How do cardless ATMs work?

During the pandemic, you may have noticed that you’re paying with cash less often, or have even stopped using it altogether.

Contactless payments have risen by a third since March 2020, with the majority of banks now offering the option to pay using a contactless card. As a result of the widespread adoption of this payment method, the UK government has increased the limit on contactless payments to £100 from October 2021.

This has been accompanied by the increased adoption of new technology, like mobile wallets and cashless payment systems. The widespread use of cardless ATMs has also increased significantly, allowing you to withdraw money whilst mitigating risk.

What are cardless ATMs and how do they work?

Cardless ATMs look like normal ATMs, but they allow you to withdraw cash without the need for a physical card.

There are several different types of cardless ATMs, so how you take out money depends on which one you’re using.

Some cardless ATMs use near-field communication technology (NFC).  With secure apps installed on your mobile phone, you can access your digital wallet to withdraw the money from a cardless ATM  by simply tapping your phone against the NFC symbol and entering your PIN.

Other ATMs rely on quick response technology (QR).  Here, you first set the mobile withdrawal up on your mobile banking app. This pre-decided amount gets shown up on your phone screen in the form of a QR code that you show to the ATM QR code reader, and the cash gets delivered.

Both these innovations cater to customers who don’t like the risk or hassle of carrying their debit card.

Cardless ATMs are also not restricted by the usual limit, however the maximum amount you can withdraw is dependent on your bank. Major banks across the US and UK have started offering this feature with their accounts, with more being expected to follow.

How secure are they?

The majority of cardless ATMs use NFC to send data between the bank’s NFC-enabled terminal and the customer’s payment device.

This means that when you tap your mobile to pay, your account information and other details needed to process the transaction are tokenized and sent to the bank’s terminal. Tokenization means that the data won’t include your name, card details or any other important information linked to your account. Instead, it will be encrypted to allow the payment to be authenticated and processed, keeping your card details secure.

Other platforms such as PayPal have an app that generates a QR code for the customer to scan. Users can then enter the chosen amount and card PIN in the app to complete the transaction.

As the number of contactless payment options continues to grow, we could see banks trialing other methods of verifying transactions, such as biometric identification, in order to keep accounts secure.

Interested in learning more about innovative technology? Check out some of our other posts!