In the United States, we are losing our fondness for cash. As in many other countries, cards and other types of electronic payments now dominate everyday commerce. To some, this is a loss. Cash represented a certain freedom from intermediation, a comforting simplicity, that you just don't get from Visa. It's funny to consider, then, how cash is in fact quite amenable to automation. Even Benjamin Franklin's face on a piece of paper can feel like a mere proxy for a database transaction. How different from "e-cash" is cash itself, when it starts and ends its lifecycle through automation?
Increasing automation of cash reflects the changing nature of banking: decades ago, a consumer might have interacted with banking primarily through a "passbook" savings account, where transactions were so infrequent that the bank recorded them directly in the patron's copy of the passbook. Over the years, nationwide travel and nationwide communications led to the ubiquitous use of inter-bank money transfers, mostly in the form of the check. The accounts that checks typically drew on—checking accounts—were made for convenience and ease of access. You might deposit your entire paycheck into an account, it might even be sent there automatically... and then when you needed a little walking around money, you would withdraw cash by the assistance of a teller. By the time I was a banked consumer, even the teller was mostly gone. Today, we get our cash from machines so that it can be deposited into other machines.
Cash handling is fraught with peril. Bills are fairly small and easy to hide, and yet quite valuable. Automation in the banking world first focused on solving this problem, of reliable and secure cash handling within the bank branch. The primary measure against theft by insiders was that the theft would be discovered, as a result of the careful bookkeeping that typifies banks. But, well, that bookkeeping was surprisingly labor-intensive in even the bank of the 1950s.
Histories of the ATM usually focus on just that: the ATM. It's an interesting story, but one that I haven't been particularly inclined to cover due to the lack of a compelling angle. Let's try IBM. IBM is such an important, famous player in business automation that it forms something of a synecdoche for the larger industry. Even so, in the world of bank cash handling, IBM's efforts ultimately failed... a surprising outcome, given their dominance in the machines that actually did the accounting.
In this article, we'll examine the history of ATMs—by IBM. IBM was just one of the players in the ATM industry and, by its maturity, not even one of the more important ones. But the company has a legacy of banking products that put the ATM in a more interesting context, and despite lackluster adoption of later IBM models, their efforts were still influential enough that later ATMs inherited some of IBM's signature design concepts. I mean that more literally than you might think. But first, we have to understand where ATMs came from. We'll start with branch banking.
When you open a bank account, you typically do so at a "branch," one of many physical locations that a national bank maintains. Let us imagine that you are opening an account at your local branch of a major bank sometime around 1930; whether before or after that year's bank run is up to you. Regardless of the turbulent economic times, the branch became responsible for tracking the balance of your account. When you deposit money, a teller writes up a slip. When you come back and withdraw money, a different teller writes up a different slip. At the end of each business day, all of these slips (which basically constitute a journal in accounting terminology) have to be rounded up by the back office and posted to the ledger for your account, which was naturally kept as a card in a big binder.
A perfectly practicable 1930s technology, but you can already see the downsides. Imagine that you appear at a different branch to withdraw money from your account. Fortunately this was not very common at the time, and you would be more likely to use other means of moving money in most scenarios. Still, the bank tries to accommodate. The branch at which you have appeared can dispense cash, write a slip, and then send it to the correct branch for posting... but they also need to post it to their own ledger that tracks transactions for foreign accounts, since they need to be able to reconcile where their cash went. And that ignores the whole issue of who you are, whether or not you even have an account at another branch, and whether or not you have enough money to cover the withdrawal. Those are problems that, mercifully, could mostly be sorted out with a phone call to your home branch.
Bank branches, being branches, do not exist in isolation. The bank also has a headquarters, which tracks the finances of its various branches—both to know the bank's overall financial posture (critical considering how banks fail), and to provide controls against insider theft. Yes, that means that each of the branch banks had to produce various reports and ledger copies and then send them by courier to the bank headquarters, where an army of clerks in yet another back office did yet another round of arithmetic to produce the bank's overall ledgers.
As the United States entered World War II, an expanding economy, rapid industrial buildup, and a huge increase in national mobility (brought on by things like the railroads and highways) caused all of these tasks to occur on larger and larger scales. Major banks expanded into a tiered system, in which branches reported their transactions to "regional centers" for reconciliation and further reporting up to headquarters. The largest banks turned to unit record equipment or "business machines," arguably the first form of business computing: punched card machines that did not evaluate programs, but sorted and summed.
Simple punched card equipment gave way to advanced punched card equipment, innovations like the "posting machine." These did exactly what they promised: given a stack of punched cards encoding transactions, they produced a ledger with accurately computed sums. Specialized posting machines were made for industries ranging from hospitality (posting room service and dining charges to room folios) to every part of finance, and might be built custom to the business process of a large customer.
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