Smartphone apps are about to eat your ATM card

Olga Kharif

Forgot your bank card at home? No worries. Many ATMs will soon dispense cash with help from a smartphone and banking app.

A growing number of banks are letting consumers arrange withdrawals via their mobile app and pick up the cash at a nearby automated teller machine. Customers authenticate the transaction by scanning a QR code with their phone, entering a one-time security code or tapping their device on the machine.

The idea is to help customers who have forgotten their cards or worry about thieves stealing their card data via ATMs. While so-called cardless cash access is only available at about 2,000 of the half a million or so U.S. ATMs in use today, it’s expanding rapidly and will be at as many as 95,000 machines by year end, according to payments researcher Crone Consulting LLC.

JPMorgan Chase & Co. plans to roll out the feature later this year. Bank of America Corp. said it will extend the technology to 5,000 ATMs by year end. And Wells Fargo & Co. is letting some users of mobile wallets like Apple Pay authenticate through their phone, and expects more than 40 percent of its ATMs to be enabled for this technology by year end.

In possibly the largest deployment to date, Payment Alliance International, the nation’s largest closely held provider of ATM processing and maintenance services, plans to announce Friday that it will start rolling out the technology in August or September, and plans to have cardless cash access at 25,000 machines in stores and gas stations by the end of 2017.

Acceptance Grows

Smartphone-based ATM cash withdrawals are gaining popularity as consumers grow more comfortable using their phones to make purchases in stores via mobile wallets like Apple Pay, and to send money to friends and relatives. Next year, PAI plans to let consumers transfer money to others for withdrawal at an ATM.

“I could envision at some point perhaps some of these locations not taking a card at all,” Donna Embry, the company’s chief payments adviser, said in an interview.

Wintrust Financial Corp., which operates 225 ATMs around Chicago and in southern Wisconsin, began experimenting with the feature about 11/2 years ago and found the service appeals to consumers of all ages, basically anyone with a smartphone, Tom Ormseth, a senior vice president, said in an interview.

“People are just more and more dependent on their phone, it’s an easier way for them to do things,” Ormseth said. “Mobile wallets were being talked about a lot. Apple Pay pushed that a little bit more, Android Pay pushed that a little bit more. So we are at the right time in terms of adoption.”

The technology has cut transaction times at ATMs to about 10 seconds from 45 seconds, he said, adding that more than 8 percent of the bank’s mobile customers use the service.

Smartphone-based ATM transactions have also helped combat skimming, where criminals insert a device in an ATM that steals customers’ credentials and lets them make withdrawals later. Last year, the number of ATMs compromised by criminals in the U.S. jumped 546 percent, according to FICO Card Alert Service.

Upgrading an ATM with software for such smartphone-based withdrawals cost about $800, Ormseth said.

Some consumers using the technology are visiting ATMs more often, said Doug Brown, a senior vice presidentat FIS, which provided the technology to PAI and about 35 banks including Wintrust.

“People will add an incremental one-two transactions a month,” Brown said in an interview. “It’s early and emerging quite rapidly.” Since making the feature available to its customer banks in early 2015, FIS has processed $50 million in cardless cash withdrawals, he said.

Consumers can order a cash withdrawal from their phone banking app. The app tells them what machines nearby can dispense the cash. Once there, consumers press a button on the ATM for cardless cash, and scan the QR code that appears on the ATMs’ screen with their banking app.

“It’s something that set us apart in marketing,” Ormseth said. “We were sure it was a good idea, we knew what our costs were, and it proved out to be that way.”