A man and his machine

A man and his machine
Tags: Bank / Credit Union, Other
April 10, 2005

John Shepherd-Barron is credited with the invention of the ATM. His vision for a 24/7 cash dispenser was conceived one night in the bath back in the mid-1960s. At the time, he was managing director of De La Rue Instruments in London.

"I remember being infuriated that I could not always get access to my money when I needed it, especially over weekends when banks were closed," Shepherd-Barron said. "I started thinking of a way of getting money around the clock."

The invention of the ATM brought together different ideas, experiences and technologies. For example, Shepherd-Barron's armored trucking division was then responsible for moving most of the cash in the UK. He had earlier brought over the idea of armored trucking from the United States. But he had started his career with De La Rue on the currency printing side of the business.

"I had been heavily involved in printing money, and then moving money," he said. "The next step that seemed to follow was dispensing money automatically, to complete the process."

"The big break came when I asked the general manager of Barclays Bank for 90 seconds of his time to share the new idea I had. His reply came after 85 seconds: 'If you can make this device you are speaking about, I will buy it right now.'"

The first machines

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Soon afterward, a deal was signed with the bank to develop six ATMs (then called DACS for De La Rue Automatic Cash System) for trial, followed by 50 more machines. It took one year to develop the machine and make it work.

"Devising the coding was the complicated part," he said. "We wanted the end product to deliver batches of 10 £1 notes - enough cash for a weekend."

The world's first ATM, or DACS, was installed outside a north London branch of Barclays Bank in 1967. Shepherd-Barron's invention had become a reality.

ATMs around the world

Shepherd-Barron took the concept to both the U.S. and Japan, destined to become the world's biggest ATM markets. At a 1967 conference of 2,000 U.S. bankers in Miami, Shepherd-Barron was given 12 minutes to talk about the new self-service banking device.

Few of the 2,000 delegates took brochures away with them. But soon after, he got his first U.S. order, from First Pennsylvania Bank for six machines to be installed in Philadelphia.

"Then things began to snowball. The check token originally used to initiate transactions switched to the card," he said.

"Later, I took the idea to Japan and they told me 'Thank you very much, but we are going to develop our own machines in Japan. However, we will pay royalties for your idea for seven years.' Typical of the Japanese, they honored this commitment and paid the royalties religiously," he said.

Never patented

One of the many twists in the ATM story is that the device has never been patented. This allowed rival machines to enter the market quickly, which resulted in a rapid rate of growth for the industry. Shepherd-Barron explained why he never had his invention patented.

"We asked our legal team about that. They advised us that applying for a patent would have involved disclosing the coding system, which in turn would have enabled criminals to work the code out," he said. "So for security reasons, we never proceeded with the patent in order to protect the coding process."

Did the inventor of the machine believe the industry would become as big as it has? "Yes, I thought it would. I knew it would change banking."

Today, 79-year-old Shepherd-Barron lives in a remote spot in the far north of Scotland, enjoying his hobbies of fishing and shooting. In December 2004, he was appointed an Officer of the Order of the British Empire in honor of his contribution to the banking industry.