechanical (such as card transport mechanisms;

keypads; hard disk failures; envelope deposit mechanisms); software (such

as operating system; driver; application); communications; or purely down to

operator error.

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To aid in reliability, some ATMs print each transaction to a roll paper journal

that is stored inside the ATM, which allows both the users of the ATMs and the

related financial institutions to settle things based on the records in the journal

in case there is a dispute. In some cases, transactions are posted to an electronic

journal to remove the cost of supplying journal paper to the ATM and for more

convenient searching of data.

Improper money checking can cause the possibility of a customer

receiving counterfeit banknotes from an ATM. While bank personnel are

generally trained better at spotting and removing counterfeit cash, the resulting

ATM money supplies used by banks provide no guarantee for proper banknotes,

as the Federal Criminal Police Office of Germany has confirmed that there are

regularly incidents of false banknotes having been dispensed through bank

ATMs. Some ATMs may be stocked and wholly owned by outside companies,

which can further complicate this problem. Bill validation technology can be

used by ATM providers to help ensure the authenticity of the cash before it is

stocked in an ATM; ATMs that have cash recycling capabilities include this

capability.

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CHAPTER 11

CONCLUSION

World is changing fast. The process of globalization has taken everything in its

fold. New ideas and new economic thinking are taking over the world.

Technology is considered to be the prime factor in leading the change.

Technology is very dynamic force. It is changing the competitive landscape of

the financial services and banking industry. It is influencing the way their

products and services are sold and delivered.

The banking industry has emerged as one of the driving forces behind the

development of information based technologies. It has made significant

progress in recapitalizing systems, in eliminating problem assets from balance

sheet in improving supervisory and regulatory framework day to day

transactions in banks are automated which better service in processing

transactions. Better customer is provided using. IT aided developments such as

introduction of ATM. The uses of ATM have been done by everyone today. It

has become a new lifeline for the people in every country to remove money.

The following graph shows the usages of ATM in the India. As compare to

India the ATM usages in U.S is high.

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CHAPTER 12

WEBILOGRAPHY

www.rbi.org

www.allbankingsolutions.com

ATM in Banks.

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