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The Age of Electronics: US Banks Replace ATM Cards with Smartphones

In recent years, the smartphone has practically rendered obsolete just about every gadget imaginable—The camera, camcorder, voice recorder, music player, television, computer, old fashioned pen and paper… even flashlights.

But just when you thought it couldn’t possibly replace anything else, it does.

According to a press release by Agence France-Presse, three of the biggest banks in the US (Wells Fargo, Bank of America, and Chase) are already in the process of replacing their ATMs with ones that use smartphones to withdraw money instead of cards.

How do card-less ATMs work?

Currently, customers will be able to access card-less ATMs with their smartphones using near-field communication (NFC) and by inputting codes from their bank’s mobile app.

Bank of America and Wells Fargo are opting for NFC, which is the same tap-to-pay technology used in Apple Pay and Android Pay. You just sign in to your mobile wallet or bank app, and then physically tap your smartphone on the ATM and enter a PIN to withdraw cash.

While there are already ATMs with NFC readers – like more than half of Bank of America’s 16,100 ATMs – it’s still very rare. But that won’t be the case for long, as Wells Fargo estimates that more than a third of its 13,000 ATMs will be equipped with NFC readers by the end of the year.

Chase, on the other hand, has announced that they’ll be using a code-based system for now, until their NFC system is ready to roll out. Unlike the NFC system, this code-based system only requires a software upgrade on ATMs.

Using the code-based system, customers will first request a seven or eight-digit access code using their bank’s mobile app, and then type those numbers into an ATM before they can use it. The codes can only be used once and expire in 10 minutes to prevent it from being stolen or misused.

Are card-less ATMs safe?

Ed O’Brien, director at bank consulting firm Mercator Advisory Group says yes – even more than we think it is.

“The magnetic stripe has an issue of security. Someone can duplicate a magnetic stripe, which does happen all too often,” says O’Brien “But if a phone is stolen, a thief would have to get past a few layers of security to withdraw cash from an ATM. They’d need to unlock the phone, sign in to the mobile bank app or mobile wallet and, in most cases, know the customer’s PIN.”

Stealing bank information using your card’s magnetic stripe is known as skimming. Criminals install tiny devices on ATMs that can clone your card by duplicating its magnetic stripe. It’s estimated that banks have lost some $2 billion in 2015 from skimming.

Other security experts also point out that using a smartphone lessens the time a person will spend at an ATM to around 10 seconds from the usual 30 to 40 seconds, giving customers more physical security because transactions are faster.

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