After 50 years using clunky ATMs, many financial institutions are eyeing costly “cardless” upgrades to the old models that perform more functions by remote control using a mobile phone, and consumer reaction to them could be a bellwether for adoption of other mobile payment technologies.

Cardtronics -- which provides ATM services for banks and credit unions -- recently announced it will add FIS Cardless Cash technology to its entire fleet of ATMs over the next two years, following Wells Fargo, which in March converted all 13,000 of its U.S. ATMs to cardless technology. Bank of America, JPMorgan Chase and many others are in the process of converting to the new approach.

The new generation of hands-free ATMs cuts fraud risk by minimizing password-exposure on public ATM keypads and adds convenience with seamless access to other account operations, but it’s unclear whether large numbers of consumers are ready to ditch deeply entrenched behavior based on five decades of inserting a plastic card to get cash, analysts say.

Mark Ranta, head of digital payments at ACI Worldwide
Mark Ranta, head of digital payments at ACI Worldwide

“Cardless ATMs face the same challenges we’ve seen with consumer adoption of mobile wallets,” said Mark Ranta, head of digital payments at ACI Worldwide. “While newer ATMs obviously provide easier, more secure methods of accessing bank accounts, a lot of education and marketing is going to be needed to get consumers to change their habits.”

A recent ACI survey of 8,000 U.S. consumers suggested that one in four banking customers are open to better and more secure authentication methods, but 40% of consumers haven’t considered changing their use of the traditional ATM.

A problem FIs may face is the uneven rollout of cardless ATMs, creating an inconsistent user experience, Ranta said.

“Banks are going to need to move carefully to get their return on investment in cardless ATMs by giving customers an incentive to change their habits, and repeat and reward that behavior, or they risk customers defaulting to the old approach, or not using it at all,” Ranta said.

Patchy merchant acceptance of third-party mobile wallets like Apple Pay, Android Pay and Samsung Pay has contributed to an inconsistent consumer experience with mobile wallets, and that’s one of the factors slowing their widespread adoption, Ranta contends.

But if banks and credit unions succeed in wooing broad swaths of their customers to cardless ATMs, it could be a boon for the overall movement away from plastic cards to mobile payments, which offer more secure authentication methods with biometrics and device identification, Ranta said.

FIS is optimistic about its Cardless Cash catching on faster than NFC wallets.

“We see more than 55% of consumers retrying, or reusing Cardless Cash within the first 90 days of using it,” said Doug Brown, FIS’ senior vice president and general manager of mobile.

One reason is that consumers access Cardless Cash as part of their bank’s mobile banking app, and they log in an average of 18 times per month, which creates a much higher exposure to the concept than NFC wallets, Brown said.

“The Cardless Cash ATM experience is also consistent and fast, typically 10 seconds, unlike the (NFC wallet) POS experience, which varies considerably,” he added.

If a critical mass of consumers begins to embrace cardless ATMs, it could possibly help drive mobile payments as a whole, Ranta speculated.

“If you marry the positive experience of cardless ATMs with a positive experience of mobile payments at the POS and a growing availability of mobile person-to-person services like Zelle, we may finally see a big shift from manual to mobile payments,” Ranta said.

Another driver for cardless cash and mobile payments could be the rise of mobile order-ahead, which is catching on quickly with some customer segments, said Aaron McPherson, an independent payments consultant.

“It’s hard to change consumer behavior, but cardless ATMs are coming along at a time when consumers are being educated to use their phones to order ahead and pay for rides and parking, so it may have a good chance of catching on with certain younger customer segments first,” McPherson said.

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