Automated Teller Machine (ATM) Introduction - Advantages and Disadvantages

Automated Teller Machine (ATM) Introduction - Advantages and Disadvantages



In my childhood I used to think that ATM is nothing but Any Time Money. It took me 22 years to know that its Automated Teller Machine. Now a days everybody knows what an ATM is and how useful it is. But for the sake of formality we shall start with the technical definition of ATM. The Automated Teller Machine (ATM) is a machine which facilitates basic banking activities viz, withdrawal of money, depositing money and checking of ones own balances etc. ATM does most of the functions of cashier in the bank. ATM is operated by plastic card issued by the bank which is called as ATM Card, with it special features. This plastic ATM Card is replacing cheque, personal attendance of the customer, banking hours and bank holidays restriction and paper based verification.

Electronic banking i.e., computerization of banking operations in India has picked up during  the second half of 1990's. This has helped to introduce ATMs.


ATMs are established in important places by the authorized bank in cities and important towns. The Indian Railway gave a mandate to 10 leading banks to host ATMs at Railway Stations.

Banks in India realized the need for ATM-interchange deals to keep their overheads under check . Under ATM inter-change, customers of one bank are offered free access to the other bank's ATM network


What is the difference between Credit Card and ATM Card ?

The essential difference between the Credit Card and ATM Card is that the former offers credit facility as the name suggests, whereas the latter in a networked environment allows the occupant of the cardholder to be directly debited.

Advantages of ATM :

• Round the Clock Services : ATM provides banking services to its customers round the clock, 24 hours a day, 7 days a week and 365 days a year.
• Access to bank from any part of the world : Essential banking services like deposits, withdrawals transfer of funds, etc can be accessed by customers from any part of the world.
• Expansion of Services to any corner of the world : Of the Banks can expand their services to any corner of the world by providing electronic access to its customers.
• Reduction in cost of operation : This reduces human intervention and thereby reduces the cost of operations and increases profitability of banks.
• For shopping Purpose : Now a days almost every shopping mall, restaurant and other organizations are accepting credit card payments.

Disadvantages :

• Cannot be provided in rural areas : In a country like India, where banks are having large number of rural and non-computerized branches, ATM services cannot be provided.
• Presence various constraints : Even if banks make some efforts to introduce ATM services country side, various constraints like illiteracy, security concern, etc., may not permit that.
• Limitation of cash withdrawals : Again there is a limitation of cash withdrawals from ATM. For example, many banks do not permit withdrawal of more than 25,000 at a time. 
• Cash deposit facility is not safe : Similarly cash deposit facility is restricted and not safe as dropping of envelope with can in ATM is not advisable. 
• Possibility of misusing ATM card : ATM card, if misplaced, lost or stolen, may be misused. There are number of such reported incidences now a days.
• Loss of personnel touch with the Banks : Last but not the least, customers lose personal touch with their bankers.

The ATM usage in India is growing very fast, i.e., at 300 percent, as per the survey conducted in 2002 the density in relation to population stands at a mere 4 ATMs per million population, now its triplicated.   Indian Banking Industry has developed during this 11 years of span and it also has introduced so many new technologies like Talking ATMs and White Labeled ATMs.