Why a Cardless ATM Future Should Spark Excitement… And Worry

The next time you withdraw cash out of an ATM, imagine what it would be like if you could do it without using a debit card. That might soon become reality if some banks have their way.

A handful of banks, like City National in Los Angeles, Wintrust in Illinois, and BMO Harris in Chicago, have begun experimenting with cardless ATMs. These new ATMs seem pretty straightforward: log onto your bank's mobile app, type in the amount of money you want to withdraw, enter your PIN, and voila — grab your $60 from the ATM.

Supporters of the movement to go cardless at the ATM tout a number of reasons why it's beneficial, including increased customer convenience, speedier transactions, and improved security. But wait a second. Regarding that last point — are cardless ATMs really that much safer?

Hacking issues
In a world where data breaches are becoming as common as encountering traffic at 5 p.m. — Russian criminals stealing 1.2 billion passwords and Target's epic data theft among recent high-profile cases — you might have reservations about going cardless at the ATM. And your worries are justified.

Recently, a man in Tampa was the victim of theft, losing $300 from his checking account at SunTrust bank. The culprit used the man's debit card and PIN number at a cardless ATM in Miami. Some say the man's data was hacked.

In a cardless ATM transaction, your mobile device works kind of like a remote control. You enter the correct information on your phone, head to the ATM, confirm your identity, and leave with money in your pocket. At some banks, you can even place an order for cash as much as 24 hours before the transaction. You just need to have the app open on your phone and scan a code on the ATM machine to prove your identity. If you're thinking that this doesn't sound like the safest way to withdraw funds, you might be right.

With cardless ATMs, it's easy to identify where hackers or mistakes can disrupt the process and leave you vulnerable to data theft. Spy cameras and hidden skimmers are tiny devices difficult to detect and they can be used to capture your data.

Phones can also be easily lost or stolen. And what a friend or family member borrows your phone? Is it possible that he or she could use it to withdraw cash? Since these types of ATMs are in a test or pilot phase, consumers who go cardless might be particularly susceptible to theft. Because the technology is still being tested out at select locations, kinks need to be worked out before ATMs are rolled out to the public at large. Safety, of course, should be the primary concern so that the events that happened in Tampa are not repeated again.

The move toward mobile
One reason why midsized banks like Wintrust are turning to cardless ATMs is competition. Mid-sized banks and credit unions have to compete with larger — and richer — financial institutions as well as big players in the tech field like Google and PayPal. The cardless ATM movement is just one part of a larger push toward mobile, which is expected to be a big growth area for banks.

"Mobile wallets are inevitable. When it happens is a different story," said Tom Ormseth, senior vice president at Wintrust, in a FIS careless cash access case study. Ormseth believes that it takes less than 11 seconds to pick up money from a cardless ATM. See for yourself in this video.

Wintrust's mobile development comes at a time when big banks, like Bank of America, are heavily investing in digital banking. This year, Bank of America surpassed 15 million active mobile banking customers — and that number is growing by more than 200,000 each month.

It's clear that consumers are increasingly using their mobile phones to conduct more activities and do more things, but are they ready to use smartphones to withdraw money? Cardless ATMs would be convenient for many consumers, saving them time and easing fears they might have about losing their card. But there are still many questions that need to be answered about the safety of careless ATMs, which are already used overseas inplaces like South Africa.

What does the future hold?
Still, with banks investing so much in mobile, it's exciting to think about what the future holds. Using your mobile phone to withdraw cash opens up several possibilities. In the future, cardless ATM users could potentially receive offers and discounts from nearby businesses.

Another possibility for the future: a user could authorize a third party to withdraw a specific amount of cash from his or her account, using the app to pick a person from the user's contacts list. The app can then send a text message to that person with a code that he or she can use at an ATM to withdraw money. Mobile technology could also be used to strengthen methods of identification at an ATM.

Any benefits that arise from using mobile technology in banking are a long way off. Many people are not yet ready to use their mobile phones as wallets or to withdraw cash. If you're concerned about going cardless at the ATM, you might have some time to come to grips with your grievances. In a survey of 92 U.S. Independent ATM deployers, half said they have not yet developed a strategy to implement contactless or mobile transactions at the ATM. And nearly half are unsure how these types of ATMs might affect the industry.

What do you think about these types of ATMs? Leave a comment and let us know: Would you use a cardless ATM? Why or why not?