Banking News

How an ATM works?


The cards used in ATM are plastic cards with magnetic strip or a card embedded with small chip.  The commercial banks in India, issue ATM cards viz. Debit Cards, Credit Cards, and Pre-paid cards, to their customers on request. When a card holder visits the ATM kiosk, it prompts the cardholder   to authenticate themselves, by inserting the ATM card on a slot provided in the machine. A host computer is connected or communicated via network to ATMs. On insertion of ATM card in the ATM, the host computer supplies electronic data of card users’ account and the crypto-processor inside the ATM encodes magnetic stripe or chip of the ATM card.  The ATM validates the card for operation on scrutiny of card user’s data and security features of the card. After the validation process, the cardholder will be asked to enter numeric password which is commonly known as PIN (Personal Identification Number). If the PIN is correctly entered, the ATM permits operation to user viz. to verify the balance in the account, deposit cash or withdraw cash, request for cheque book or request for statement of account etc.

Latest developments in ATMs

Biometric system:

A Swedish startup ‘Quixter’ has produced a device that allows the card holder to swipe his hand instead of using credit card for payments. The biometric system scans the veins in hands to identify a person and approves payments in seconds.     Just like fingerprints, no two humans have the same pattern of veins in their hands; therefore committing fraud under biometric card system is impossible. The card holder has to enter the last four digits of his/her phone number and then to hold his/her hand above the sensor. The transaction takes less than 5 seconds. According to news agencies, people need to first register their social security number and phone number. A new user then has their palm scanned thrice and receives an activation link via the Quixter website. After filling out some more information that links their biometric profile to payment methods, they’re good to go.

Withdrawal with the aid of mobile phones:

In Great Briton, money can be withdrawn from ATM, with the aid of their mobile phones. The Royal Bank of Scotland recently introduced a new system, which facilitates their customers to withdraw cash up to GBP 100 from ATM, using their mobile phones.

Latest news:

Time extended for migration of existing magnetic stripe cards to EMV Chip and Pin based cards

As a security and risk mitigation measure RBI vide its circular dated May 07, 2015 directed that with effect from September 01, 2015 all debit and credit, domestic and international cards issued by the banks shall be EMV Chip and PIN based cards. However in view of various banks expressing difficulties in meeting the above timeline, the Central Bank has now extended the time limit for EMV Chip and PIN cards as under

Cards issued for PMJDY / BSBDA) and other Government schemes      : September 30, 2016

All new cards other than cards mentioned above                                              : January 31, 2016

Banks were asked to take necessary steps with regard to migration of existing magnetic strip cards to EMV Chip and PIN cards so as to ensure that all magnetic strip cards are replaced by December 31, 2018 irrespective of validity period of the cards.

RBI further advised that during the extended period, all cards issued for international usage will necessary be EMV Chip and PIN cards. If they receive any specific request for issuance of domestic cards with EMV Chip and PIN cards, the banks should promptly comply with the request.

Related articles:  i). ATMs: What does White Label, Brown Label, and On-line, Off-line ATM mean?  ii) White Label ATMs and International Card transactions   (Category: Modern Banking)

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