Many companies are seeking fresh ways to use mobile phones to add functionality and security at ATMs.
A process called mobile cash access, which is popular overseas, is beginning to draw the attention of financial institutions in the United States. However, most programs here are only in the conceptual stages.
When SunTrust bought 1,200 new ATMs from NCR last month, it said one factor in its decision is NCR's ability to add future technologies such as the use of mobile devices for authentication. And last year Evangelical Christian Credit Union's Matt Weidler won an industry contest for designing a system that replaces ATM cards with a text-message verification service.
But cloud-based and mobile-based applications can be disruptive to the payments industry, even if they are focused on ATM access, since many consumers use the same card for point of sale payments.
"Card companies are trying to protect interchange revenue … [and] the card metaphor," leading to slow progress in replacing cards with phones in the U.S., says Richard Crone, CEO of Crone Consulting LLC.
However, there are opportunities to protect — and even add — revenue by supporting a switch to mobile devices for ATM access and payments, says Donna Embry, senior vice president of strategic development at Payment Alliance International.
Issuers "may even be able to charge more because of consumer convenience," she says.
Both Crone and Embry agree on the advantages of connecting mobile technology with ATMs.
A successful example is First National Bank in South Africa, which allows consumers to specify the amount and details of ATM withdrawals on a phone's screen. Users then receive a one-time PIN that must be used within 30 minutes.
With this process, consumers don't have to bring debit or credit cards to withdraw cash. First National Bank said in June that it has a 33% share of the country's mobile banking market, according to a survey conducted by the South African Advertising Research Foundation. The bank said its monthly transaction volume from mobile banking users exceeds 2 billion rand, or $238 million U.S. dollars.
Crone says mobile cash access is secure because the transaction is staged in the cloud, eliminating many of the vulnerabilities plastic cards have. For example, magnetic-stripe cards can be compromised by skimming devices planted on ATMs to steal account data as the card is swiped. Since a mobile phone doesn't use a magnetic stripe, fraudsters cannot attack it the same way.
Using mobile technology to stage transactions not only simplifies ATM use with a secure process, but also provides opportunities for advertising revenue.
Grocery stores charge $60 to $100 per ad printed to a receipt, and "merchants are willing to pay that price because they know the customer is 20 feet away from their services," says Crone.
ATM operators can exploit this. Not only would merchants be able to display advertisements on the ATM's screen, but they could follow up with offers sent to the phone on receipts sent by text-message or email.
"The ATM is a medium for digital advertising," Embry says. "You can stream ads on the screen, rent the physical hardware as a billboard, or send messages to users."
As payments technology advances, people are still going to need access to cash, says Embry.
"Even with a drop of 10% a year in cash in circulation, it'd still take 100 years for there to be no cash," Embry says.
Crone says mobile cash access technology can even increase the frequency of use at ATMs. Customers would be using ATMs more frequently but for lower amounts, he says.
"The most valued utility of any funded account is the ability to get cash," says Crone.
Adding mobile-phone access to ATMs could even attract the underbanked, Crone says.