It wasn’t that long ago when you had to go into the bank and stand in line if you wanted to do a transaction. ATM cards were a godsend, they made it easy to get cash and convenient, 24/7 access to your money. Soon, they could be unnecessary.
Earlier this year Wintrust Financial, a holding company for 15 banks, became the first U.S. financial institution to make available technology that permits people to authenticate ATM transactions with their smartphone, instead of a plastic card. The technology, powered by FIS, a banking and payment company, has also been rolled out by BMO Harris.
"The mobile phone is rapidly becoming the authentication device for more and more financial transactions, especially at retail. This ranges from Apple Pay, Visa’s new Mobile Location Confirmation, and now the use of NFC in proximity to the ATM machine," says Mike Buhrmann, CEO of Finsphere, the company whose patented technology is powering the recently introduced Mobile Location Confirmation for Visa and their customer banks and cardholders.
For sure mobile payments are a hot topic in the banking industry. "Smartphones almost certainly will replace cards of all sorts. They have already subsumed almost every other item in our lives from flashlight to compasses," points out Dan Meader, CEO of Allowance.Manager.com. "ATMs are going the way of the dodo."
But others are less sure about how fast change will come. Financial expert Harrine Freeman of H.E. Freeman Enterprises, is doubtful that cardless ATMs will be the standard everywhere any time soon. "There are several technology advances that have to be implemented to make this possible."
Then there’s the cost of overhauling thousands of ATMs to mobile-friendly technology. "It’s no small undertaking. To think ATMs will rapidly migrate from a plastic-based to a mobile-based experience for customers is premature," says Trevor Knott, vice president of services at Saylent, a provider of data analytics software and services to financial institutions.
However, the technology does have advantages, speed being one of them. "Think about it, you don’t have to dip and go through and wait and tap your arm while the device recognizes your card and then you type in your pin, etc. Depending on the setup you literally just scan or tap in and you’re authenticated, up and running and your cash is dispensed," says Mark Ranta, senior solutions consultant digital channels for ACI Worldwide.
"One bank I talked to in Los Angeles was discussing how the people who were most impressed with this technology were women," he says.
David Bakke, a financial columnist for Moneycrashers.com believes one of the chief advantages of a cardless ATM is security. "Criminals would no longer be able to steal your customer information by installing skimming devices on ATMs, plus they would need both your mobile device and the log in information to the bank’s mobile app to access your money."
But that’s not to say there are no downsides. "As banking activity of all sorts has gone mobile, hackers have followed and currently have the upper hand," says Vince Arneja, vice president of product management at Arxan, a mobile app security company. "Most financial services apps have been hacked, and there is a growing trend in financial app hacking," he says.
According Arneja, 95% of Android apps have been hacked and 70% of iOS apps have been hacked. Android app hacking increased from 76% to 95% from 2013 to 2014, and iOS app hacking increased from 36% to 70% over that same time period.
Damien Hugoo, product manager of Easy Solutions, a security vendor, believes hackers will be driven to mobile banking even more. "Only a limited number of big banks allow high risk transactions such as ACH and Wire to be performed through their app. This limited the attractiveness for hackers of the mobile channel. But now, if you are able to comprise mobile banking you will be able to get cash. Now you’re talking!"
Without question, says Arneja, "It’s crucial that banks and payment providers look to security platforms to defend, detect, and react to attacks and exploits."
Another troubling fact, says Hugoo, "If you happen to lose the mobile, you are not only losing your mobile, but also access to your money."
Of much importance, says Knott, is the lack of a significantly improved form-factor for the consumer. "Does the phone-based experience offer significantly more in terms of convenience, reliability or security over plastic?" he asks. "Does the customer gain a significantly greater sense of control over the transaction with mobile? With less than a resounding ‘yes’ at this juncture to these questions, we should expect that the exciting development in mobile-at-the-ATM, will over time, lead to people demanding mobile as an additional option at the ATM, but not as a full-scale replacement for plastic."