Book Review: Cash and Dash: How ATMs and Computers Changed Banking — by Bernardo Batiz Lazo

A qualitative and quantitative study of a major fintech innovation that set the standard for online banking, online authorization and solved a major problem for banks expanding their operations

Disclosure: I am lucky to know Bernardo and even contribute to one of his numerous projects, researching the modern applications of payments and developments of modern payment technologies and am still in awe of the prowess of his pushing several research projects — something that allowed him to illuminate the audience with a major research about the advent of ATM.

As all innovations, ATM did not happen on a whim or because of some crazy idea getting out of control in a research lab: unlike experiments with personal computers, the invention of mouse, the desire to automate government decision making in USSR and Argentina, ATM happened because of a concerted action of technology providers helping banks to grasp with a number of problems:

  • The need to automate working with checks that dominated the commercial and social exchange in the aftermath of the WW2;
  • Control back-office costs that were spiraling out of control because of the economic growth, coinciding with demands by socially conscious and outright socialist governments threatening to nationalize inefficient businesses unless they address the growing need for their services.

Bank consumers were becoming increasingly mobile and could not longer rely on their home branch for their services and had to have access to means of payment wherever they went.

“It has also seldom been acknowledged that the advent of automatically dispensed banknotes coincided with the growth of stand-alone contraptions to automatically sell sweets, petrol, access to public transport, and even dry cleaning.”

With banks like Barclays trying to reign in additional workload through applying centralized processing of teller operations — institutions tried to control spiraling costs of manning branches:

The combination of the First World War, the depression of the inter-war years, and high economic growth in the decades that followed the end of the Second World War, resulted in inadequate levels of male staff at the clearing banks. Female clerical workers — who were paid lower wages — made up some of the shortfall. As the peacetime economic recovery took hold, women found it more appealing to be employed in manufacturing because of the highly repetitive and demanding tasks at bank branches. This led to an increasingly high turnover rate of women — that banks wanted to solve through technology.

Some new forms of dispensing cash were in part motivated by auxiliary innovation: the popularity of a personal car aided the development of drive-through dispensation of cash by Diebold, as it also tried to integrate CCTV to communicate with the users.

The objective to move from using one-time irradiated slips for standard denomination of cash given to a case where user would select the amount and continue using the token repeatedly, required proper mechanism solved by card, automation of transactions, enablement of secure authorization sequence — and PIN / PAN algorythm for cards. In part it aided the development of merchant POS networks and contributed to internationalisartion of this standard under the banner of payment schemes.

The combination of developments in the USA and Europe help to explain the genesis of a global ATM network built around Visa and MasterCard. A first important move took place in 1981, when Visa International announced plans to invest $15 — 20 million in upgrading its international data-transmission system to allow member banks to connect their ATMs across the world.28 MasterCard, its main rival, thought the idea of interconnecting across borders ‘too grandiose…[since an] American tourist [for example], would be unable to understand an ATM in Japan.