Smartphones May Be the New ATM Cards, But Security Questions Remain

Ever since the introduction of Apple Pay in 2014 mobile payments have been the talk of the town. At the same time mobile banking apps have helped customers take care of their financial needs without needing to visit a branch, while also saving big banks a considerable amount on transactions. Still there’s one thing that smartphones aren’t able to do: spit out cash.

While ATMs may still be a necessity for the time being, many banks are now looking to replace ATM cards with mobile devices. As Stacy Cowley writes for Dealbook, JPMorgan Chase, Bank of America, and Wells Fargo are all working to deploy more mobile-integrated ATMs throughout the nation. The banks are hoping that this investment in technology will bring an added convenience to customers, with Jonathan Velline of Wells Fargo explaining, “It’s about having the choice. If you’ve lost your card or left home without your wallet, chances are you still have your smartphone in your hand.” However, in this case, there is more to think about than just convenience. 

One of the biggest and most consistent issues that FinTech companies often face are questions of security. Unfortunately those same concerns are currently affecting the move to mobile-equipped ATMs. On the one hand using a smartphone instead of a card removes the possibility of skimming — a process used to obtain credit card information. Of course this has only led scammers and criminals to other types of fraud. For example Dealbook recalls a Chase customer who had $2,900 stolen from her account after someone got a hold of her Chase app login info and used a card-less ATM to make withdrawals. The bank later reimbursed the customer and has said they’ve improved app security since then that they believe will prevent similar instances, although customers are still not required to enter their PIN to make transactions.

To that point, it may not be the cardless medium that presents issues but the layers of security that institutions apply to it. In fact Dealbook reports that several other banks have seen much lower rates of fraud with mobile ATM withdrawals compared to card-based transactions. For instance Wintrust Financial says they’ve had no instances of fraud in the three years they’ve been operating their 250 cardless machines. Similarly, just as different banks utilize different security measures, they also use a variety of technologies to complete transactions. In the case of Wintrust, customers approaching the ATM scan a QR code with their device in order to gain access. However the majority of larger institutions have opted for near-field communication (NFC) integration, used by Apple Pay and other popular mobile payments platforms. 

Despite the interest taken in mobile-equipped ATMs, there are still many who wonder if their time will be short lived, only to be taken over by the next technology. After all Citibank has demoed a prototype ATM that uses retinal scans to confirm a user’s identity while others have looked to biometrics. Although the technology is certainly there (or at least close), it stands to reason that institutions would have a hard time getting customers to buy into these seemingly sci-fi solutions regardless of how secure they were — not to mention the high cost associated with producing such machines. So, in the meantime, expect more ATMs to start sporting smartphone integrations as mobile payments and other financial technologies make inroads with the general public.


Jonathan Dyer

I'm a small town guy living in Los Angeles looking to make solid financial decisions. I write for a number of finance websites, including HuffingtonPost and Business2Community. I founded in 2015 to focus on personal finance and the emerging FinTech markets.

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