Wells Fargo's Future Is No Longer In the (Plastic) Cards

Wells Fargo's embrace of Near Field Communication technology is rapidly approaching at least one milestone — a customer experience that does not require a card to use an ATM or pay in a store.

The bank has just launched its own branded mobile payment system and is on a path to enable its entire ATM fleet for mobile access, with 40% of ATMs, or about 5,000 machines, converted by the end of this year and the remainder converting next year.

These advancements address different ends of the money spectrum —cash access and cashless payments — but both represent ways for banks to stay relevant in their customers' increasingly digital lives.

"ATMs have often been treated as separate from mobile payments, but it's a nice proposition to put them together," said Braden More, head of enterprise payments for Wells Fargo.

Wells Fargo rolled out its Wallet app nationally in late July, a move that's considered a bellwether to the banks that are evaluating their own mobile wallet strategy. Most banks support one or more of the third party wallets from Apple, Samsung and Google, but transaction fees and control over card placement give the bank-branded approach considerable appeal.

There are a lot of strategies at play, ranging from HSBC's approach of using third-party wallets to build a mobile userbase before beginning its own project; to JPMorgan Chase's efforts to partner with merchants ahead of the launch of its own payments app.

Wells Fargo, which built its mobile wallet app and contactless ATM technology mostly through its own IT department, can place a lot of competitive pressure on other banks by building a wallet app that's tailored to its customer base.

"The advantage of building the wallet internally is you can focus on how it works with your customer relationships. You can have a tool that's optimized and nimble," More said. "If you are working with another vendor you are working with a system that's partly based on what they have done for other large clients."

Wells Fargo also supports all three major third-party mobile wallets, and any contactless mobile wallet can access Wells ATMs, a move More said gives flexibility and also fits consumer patterns.The Federal Reserve reports nearly two thirds of mobile banking users check their account balances on the phone before making a purchase, placing ATM access in the middle between shopping and payments, More said.

"There's a utility. It's one less thing to carry around with you," said Andy Schmidt, an executive advisor at CEB. "By having cardless ATMs bundled into the mobile payments and mobile banking experience, it's much easier to bring different user experiences together."

By pushing forward with cardless ATMs, Wells Fargo is also competing in a race to bring new life to old cash machines. Bank of America recently announced a push for cardless ATMs to support mobile payments, following other banks such as BMO. And bank technology sellers such as Fiserv and NCR are also anticipating the pairing of contactless mobile payments and ATM access.

"Payments are at the core of day to day interaction, so it's a great place to connect with consumers and to bring different experiences together," More said.

By deploying its own wallet now, which is relatively early among card issuers, Wells hopes to avoid the competitive pressure it expects to come for late adopters.

"In being an early mover you are learning and building skills that can be expanded later," More said. "As the mobile payment market is forming you can interact with consumers and it's much easier to then grow that relationship."