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Could mobile be the future for ATMs and FI brands?

February 25, 2014 by Rebecca Hellmann — Marketing and Sales Coordinator, Welch ATM

You might have heard the buzz about mobile and cardless payments. Tech companies around the globe are touting mobile wallets, near field communications and other technologies as the "future of payments."

Target is already offering mobile coupons through their "Cartwheel" application and Starbucks currently offers a form of mobile payment at their stores. With these two major retailers leading the way, it seems that the rumors of a card-free society could be more than just tech fantasy.

So, if there are no cards, how will customers and members use the ATM?

ATMs will need to evolve with the rest of payment technology to enable cardless transactions. However, the dust has not yet settled, so it's not clear which cardless technology or technologies will win out.

Going cardless could be a double-edged sword for credit unions and banks. While it reduces the expense of issuing physical cards, it also reduces the exposure of current customers and members to the financial institution's brand.

As mobile and cardless technologies take off, banks and credit unions will need to find other ways to make certain that their brand remains front and center just as it does in today's payment and ATM processes. The key for financial institutions is to back the technologies that will most benefit their brand.

Current Cardless Options

Google Wallet and many other e-wallet technologies rely on NFC. This cardless option is used currently in Asia, most notably in public transportation networks in Japan and South Korea. European countries are also beginning to adopt the technology for transportation and other low value purchases.

NFC uses a low frequency transmission to enable communication between a payment device and a phone or other portable device. A merchant must install NFC-enabled hardware and software to read anNFC transmission via mobile wallet or plastic card.

Financial institutions would have to either partner with an existing wallet provider or develop their own wallet in order to offer mobile NFC capability. Complicating the issue is the limited number of mobile devices currently sporting NFC chips. Apple's iPhone, for instance, still does not support NFC.

Some mobile wallets do not rely on NFC technology. Square, developer of the widely used credit card swipe device for smartphones, has developed a different version — however, it only works with their branded point of sale machines.

Loop, a level-one PCI service provider, has introduced LoopWallet (now available for iOS 7 and soon to be released for Android). The Loop system works with any magnetic stripe system by emitting the same signal that is generated when a card is swiped. However, LoopWallet requires a small device called a "Loop Fob" that attaches to the user's keychain. The Fob is also available in the form of an iPhone case.

PayPal has released yet another version of cardless technology. Consumers who have a PayPal account can pay for a purchase using their phone number and a secure PIN at many major retailers, including Home Depot. With a simple software upgrade, this technology could be integrated at the ATM.

Additionally, PayPal is working on a system that uses Bluetooth technology to allow customers to pay for their items in the store as they pick them up, completely avoiding the checkout line. Both options cut financial institutions out of the payment loop.

Quick Response codes, images that can communicate encoded information, are also being considered by many companies as payment devices. To use a QR code, the consumer must select a payment card from a mobile wallet and designate an amount to be transferred. This generates a one-time QR code within the wallet app. A POS device or ATM reads the generated QR code and completes the transaction.

Some ATM manufacturers already have — or are developing — QR code readers and applications for the ATM. However, implementing QR code technology would requires hardware and software updates. For FIs, the system might also require some application development in order to generate the QR code information.

PAYe is a new ATM-exclusive system that lets its users transfer money to themselves or others via a phone number and PIN. The PAYe user logs into the application, enters the phone number of the person to receive funds and the amount to send. The recipient receives a text message with a single-use PIN and the dollar amount, which can be entered at the nearest PAYe -enabled ATM to retrieve the cash.

PAYe implementation at the ATM requires a simple software upgrade (which also enables on-screen advertising during transaction processing). This cardless option still eliminates the bank or credit union brand in regard to the card, but could easily deliver the user to a branded ATM.

Should you be ready for mobile now?

Cardless technologies are already in use in an increasing number of countries throughout Asia, Africa and Europe. However, the United States has yet to lay down a framework for any given solution.

The key for financial institutions at this early stage is to research available technologies and support the one that best fits their needs.

Working with industry associations such as NAFCU, CUNA, ABA, and others to push through the best solutions will help to ensure that financial institutions have a voice in the selection and standardization of mobile and cardless technologies. Collaboration can also help to ensure a solution that is both cost-effective and conducive to brand exposure.

About Rebecca Hellmann

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