The 50-year Banking Revolution

50 years ago, in June 1967 while The Beatles’ Sgt. Pepper album was revolutionising the music industry, a quieter revolution began in the high street when the world’s first Automated Teller Machine (ATM) dispensing cash was unveiled at the Enfield branch of Barclays Bank.

TV personality Reg Varney became the first person to withdraw cash. The convoluted process which resulted in the machine swallowing a cheque containing radioactive carbon-14 and then dispensing a tenner, had started with a trip into the bank beforehand. Reg entered a six-digit PIN which the cash machine matched against data in the carbon-14.
There is much debate over who the actual inventor of the cash machine was, but the idea of a personal identification number (PIN) was thought up by the designer, John Shepherd-Barron, and refined by his wife Caroline who changed his six-digit number to four as it was easier to remember.
However, I would argue that the anniversary to really celebrate didn’t happen until five years later, when a technological transformation profoundly changed our interaction with cash and credit.
The first ATM as we know it today was finally introduced in 1972 at the request of Lloyds Bank, after IBM engineer Forrest Parry, aided by his wife and her iron, attached a strip of magnetic tape to a card allowing a small, portable method of data storage, customers could access their money at any time without talking to a cashier. It is that move from paper to plastic which transformed the way we interact with banks.
For many people, the ATM was their first experience with a computer and before mobile phones, they were probably the single most influential piece of technology for the public. I wonder how they influenced the designers of the smart phones and computers of the 1990s and 2000s? I was told a story about an incident in the late seventies when a woman who had never used an ATM – or any other computer – inserted her card for the first time. She read on the screen: “Enter the amount to withdraw – the sum must be in multiples of five.” Wanting to take out £40, but not entirely sure how to proceed, she cautiously entered £55,555,555 and wondered why her card was swallowed.
The modern ATM experience is clear and well-tested, and every point of the interaction is carefully considered. For example, in the UK, the ATM returns your card before dispensing the money. Tests showed that, as soon as people got their cash, they would consider the transaction complete and walk off forgetting their card.
By the time TV personality Cheryl Baker opened the first drive-thru cash machine in 1998 (at Hatton Cross near Heathrow) the card had become ubiquitous and its uses manifold. Today, an ATM is installed somewhere in the world every three minutes. They are helicoptered in to refugee camps as part of disaster responses, and they are found on the tops of mountains and in Antarctica. Yet it’s only because its users carry cards that this is possible.
Jersey was already welcoming a number of international banking groups and finance houses from as far afield as Canada and South Africa during the sixties. By 1967, Jersey was already an established finance centre, although nowhere near the scale of today. Bank deposits, other than those from the UK clearing banks, stood at £71.3 million. I wonder if anyone in the sixties would have been far sighted enough to forecast that 50 years later, the level of deposits attracted to Jersey would be in the billions, rather than the millions.
The precise date and location of Jersey’s first ATM has been lost, but I like to think that the local equivalent of Reg or Cheryl was on hand to withdraw the first cash.
The ATM is an illustration of the steady evolution in banking services. Cards are being replaced by finger prints and mobile phones as means of customer identification, and whilst our cards morph with our phones as some global banks are now offering Apple Pay and Android Pay solutions for ATMs. These machines fundamentally remain the method of obtaining that oldest of means of transaction – cash.
Innovation aside, global banking has been shrinking since the 2008 crisis as financial organisations re-structure their operations, seek to reduce costs and cope with increasing regulation, while finding ways to remain profitable. The future of banking in Jersey will depend on our ability to react and adapt to change. The ATM’s influence has been profound not because of the machine which was installed 50 years ago, but because of its marriage with the card which appeared 45 years ago. Similarly, future changes may be the result of new technologies amalgamating and changing one another. 
A new type of ATM is also emerging for bitcoin, the digital currency which can be bought and sold electronically. Jersey has one such machine in place already. 50 years on, does it perhaps serve as a symbol of an ongoing banking revolution between digital and financial services and the opportunities which we are only just beginning to explore?

 

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