Chase Is Tiptoeing into Cardless ATMs as Banks Look to Defend 50-Year-Old Workhorse

Chase Bank is tiptoeing into the world of cardless ATMs for consumers — catching up to the likes of Bank of America and Wells Fargo.

The ATM has been a workhorse for the financial industry but as it crosses its 50th birthday,  the ATM is facing competition from mobile phones and cashless transactions at the register. Indeed, ever since the introduction of the ATM, banks have experimented with new services and features. In 1988, American Banker recalls, consumers could buy stamps through an ATM. Who remembers that deathless feature?

ATMs are often cited as one of the most important innovations in banking over the last 50 years. But their roles are changing and debit payments at the cash register are challenging growth. Between 2010 and 2015, ATM machine installation increased at a 12.4% compound annual growth rate, to 3.2 million from 2 million, according to a report by Accenture and the ATM Industry Association. But growth is expected to slow sharply in the next five years, with ATMs expected to total 3.5 million by 2020. The role of the ATM “has evolved… to be a channel complementary to branch, mobile and internet banking.”

Translation: ATMs no longer have as strong hold on consumers and how they access cash to make payments.

The marketing script for cardless transactions would seem ready to write itself: ATM users can just wave their phones in front of the machine and transact their business.

It seems a fitting shift for the ATM.

ATM users, however, haven’t read the script and aren’t so quick to adapt, especially in the U.S. ATM Marketplace has reported that even Americans who can use the cardless technology simply forget that they can do this. Using a phone isn’t necessarily easier than a card, requiring ATM users to unlock their phones, open a mobile wallet (say Apple Pay or the bank wallet) to select a debit card, and some even ask to input a special code in the ATM machine  — all before they actually put in their PIN. And you can’t necessarily open a locked bank door after hours with your phone.

The word “seamless” doesn’t exactly spring to mind.

“99% of on the spot, retail transactions work well today,” said Bernardo Batiz-Lazo, professor of business history and bank management at the University of Wales, Bangor. Banks have been working on cardless transactions for years, he said. “Innovation in payments takes a long time to mature.”

The rule in innovation is that the change must be 10x better — which isn’t obviously so with the switch to cardless at this moment. Banks tout cardless transactions to prevent certain types of theft, but as with all new technologies, it opens them to new ones.

It might be understandable, then, that JPMorgan Chase might not be in a hurry to deploy cardless ATMs, though it certainly talks the talk. In its 2015 letter to investors, Chief Operating Officer Matt Zames said its digitally empowered ATMs would perform 90% of teller functions and include “cardless authentication.” He added: “…that means more transaction flexibility and simpler customer experiences that work seamlessly with our other digital channels.”

So far, Chase has deployed only 600 cardless ATMs in Miami, Jacksonville, San Francisco, and Columbus, Ohio. Later next year, the bank will roll out ATMs enabled with Near Field Communication (NFC), a JPMorgan Chase spokesman said. Then Chase customers won’t need a one-time code; like BofA or Wells, customers will only open their phones (presumably after unlocking their screens), select the bank debit card in their mobile wallets, and then hold the phone up to the cardless reader. No sweat.