Cardless ATMs – The Wave of the Future?
July 21, 2017 - Exploring how consumers can access their accounts at ATMs without a physical card
Given the growth of mobile in banking and payments, it is no surprise that the mobile phone is finding its way into the ATM space as well. In fact, several large banks (e.g. Chase, Bank of America, and Wells Fargo) have either implemented or are piloting mobile access at their ATMs. In essence, these banks are providing customers with the ability to access their accounts at ATMs without a physical card. Additionally, some banks are going further and using biometrics to identify and authenticate customers and provide them with ATM access without the need for a phone or a card.
Cardless ATM technology can be broadly divided into the following areas:
- Near field communications (NFC)
- One-time Verification Code
- QR Code
NFC Based ATMs
NFC provides highly interoperable and widely adaptable cross-bank ATM functionality offering both customer convenience and security. However, NFC implementation at ATMs requires large investments in hardware, software, and certification – NFC readers and payment application software.
In May 2016 at the Google IO conference, Bank of America unveiled its first cardless ATM whereby customers could use their NFC-enabled smart phones and mobile wallets to access an ATM / enter their PIN and perform all transactions that they would normally do with a card. The customer experience is similar to an NFC mobile payment transaction at a merchant.
Verification Code and QR Code Based ATMs
One-time use Verification Codes and QR codes offer a faster and more economical time to market given that the ATM owner / processor needs to make only a software upgrade. From a customer perspective the process is fairly straight forward and secure. The customer opens up the mobile banking app on the smart phone, selects the account, and enters the amount of cash to withdraw. In the case of the one-time use code the system generates a code that is entered at the ATM along with the PIN to withdraw cash and/or conduct other banking functions. In the case of QR code based functionality, the ATM generates the QR code, which the customer scans with his / her mobile app (mobile phone) to gain access, withdraw cash, conduct banking activities, etc.
In March 2015, BMO Harris announced the deployment of "Mobile Cash", which relies on QR code technology. In March 2017, Wells Fargo enabled their entire ATM fleet of 13,000 terminals for cardless access using a one-time code and PIN.
Biometric identification and authentication does away with a card and phone and uses a customer’s unique physical attributes (typically a fingerprint, palm print, iris, or face) to provide access to their account at an ATM (or even a branch.) Under a biometric implementation, customers would enroll / store their fingerprint or an iris scan in the bank’s secure database and link their account(s) to those digital credentials. In general, biometrics offer a high degree of customer convenience and security but have their own shortcomings and the technology is far from perfect – expensive implementation, privacy issues, database security, etc.
- Biometrics at the ATM started to gain attention in June 2012, when Itautec, a Brazilian electronics company announced the deployment of multispectral fingerprint readers in ATMs.
- In December 2016, DCB bank in Madhya Pradesh, India launched its first ‘Cardless and PIN less’ ATM. Customers are required to enter their Aadhaar card number (Universal ID) and fingerprint linked to the Aadhaar card at the ATMs for the purpose of authentication.
- In late 2016, Qatar National Bank in Doha, Qatar deployed Iris scan based ATMs.
- Recently in June 2017, Diebold and Samsung have partnered to demonstrate a mobile-based biometric authentication ATM, which uses Samsung SDS Nexsign. Nexsign is a FIDO-compliant biometric authentication platform to pair facial recognition technology with the ATM to complete a secure cardless cash withdrawal within seconds.
Users can use their Samsung Galaxy S8 mobile banking app prior to arrival at the ATM. Once the customer taps device against the NFC reader on the ATM, confirms the transaction and receives a prompt to complete authentication via facial recognition on the mobile device.
Benefits of Cardless ATMs
- Enhanced Security: According to a FICO study in 2015-16, about 60% of card present fraud (mainly skimming) was reported at ATM’s most of which occurred at non-bank-owned (offsite?) ATMs. Cardless ATM’s promise to dramatically reduce the incidence of skimming related fraud.
- Convenient P2P Cash Transfers: One-time verification code based cardless ATM’s have interesting applications in P2P transfers where an account owner can delegate ATM access to a trusted partner by sending the one-time code and PIN. . (Parent sending cash to student at college.)
- Superior Cardholder Experience: Cardless ATMs are more convenient to access and align well with the ongoing transition to a mobile banking / payments model. (No need to carry a wallet and card).
Cardless ATMs – future is here!
We have come a long way in the world of payments from embossed cards to mobile wallets in a race to provide a hassle-free cardholder experience and increased security. At present less than 10% of ATMs are providing cardless services but with these implementations belonging to some leading ATM owners, it could definitely be a motivation for other bank/non-bank ATM owners as well.
This year in June 2017, FIS partnered with Cardtronics, which is a leading ATM owner in the U.S. to offer its customers with cardless services using FIS mobile banking app. FIS has been testing QR code scan based cardless services since 2016 but this announcement would definitely act as a push to the ATM industry for such implementations as Cardtronics owns more than 30,000 ATMs in the U.S.
Clearly, there will be several more user-friendly and secure Cardless ATM implementation approaches that will find their way. We believe that Cardless ATMs have a great future, and the future is here.