With sales of mobile devices outpacing their distribution of debit and credit cards, banks in some countries are looking at new ways consumers may access cash at ATMs.
Efforts are under way to tie more than traditional magnetic stripe cards to ATM access by using technology that enables consumers to withdraw funds with either a mobile phone or a contactless card.
Such methods may help to reduce fraud, enable consumers to make person-to-person payments, alleviate the need to carry cards and bring banking to underserved areas where many consumers have a mobile phone but not a bank account.
An increase in mobile-based payments is one major factor prompting the changes in how consumers may access ATMs, but rising availability of contactless cards also is a factor, especially in regions such as Europe where many consumers have and use contactless bankcards for small purchases and public transit.
It remains to be seen whether the trend will spread to the United States, Todd Ablowitz, president of Centennial, Colo.-based Double Diamond Group LLC, tells PaymentsSource. “It is possible the trend will come to the U.S., but it will take some time,” Ablowitz says, noting the U.S. must have a bigger rollout of mobile payments to increase the chances.
Moreover, many U.S. consumers still identify with the convenience of using mag-stripe cards to withdraw money at ATMs anywhere in the country, Ablowitz adds.
But elsewhere, such countries as South Africa, India and Spain are leading the way with contactless and cardless ATMs to minimize risk and to reach out to unbanked consumers by enabling them to use their mobile phones to access cash and send funds to family or friends.
Cardholders in India soon will be able to withdraw cash from ATMs without using a bankcard through a contactless service from the Indian operation of Roamware Inc., a San Francisco-based financial services provider (
Once approved, Roamware would equip the ATMs with a software upgrade to enable noncardholders to facilitate withdrawals, Avnish Chauhan Roamware executive vice president, tells PaymentsSource.
Consumers with any type of mobile phone would be able to withdraw cash from participating ATMs as long as they have a bank account, he adds. A Roamware spokesperson says deployers can use the company’s software with any ATM.
With its service, once Roamware authorizes the withdrawal request, the bank processes the transaction using the Roamware platform, which contacts the bank’s account-management system and validates the withdrawal amount and holds the funds for the consumer to withdraw, Chauhan says. Roamware then generates a unique code, which it sends to the consumer via text message.
The code is valid for a short amount of time, usually up to one hour, Chauhan notes. Consumers would withdraw the funds by entering the code and their mobile-phone number into the ATM. If Roamware determines both are accurate, it authorizes the transaction to allow the withdrawal to occur.
Consumers sending funds to unbanked individuals enter the recipient’s mobile-phone number when setting up the withdrawal. The recipient then continues the process at the ATM by entering his mobile-phone number and the code he receives via text message, Chauhan says.
“Cardless ATMs are a great way to embrace the larger community of unbanked and underbanked consumers,” Chauhan says. Many consumers, such as children, minors and short-term laborers, would be able to receive cash from family or friends who have bank accounts, he adds.
“Less than a fifth of the global population has access to traditional structured banking services, while mobile services are available to over 4 billion subscribers,” Chauhan says. “Our technology is extending the reach of financial services to unbanked consumers through the convergence of mobility and finance.”
Small businesses such as car-fleet owners also may use cardless ATMs to provide money to drivers who may require cash while on the road, Chauhan says.
Cardless withdrawals should cost the same as regular swiped transactions. However, a bank could decide to charge the cardholder an extra fee for a cardless withdrawal, Chauhan says.
Johannesburg, South Africa-based First National Bank also has eliminated the need for consumers to use cards to initiate ATM withdrawals.
The bank in March began enabling consumers to make withdrawals from ATMs deployed in Johannesburg using their mobile phones. The bank did not note in its announcement how many machines its deploys that support the service.
A representative from the institution was unable to comment by PaymentsSource deadline.
Consumers log in to the bank’s Cellphone Banking service and select the banking option. They then chose the specific account they want to access, and the bank sends them a text message once the transaction is completed online.
Similar to Roamware’s service, the text message includes a temporary single-use PIN for the ATM transaction that must be used within 30 minutes for security purposes.
While both Roamware and First National Bank are providing only mobile-based ATM withdrawals, some banks also are offering a contactless option.
Spain-based bank Caja de Ahorros y Pensiones de Barcelona, or “La Caixa,” which operates the largest cash-machine network in Spain, in early April installed the first contactless ATMs, leveraging technology from Fujitsu Global (
La Caixa deployed the machines in Barcelona, Sitges and Palma. The technology integrated into the machines enables consumers to either withdraw funds using their contactless EMV chip-and-PIN bankcard or a Near Field Communication-enabled phone.
Consumers place their contactless card or mobile phone near the reader on the ATM and enter their PIN to complete the withdrawal for no additional fee. The ATMs feature twin screens, one for transactions and the other for operational/commercial bank account support.
The entire cash-withdrawal process takes about 26 seconds compared with 38 seconds for withdrawals made by inserting a card, a LaCaixa spokesperson tells PaymentsSource.
The ATMs also are secure because contactless cards are protected by EMV security protocols and a PIN only cardholders know, the spokesperson says. Moreover, “fraudsters would have to intercept the transmission in the two to three centimeters between the card and the contactless reader,” she adds.
As the mobile-payments market continues to evolve, financial institutions should consider phones for ATM access because so many consumers have mobile phones but may not have a bank account or a bankcard, Ablowitz says, explaining why ATM makers have identified the ubiquity of phones and the potential business case to support noncard access to their machines.
This is especially true outside the U.S., where conversions to chip cards already are necessitating the need to upgrade cash dispensers, he says.
Overall, however, cardless and contactless ATM deployments will depend on the demands within a country for alternative means to access the machines, Ablowitz notes. “The more popular mobile payments become, the greater need there is for ATMs enabling consumers to withdraw funds using mobile phones,” he says.
Moreover, contactless and cardless ATMs enhance the customer experience by providing improvements in security and functionality, Ablowitz says.
Indeed, the improved security element is especially important because “ATM debit card skimming is currently on the rise,” says Julie Conroy McNelley, a senior risk and fraud analyst at Boston-based Aite Group LLC.
In a February Aite report regarding fraud management, financial institutions ranked card skimming as the third-leading cause of fraud loss after malicious software and counterfeit debit and credit cards.
Card skimming also is on the rise because it spans across multiple channels such as ATMs or in-store payments, according to Aite. Cardless and contactless ATMs basically eliminate and minimize the option to skim, so the risk for card fraud decreases, McNelley says.
But while the ATMs may be relatively secure and enable unbanked consumers to withdraw money, many banks may need to find an “appropriate incentive to encourage consumers to change their behaviors,” McNelley says. Consumers are trained to use their cards at ATMs, and adding extra steps such as going online and then going to the machine may deter them, she notes.
Subsequently, while banks in more countries are beginning to roll out contactless and cardless ATM services, “it may not take off like wildfire until banks can figure out the best way to present what is in it for consumers,” McNelley contends.
As the use and popularity of mobile payments and contactless cards continue to increase, more banks throughout the world will be evaluating whether their ATMs can accommodate new–and popular–technologies for cash access.
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