how does the ATM recognizes different banknotes when you make a cash deposit?
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Depends on the machine itself, but for the most part: They don’t.
They come into two types of deposits, direct bills, and envelopped bills.
For the first one, it’s no different from inserting your bills in a vending machine: Scan bill, analyze image, tell it’s a $10, add $10.
For the envelopped bills, which is the vast majority of ATM deposits, they kinda trust you aren’t lying for now, and put the money in your account, which is called transit money. They label the envelope deposit you make with your bank account information and the transaction number, along with the amount you claimed. Someone, regularly, comes over, picks them up, and makes sure that those envelopes have the amount they claim to have, and when that happens, they just clear the transit money from all doubt.
It is worth mentioning that demonstrably false deposits can lead to heavy consequences, up to and including jail (though if it was an honest mistake, they often start by calling you and making sure you didn’t do a dumb). Credit insolvency also often leads to that money being “frozen” until they treat it manually, too.
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