The ATM communicates through a host processor. This is where all the various ATM networks become available to the ATM user, such as: Visa, MasterCard, Cirrus, American Express, Plus, NYCE, Pulse, Maetro, Star, Discover, AFFN, and Quest.

The host processor can support either leased line or dial-up ATMs. Leased line machines connect directly to the host processor through a four-wire, point-to point, dedicated telephone line. Dial-up ATMs connect to the host processor through a normal phone line using a modem and a toll free number.

Dial-up ATMs are preferred for retail merchant locations where cost is a greater factor. The initial cost for a dial-up ATM is less than half that for a leased line ATM. Dial-up ATMs with touch tone capability is recommended for merchants. The monthly costs for dial-up ATMs are much cheaper than a leased line.

An ATM has two input devices. One is a card reader and the other is a keypad. The card reader captures the account information that is stored on the magnetic strip of the ATM/debit or credit card. The processor uses this information to route transaction information to the cardholder’s bank. The customer enters the information on the keypad and uses a personal identification number (PIN) for verification by the bank.

Dial-up ATMs commonly use a monochrome or Color LCD display screen to prompt the customer through each step of the transaction. There is a receipt printer that provides the cardholder with a receipt of the transaction, and a cash dispensing mechanism that dispenses the money to the customer. The cash dispensing mechanism has an electric eye that counts each bill as it exits the dispenser mechanism. The bill count and all information pertaining to a transaction are recorded in a journal in the ATM.

The ATM will forward the transaction information to the host processor. This information is then forwarded to the bank or institution that issued the card. If the cardholder is requesting cash, the host processor initiates an electronic funds transfer to take place from the customer’s checking account to the host processor’s account. The processor will then send an approval code to the ATM authorizing the machine to dispense the cash. The processor then transfers the cardholder’s funds into the merchant’s bank account, usually the next business day. The merchant is reimbursed for all funds dispensed by the ATM.