ELI5%3A%20 How do ATMs work when they’re paired with slot machines?

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Hi, was just always curious about this:

How do ATMs work in terms of when they’re paired with slot machines?

I sometimes see ATMs near slot machines and don’t understand how they profitably make money. I get they charge like a £3 fee or something for convenience but if a person withdraws like £50 and inevitably loses it all to a slot machine that means you only make £3 profit if it’s your own money in the ATM.

I also hear about third parties lending you money or something like that but I don’t know what the companies are and I don’t really understand how that works either in terms of how it’s profitable for both parties.

Many thanks to anyone who takes time out of their day to respond. I’m kind of just looking into the slot machine business because I hear it can be very profitable if you build up a lot of them.

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5 Answers

Anonymous 0 Comments

When someone pulls $50 from an ATM, they’re not taking your $50. You are debiting $50 from their bank account, and then charging them $3 on top of that for the convenience of providing them with that $50 in cash form right away.

So say you have your ATM stocked with $10,000. 100 people come to your ATM and each withdraws $100 at a $3 fee. You will have debited $10,000 from their bank accounts, and you will also have charged them $300 in transaction fees. (There are some minor additional fees that are being ignored for the purposes of simplicity)

Anonymous 0 Comments

> I get they charge like a £3 fee or something for convenience

There you go. That’s how they make money.

> if a person withdraws like £50 and inevitably loses it all to a slot machine that means you only make £3 profit

When a person withdraws money, the ATM owner takes a fee. What the person does with their money afterwards is meaningless. The ATM owner made the same fee whether the person spends their money on a slot machine, or buys a pack of gum, or goes out for dinner, or puts the money in their wallet and never uses it. Who cares?

The reason that people would put an ATM next to a slot machine is to make it really easy for addicts to waste all of their money on a slot machine.

Anonymous 0 Comments

You’re overthinking where the money comes from and where the money goes. Imagine you had the opportunity to buy a magic box and put it next to a slot machine. People occasionally push the button on your magic box. Every time someone decides to push the button, you get £3. That adds up pretty quick. Over time, you recoup the cost of the magic box and turn a profit.

There is money involved here, obviously. But as owner of the ATM, you don’t give out your own money. Every time you hand out money, the bank that money was withdrawn from gives you the money back, instantly (electronically). That part is a wash. The same amount of money goes to you as you pay out. But you keep the £3 every time someone uses the machine. Imagine how that adds up over 1000 transaction, or 100,000.

Anonymous 0 Comments

The ATM fee is charged to your account. If you withdraw 50, pay a 3 fee, and lose it walk, the casino walks away with $53

Anonymous 0 Comments

The bank that runs/pays for the ATM isn’t really trying to make a big profit off of the ATM – the ATM isn’t its own business, it’s just something to make the bank more convenient to use. The fee is to offset the cost of supporting the ATM. Once it’s out of the ATM, the bank no longer cares where the money goes – you could spend it on groceries or lose it gambling, it’s all the same to the bank.

Unless you’re saying that the ATM is owned by the same people who own the slot machines? In which case, yeah, that would not make very much sense. Sometimes there are *change machines* near slot machines – those turn other kinds of money (bank money, paper money) into coins you can use in the machines. You keep the other money, though, plus any fees, *and* you keep the coins when you empty your slot machines, so the profit there is pretty straightforward.

Private loans work the same way banks actually make their money. You say, “I need to spend £1000 on bills/goods/gambling addictions, but I don’t have £1000 right now.” The loan company says, “We have £1000. You can borrow it, but you’ll owe us £1500 later.” The company profits because – if they get paid back – they made £500 profit on the loan. The person who took the loan doesn’t profit – they lose an extra £500! – but sometimes owing extra money later is the only option they have to avoid trouble *now.*