If you have a bank account in Colorado, you’ve most likely used an ATM before. The process is simple: you insert your card, input the PIN code, and then choose the amount of money you want to withdraw in $20 increments. The money withdrawal process is easy enough to understand, but have you ever thought about what happens behind the scenes? Let’s take a look at how ATM processing works.
What do ATMs do?
First off, let’s go over exactly what ATMs are. ATM stands for Automatic Teller Machine, and since its creation, the ATM has become one of the greatest revolutions in modern banking. ATMs provide cardholders with easy access to the cash in their bank, and for merchants, ATMs create a stream of income through small transaction fees. By providing the cash to the cardholder without a human teller, the bank saves a significant amount of money and time, creating a win-win situation for both parties.
What is an ATM processor?
For ATMs to access the necessary information to provide money for ATM users, the data terminal has to communicate with the bank through a host processor. This ATM processor then gets the cardholder’s information and requests a transaction. Whereas this process used to be conducted through a telephone line, modern machines connect with host servers via the internet.
How do ATM processors work?
When cardholders insert their card and necessary information on the ATM keypad, the data is forwarded to the ATM processor. The processor then routes a transaction request to the bank. If the requested amount is available to be withdrawn, the ATM processor creates an electronic funds transfer from the cardholder’s bank and the processor’s account.
Then, the host processor sends the ATM an approved code that enables the machine to dispense the requested amount. Finally, the ATM processor will transfer the funds from the cardholder’s account into the account of whatever entity holds the ATM. This usually happens on the next business day to ensure that the merchant is reimbursed for the funds the cardholder just took out of the ATM. All of this happens within a matter of seconds. When it’s all over, you take your card and cash with you. What a brilliant invention, right?
How does an ATM processor make money?
ATM processors make money by charging a small fee for each transaction. Because the processor acts as a middleman between so many institutions and banks, fees are charged in exchange for the convenience ATM processors provide.
It is truly impressive how ATM processing works. If you need the right ATM for your event or business in Colorado, Mile High ATM can help make that happen. We offer the most efficient ATM based on your needs.