Editor's note: The following article, penned by ATM Industry Association Chief Executive Mike Lee, in late 2002, relates Lee's discussion with John Shepherd-Barron, the Scot credited with the invention of the ATM. As the 79-year-old Shepherd-Barron just received an Officer of the Order of the British Empire (OBE) award in honor of his contribution, it seemed like an opportune time to reprint his reminisces, as told to Lee.
I have just put the telephone down after one of the most privileged conversations I have ever had. I have just spoken to John Shepherd-Barron, the inventor of the ATM.
It is fitting that the interview was telephonic, because this is a man whose name deserves to stand alongside that of Alexander Graham Bell. But the inventor of the cash dispenser is virtually unknown. Nonetheless, his invention has changed not only the face of banking but also the way we conduct our daily lives. It is a technology that has altered our lifestyles more significantly than most other inventions.
I believe he deserves to be classified as a technological visionary, due to the way the ATM is shaping the evolution of a 24-hour, self-service society more than perhaps any other technology.
He comes across as dynamic yet friendly, incisive yet good-natured, saying more than once when recounting his story of the quiet revolution his invention brought about: "It was all good fun really."
The installation of the first ATM, at a Barclays branch in 1967."
Today, Shepherd-Barron lives in a remote spot in the far north of Scotland, enjoying his hobbies of fishing and shooting, far removed from the 24/7 self-service consumer society he helped create.
His achievement in bringing about the creation of the ATM industry is no less than visionary.
Today there are an estimated 1.3 million machines worldwide with a new one being installed somewhere in the world every seven minutes or so. So while I was speaking to him, three more machines were installed in the world. Furthermore, Retail Banking Research predicts a 35 percent increase in the global installed base between 2001 and 2007.
An idea born in the bath
Shepherd-Barron's vision for a 24/7 cash dispenser was conceived one night in the bath back in the mid 1960s when the Beatles were at the peak of their fame, human beings had not yet walked on the moon, and PCs and cell phones did not exist. At the time, he was managing director of De La Rue Instruments. He knew that if the business unit he was managing did not create a new product soon, it would fail. "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," he told me. "I started thinking of a way of getting money around the clock."
Shepherd-Barron's method of thinking was to conceive the end product first, in this case a machine that could deliver money 24/7. Then he worked backwards from that concept through all the "hows" of development.
"Think out a new idea, working out what you are trying to achieve, including the specs of the product, and then work backwards -- never the other way around," he advised.
The invention of the ATM brought different ideas, different experiences and different technologies together. 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."
Another element that went into the creative mix that led to the ATM's creation was the Carbon 14 system developed for using secure tokens at Shell petrol stations by big commercial companies in exchange for filling their tanks with fuel. The Carbon 14 technology provided the security for the token.
"I thought, if a secure token can be used in exchange for petrol, why can't we use a secure check, impregnated with carbon 14, in exchange for cash at a suite of machines out in the High Street?" Shepherd-Barron said.
"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
Soon afterwards, a deal was signed with the bank to develop six ATMs (called then a DACS -- 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.
"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.'" John Shepherd-Barron inventor of the ATM
"Devising the coding was the complicated part," he commented on the initial development phase. "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. The next cash-dispensing machine was produced by Chubb and deployed by Westminster Bank the very next week!
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, shortly after the first ATMs had been installed in England, Shepherd-Barron was given 12 minutes to talk about the new self-service banking device.
At first, Shepherd-Barron said, it was received as "a wacky European idea that wouldn't sell in America." 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.' Typically of the Japanese, they honored this commitment and paid the royalties religiously. So our own machines were never sold in Japan," he said.
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 shed light on 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."
Ironically enough, though, Shepherd-Barron thought cash would eventually be replaced by EFT/POS, as cash distribution is expensive. Fortunately for his invention, cash has refused to go away and today is stronger than ever in most countries of the world.