Many major financial institutions are innovating with cardless ATM capabilities that allow consumers to withdraw cash using mobile devices instead of plastic cards to authenticate themselves and initiate transactions.
Financial institutions view cardless ATMs as a way to improve convenience by eliminating the need for people to carry and replace easily lost or stolen cards, and also to reduce the cost to the institution of continual card replacement.
While cardless ATM technology is not new, its growing acceptance is being facilitated by new innovations in mobile payments technology in general.
Threats to cardless ATM acceptance
Currently, consumer demand for cardless ATMs is relatively low. For its ATM Future Trends 2017 report, ATM Marketplace surveyed U.S. consumers about the top three services they’d most like to see available at the ATM. Only 14 percent selected cardless ATM access.
One key to improving cardless ATM acceptance among consumers is to build trust and comfort by ensuring that best-in-class security measures are in place. As with any emerging technology, early instances of fraud resulting in hard-dollar losses and reputational damage are already occurring as fraudsters rush to exploit security loopholes before they’re patched.
In one early instance of cardless ATM fraud, a bank customer was defrauded of $3,000 when cybercriminals gained access to her mobile banking login credentials, which they then used to register a new mobile device for cardless ATM access.
As the mobile device takes on an increasingly high-profile role in facilitating financial transactions of all types, organizations must focus on the device itself as the central component of security.
And while early adopters have taken varying approaches to implementing cardless ATMs, some transactions still unfortunately rely on less secure username and passcode protocols, as well as one-time passcodes, which can easily be intercepted and exploited by fraudsters.
A lack of insight into potential vulnerabilities, pressure to be first to market, and never-ending market demands to decrease costs, improve operational efficiency and enhance customer engagement often clash with the time and expense involved in implementing rigorous security standards and solutions.
However, organizations must ensure that innovations such as cardless ATMs are implemented from the onset with the latest security advances available, in order to mitigate against fraud and, in turn, establish the trust essential to facilitating consumer acceptance.
Without this level of trust, consumer apathy toward cardless ATMs — combined with scrutiny of digital security in the press — threaten to hinder adoption of emerging mobile payments technology.