The ATM Card May Be Replaced by Smartphones

Part of the appeal of smartphones is that they offer ways to bypass the magnetic-stripe bank cards that are so common today. Schemes like Apple Pay and Android Pay have emerged lately, offering ways to use a phone itself — and particularly its near-field communications (NFC) capabilities — to replace the outdated and potentially unsecured ATM card.

But people are used to using physical cards. Smartphone-based payment technologies have not gained major traction yet, though that may change in the near future.

Chase ATMs Get Smarter

According to Wired, JPMorgan Chase will soon implement thousands of ATMs that will allow withdrawal by smartphone. While these machines will still work with physical debit cards, the futuristic alternative to the card will be heavily supported.

Chase will be approaching cardless ATMs from two directions, the first via a software solution. Customers will authenticate themselves by using either their Chase password or their iPhone’s TouchID. Users are then given a seven-digit access code that permits them to use the ATM without a card.

“This doesn’t replace the debit card. It’s just giving customers a more convenient choice in case they don’t have their debit card on them,” Chase spokesman Michael Fusco told Wired. “Our customer behavior is driving this as well. More of our customers are using online, mobile and ATMs. We have 40 million digital users, and monthly ATM transactions are now outpacing teller transactions in the branches.”

The Second Path Away From the ATM Card

The second approach Chase will use is far more advanced. Later this year, Chase will roll out NFC-equipped eATMs, which allow smartphones to communicate directly with cash machines. This kind of path will negate the card skimmers and spy cameras, as well as ATM malware, that have long posed security threats. But it will require the bank to alter its app and processes to adapt.

Don’t expect these newer ATMs to make an ATM card obsolete at first. People are still accustomed to using traditional plastic cards; even Chase thinks they will continue to be an option for customers. But the new machines offer biometric security advantages that may become more important to consumers in the future.

The move is significant in that it brings the smartphone into the banking system. Banks tend to move slowly in adoption, and this shift shows that they can and will change to meet the needs of the public.

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Larry Loeb

Principal, PBC Enterprises

Larry Loeb has written for many of the last century's major "dead tree" computer magazines, having been, among other...