Individuals may soon be able to use their smart phones to withdraw cash from ATMs. According to Reuters, which cited technology website TechCrunch, banking majors Bank of America Corp. BAC and Wells Fargo & Company WFC are working to integrate Apple Inc.’s AAPL Apple Pay, a mobile payment system, into their ATM network, thereby eliminating the use of plastic cards.

Betty Riess, a press representative for BofA, confirmed that the company is presently developing “a new cardless ATM solution,” which is expected to be available in selected ATMs in Silicon Valley, San Francisco, Charlotte, New York and Boston by the end of this month. Moreover, the facility will likely be available to a larger customer base by the end of 2016.

Wells Fargo, which currently supports Google’s Android Pay, is considering alternative wallets for its customers. Similar to BofA, Wells Fargo is expected to offer the facility initially at limited ATMs, and expand the same to a broader network by the end of 2016.

The ATMs will incorporate near-field communication or “NFC” technology, which will allow customers to carry out their ATM transactions through smart phone-generated PIN codes. Notably, ATM users will be able required to log in to the respective mobile wallets, and then tap their smart phones to the machine’s NFC point in order to confirm the transaction.

Currently, half of BofA’s 16,100 ATMs are already NFC-equipped. Wells Fargo, on the other hand, intends to install NFC readers in at least one-third of its total 13,000 ATMs by the end of 2016.

Apart from BofA and Wells Fargo, JPMorgan Chase & Co. JPM is also headed toward rolling out cardless ATMs in 2016. At present, the company is working on a code-based system that will generate a temporary password to facilitate the transaction through its mobile banking application. Notably, such a feature prevents pass codes from being misused or stolen.

This apart, BofA and JPMorgan intend to incorporate additional features like pre-setting ATM transactions, which will not only help customers save time, but also lower security concerns owing to shorter duration.

Why this Change?

We believe higher dependence on smart phones will help banks capitalize on the growing number of active mobile users. During fourth-quarter 2015, the active mobile user headcount at BofA and JPMorgan surged 8% and 13% year over year, respectively. At Wells Fargo, the annual tally increased 14% from 2014.

Further, the strategy is in line with the industry-wide focus on right-sizing retail network to curb expenses, as well as enhance customer experience. More importantly, smart phones offer better security compared with desktops and laptops, given their relatively higher protection layers.

Bottom Line

In this era of digitalization, customers’ appetite for mobile banking encourages banks to provide sophisticated mobile banking services.

Moreover, since traditional methods are gradually taking a backseat, the financial institutions are making consistent efforts to attract and retain clients by offering better digital experience amid a competitive environment.

Apart from smart phones, banks are also known to have shown interest in Blockchain, the “digital ledger” or the underlying technology behind Bitcoin, given its significant potential to revamp the extensive and complex network of bank payments as well as settlements.

Recently, JPMorgan partnered with start-up firm Digital Asset Holdings to launch a trial project that utilizes the blockchain technology. According to Financial Times, the technology will likely aid in resolving liquidity mismatches in some of the company’s loan funds. Moreover, it is expected to lower cost and complexities related to trading.

Notably, in Dec 2015, The Goldman Sachs Group, Inc. filed a patent application with the US Patent & Trademark Office (USPTO) – Cryptographic Currency For Securities Settlement – for a new cryptocurrency called SETLcoin.

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