The ATM

Abstract

The automated teller machine went into service in the summer of 1967, almost simultaneously in London and Uppsala, after a German safe maker had already filed a patent in 1965. Most of the first machines took vouchers or punched cards and paid out a fixed sum; one of them introduced the personal identification number. Online machines linked to the bank’s computer followed from 1968, magnetic-stripe cards in the 1970s, and chips later still. The Paderborn firm Nixdorf entered the business in 1978, and its successor merged in 2016 with the American safe maker Diebold, which had built ATMs since the 1970s.

Forerunners

The Armenian-born inventor Luther Simjian, holder of some 300 patents, patented a “deposit exchange machine” in 1960 that described paying out cash against a cheque, and his Bankograph, a machine for depositing valuables, ran for a few months in New York in 1961. In the summer of 1966 American newspapers reported a Japanese “computer loan machine” that paid out a small sum against a credit card, to be repaid with interest after three months, and in October 1966 the safe maker Diebold presented a video teller through which a clerk could check a customer and a cheque over a television link.

The earliest patent for a cash dispenser in the modern sense came from Germany. On 12 February 1965 the safe maker Ostertag of Aalen filed an application for a “Geldausgabeautomat,” credited in a revised application of 1970 to its employee Heinz Maierhöfer. It described a magnetic tape, an “electronic brain” and an armour of hardened steel, concrete and chemical agents against burglars; neither application was ever granted.

London and Uppsala, 1967

On 27 June 1967 a crowd gathered outside the Barclays branch in Enfield, north London, where the television actor Reg Varney inserted a voucher, typed a number and received ten one-pound notes from a machine set into the wall. It had been designed by John Shepherd-Barron of the banknote printer De La Rue, who said the idea had come to him in the bath on a weekend in 1965; Barclays ordered six. The vouchers carried a weakly radioactive carbon isotope, hard to forge and easy for the machine to detect, and identified themselves with a six-digit code.

On 6 July 1967 the savings bank in Uppsala opened a “Bankomat” made by Metior of Malmö, the first on the European continent. On 31 July 1967 Westminster Bank started a dispenser by the safe and lock maker Chubb in central London, designed by the engineer James Goodfellow. It lost the race to be first, but it carried the security idea that every later machine kept: Goodfellow and a colleague had patented on 2 May 1966 the combination of a machine-readable card with a personal identification number known only to the customer (see The History of Passwords and Authentication). Shepherd-Barron and Goodfellow were both later appointed OBE. On 7 May 1968 a Bankomat in Malmö was connected to an IBM System/360, the first ATM online to a bank computer.

Tübingen, 1968

Ostertag had meanwhile found a partner in Telefunken’s computer division in Konstanz, and a prototype was shown at the Hanover fair in 1966. On 27 May 1968 the Kreissparkasse Tübingen opened West Germany’s first cash machine at its head office Am Lustnauer Tor. The customer needed a key to open its front door, a small punched identity card and a supply of punched cards, each worth a 100-mark cheque that the machine kept, paying out one note per card, up to 400 marks. In its first year 150 people used it, withdrawing about 2,000 marks a day. Further machines went to Konstanz and to Belgium, France, Italy, Luxembourg, Austria and the Netherlands, but the design did not catch on; Ostertag went bankrupt in 1974.

Cards and Networks

The machines that won used magnetic-stripe cards and a connection to the bank’s computer. When Der Spiegel counted in 1977, there were some 6,000 “bank robots” in the United States, and Tokyo had hundreds that paid out five 10,000-yen notes in seconds. Diebold, which had first sold a British dispenser in the United States, brought out its own Total Automatic Banking System 500 in 1974 and soon held 45 per cent of the American market.

In West Germany the Munich city savings bank started a new-style machine, probably from IBM, on 9 February 1977, and the Verbraucherbank leased NCR’s Model 770 later that year. A Nixdorf team under Udo Tewes developed its own machine from 1977; on 11 December 1978 the Kreissparkasse Köln installed the first at its Neumarkt branch, with a four-line display and four cash cassettes, issuing statements as well as notes. The PIN was not stored on the card. The stripe held a reference value, and the bank’s computer derived a result from the typed PIN and other personal data with an algorithm based on the Data Encryption Standard; the PIN was correct if the two matched, and the reference value alone did not reveal it (see Cryptography: The Secret Science). The machine was only open during banking hours, and demand was low until machines moved into foyers and outside walls and became available around the clock. In 1979 the banking associations and the Post Office agreed that cards could be used across institutions; even so, West Germany had only about two hundred machines in the spring of 1983. East Germany got its first in March 1987 and had 274 by August 1989. Today German machines no longer accept cards with only a magnetic stripe, and need the chip (see The Smart Card).

Diebold Nixdorf

Diebold was founded in Cincinnati in 1859 by Carl Diebold, a locksmith born in Rosenberg in the Upper Palatinate in 1824, and moved to Canton, Ohio, in 1872. Its safes made its name: 878 of them reportedly came through the Great Chicago Fire of 1871 with their contents intact. Nixdorf’s cash-machine business passed to Siemens Nixdorf in 1990 and became independent as Wincor Nixdorf in 1999 (see Heinz Nixdorf). In 2016 Diebold took it over, and the merged company, Diebold Nixdorf, keeps its German headquarters on the Heinz-Nixdorf-Ring in Paderborn.