Cardless ATM access at the tipping point


It's three-and-a-half years now since I scored one of the few remaining seats in a packed conference room at ATMIA 2012 for a workshop dedicated to a new concept in ATM technology — mobile cash access.


"It's the most novel thing anyone will see at the conference," Richard Crone, CEO of payments specialist Crone Consulting, told me in a phone interview before the event.


And it might have been. But it seems that FIs — which often move at the speed of dark on new consumer-facing technologies — needed some time to decide whether this meant "novel" as in the trade show tchotchkes that sit unused in a junk drawer or "novel" as in the iPhone when it rolled out in 2007.


So, it's only recently that FIs in the U.S. have begun to roll it out as a mobile banking feature, spurred perhaps by the rising prevalence of smartphones (now owned by two-thirds of U.S. adults) and the rising incidence of skimming as card fraud migrates from EMV-enabled markets to the U.S.


In advance of the ATM & Mobile Innovation Summit Sept. 9–11 in Washington, D.C., I spoke again with Richard Crone to find out how adoption of prestaged mobile transactions is coming along and whether it's time for the industry to start thinking of it as the future of ATM access.


Q: Where is the industry today on prestaged ATM transactions?


A: It's off and running. I think it's mainstream in the deployments. We have companies like BMO Harris, Wintrust ... and there's a bunch of banks that have deployed a pilot that will be going live over the next three to six months that are not announced.


Q: Is BMO still the largest?


A: Yes, I think they have 750 ATMs deployed now, there will be a total of 950 by the end of the year.


Q: Are we looking at a QR code solution as more or less the industry standard?


A: Yeah, I think it's the easiest way to go and then depending on what happens with NFC, it will be followed with NFC. But the beauty of the QR code-based approach is that you simply walk up to the machine, you press mobile cash access, you scan the code and it spits out the cash and you're done.


Theoretically you could do the same thing with a near field communications-based option, but that's going to require a truck-roll to upgrade the hardware. And upgrading for NFC is not the same as upgrading for EMV.


Q: So we're not going to see the same situation as with POS devices, where contactless is already incorporated into the terminal?


A: [U]nless the major ATM manufacturers change their pricing and packaging approaches, they're pricing it separately as an add-on module, as well as the software to support it. They're trying to maximize the revenue for a new feature as you would expect an ATM hardware manufacturer to do.


That's why the software approach is more economical, but more importantly, more flexible. Because the key here is to extend the processing capability beyond the ATM into the mobile phone. Most of the mobile phones are an order of magnitude more powerful than the ATM, especially the older ones.


So it is safer, it's more convenient, it's faster, and it is a stepping stone to other things that ATM deployers can use to extend their value proposition into the hands of consumers.


Q: Can you tell me more about that?


A: As a foundation, you've got to do cardless cash access. That is the primary link — the linchpin to integrating the ATM and the mobile device. Once you have that you can extend the geo-based triggers for ads and offers and personalized communication before, during and after the ATM experience.


If I could get all the benefits of a personalized ad that's geo-triggered as a byproduct of using cardless cash access, then game on! That's really started the process for the ATM deployers to really change the game with where they deploy these ATMs today.


Today the ATM deployer has to pay the retailer a piece of the action on the interchange and surcharge, even though the primary reason for putting the ATM in the store to begin with is to increase foot traffic. But they don't get compensated or recognized for increasing foot traffic — they can't prove it.


So with cardless cash access you could and can. So envision this: I'm a mile away, I stage an ATM transaction on my phone. I now have the analytical stream to support proving that I actually brought that customer to that retail location.


I staged the transaction, I was this far away, it was this many minutes before I came to the store, I did indeed get cash, and as a part of the e-receipt that was run in the cardless cash access application, I activated these offers and then I went and made a purchase. With or without cash, I made a purchase at the store and the ATM deployer can prove that.


And if they can do that, they can change the economics and the reason for existence with retailers. It's a big deal. Instead of them paying the retailer, the retailer would be paying them. But more importantly, the companies that generate 95 percent of the advertising spend, though is not the retailer. It's the consumer packaged goods and product manufacturers that stock the shelves at that retailer — Kleenex, Kellogg's, Procter and Gamble. They want to reach a consumer that is in flight towards a purchase experience and they'll compensate the ATM deployer for generating a proven net in sales, as well.


Q: Is this in use anywhere?


A: It's just coming about, because you have to have the cardless cash access in place before you can do this, and so the big opportunity here is for anybody who deploys cardless cash access, certainly a financial institution and an issuer.


But it's not restricted to them; it also could be big funded account providers. PayPal for example could provide cardless cash access. You've got 169 million accounts — let's say half of those accounts have idle balances — they can allow PayPal holders to get cash out of the machines and in that case, it would be a whole new set of surcharge revenue for the ATM deployers.


If PayPal was concerned about the exit of funds or the velocity of funds going out, then they can do what FIs do today. The issuing FI charges a fee and the ATM deployer charges fees. So if PayPal wants to slow down the velocity of funds, they increase it — or if they don't care, they decrease it or have it zero.


But it's not just PayPal: mutual funds, brokerage accounts, money market accounts, home equity loans — the whole slew of accounts that are landlocked today that don't have access to cash.


So it starts by making the capability available for the traditional debit account and credit account. After that, move to these other new accounts and funded accounts that don't have access to cash and that starts to increase the use of ATMs once again.


Q: What does the near future look like for rollouts of mobile cash access by FIs?


A: It's definitely picking up and next year I see it growing exponentially given the activity of the consulting work that we've done for financial institutions in the space. You could see a couple of the biggest banks do it next year, to be ready to deploy it by the end of next year and then a bunch of smaller ones will be really leading the charge.




Other news