While skimmers use the motion of inserting and removing the card to steal the information on the magnetic stripe, ActivEdge uses a moving head inside the machine to access that data. Diebold says the reader is easy to use and far better than anything on the market right now.
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Al Pascual, a fraud and security analyst at Javelin Strategy & Research, said he thinks the new reader would deter most criminals.
"By changing the orientation that cards are fed into an ATM, this solution will render current external skimmers useless," Pascual said. "These criminals would then likely turn to an easier target rather than attempt to engineer a workaround."
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Diebold is talking with several major banks about deploying the technology on their existing machines.
Financial institutions worldwide lose more than $2 billion each year to ATM skimming fraud, according to the ATM Industry Association.
—By CNBC contributor Herb Weisbaum. Follow him on Facebook and Twitter
@TheConsumerman or visit The ConsumerMan website.