Why Wintrust Financial Is Testing Cardless ATM Transactions

Wintrust Financial Corp., a firm with 15 community bank subsidiaries, is testing technology at two ATM machines that lets people pre-order cash using their iPhones or Android devices.

The Rosemont, Ill.-based financial holding company expects the functionality, which is powered by FIS (FIS), to work at 180 ATMs by yearend, which would make it one of the first firms to offer the capability in the U.S.

"We can't fall behind on the technology side," Tom Ormseth, senior vice president of retail strategy at Wintrust, tells Bank Technology News. "The idea is to make customers' lives simpler."

Beyond facing competition by nearby big banks like Bank of America Corp. and JPMorgan Chase, Ormseth says Wintrust was motivated by another growing threat: data-savvy companies outside of the banking industry. "Down the road, banks need to act a little more like Google," he says. He's referring to both the search giant's mobile wallet offering and its data collection and analytics capability.

Analysts identify cardless ATM transactions as an emerging technology that could be used to entice consumers to use mobile banking and to create consistency among channels. "It's more of a way to get people to use digital channels," says Stephen Greer, analyst in the banking group at Celent.

The initial Wintrust cardless-cash ATM experience will work like this: After a customer connects a debit card to his mobile app online, he can tap on the mobile banking app to choose the amount he wants to take out in advance of frequenting an ATM. Then when he gets to the ATM, he clicks on a button to conjure up a QR barcode. He scans the code on the ATM, which will prompt the machine to spit out cash. Ormseth estimates the process to take about 9 to 11 seconds.

Getting customers to shift from using ATM cards to using their mobile devices at ATMs will require banks to provide value beyond simply shaving off a few seconds from the transaction. That's one of the reasons why the financial holding company envisions in the not-so-distant future letting opted-in customers receive offers from nearby merchants when using their smartphones to withdraw cash.

Even before layering in offers, Ormseth anticipates some immediate consumer benefits from deploying the functionality. Take SUV drivers, who may sit higher in their vehicles than an ATM machine's height, for example. When using FIS' Cardless Cash Access cloud-based platform, a person can "pretty reliably" scan his phone up to seven feet away from the machine, which provides more flexibility for height discrepancies, says Ormseth.

Wintrust's current pilot operates off a separate mobile app for employees. However, the capability will be integrated into existing mobile banking apps before being rolled out to customers. Assuming the pilot progresses as planned, the firm expects to introduce the technology to its ATM fleet by yearend.

Since the pilot began in March, testers have asked Wintrust to tweak minor design elements. One example: the ATM interface typically allows people to tap out quick cash for $40, while the mobile app quick cash denomination was initially set to $60. "People notice the little things," Ormseth says. "There's nothing major we'd change at this point."

Prior to the official launch, Wintrust will need to upgrade its Diebold ATM software. (NCR Corp. also has software that enables cardless ATM transactions.) The upgraded ATM operating system will allow customers to email themselves ATM receipts.

Also before going into production, Wintrust will need to figure out how it will handle customers who lose their smartphones. Since the card data is stored in the cloud, Ormseth says, "you're not losing the card if the phone disappears."

Doug Brown, senior vice president and general manager, FIS Mobile Financial Services, points out that most devices come with screen-locking functionality and that the card data can be remotely wiped.

Broadly, Brown says the Wintrust pilot shows that banks are getting more serious about controlling mobile payments and commerce. "It's becoming more of a business imperative to control the experience," Brown says.

Mobile transactions at ATMs are expected to become the fastest-growing service in the next five years, according to a June international survey published by the ATM Industry Association (ATMIA). Meanwhile, banks have been pressured to enhance their ATM software to be more teller-like because of declining foot traffic and increasing amounts of digital banking customers.

The idea of connecting the smartphone app to the ATM is not new. About a year and a half ago, two UK firms (RBS and NatWest) debuted the functionality. The feature, which relied on one-time text-messaged passwords, suffered some early blows when fraudsters found ways to steal customers' money by pulling a security code from a user's mobile app.

But that was many months ago.

"The technology has matured," says Brown, pointing out that the FIS feature stores the customer's data in the cloud rather than the device.

Interest from U.S. banks has picked up some, too. Brown says Wintrust is not the only firm testing out the capability, and from early pilots, FIS has identified one surprising trend: people are using the functionality to pre-order their money upwards of an hour to ATM arrival. "It cuts down on spontaneous cash withdrawals," he says.

Plus, he argues that cardless cash improves the customer experience by removing the need to touch a possibly dirty screen as well as reducing the risk of card skimming. "The smartphone becomes the remote control for the ATM, which is intrinsically better," Brown says.

To get people to try out the new app will likely require banks to roll out incentives tied to it. Getting more vendors interested in offering the technology will likely require one of the big banks to launch the feature.

"To move consumer behavior, [you] will need to add something on top of it," says Greer. "I do see it as something in the future to look at."