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The trusty bank card has been with us for half a century now – Barclays bank started issuing cards to their customers in 1967. But is time running out for cards as customers demand more services from banks via their smartphones?
Cash withdrawals at ATMs in Australia are now at the lowest level for 13 years. It seems that customers are finding they can manage without cash and most banking services can be performed using online services or apps.
The one thing that customers never leave home without is their phone and banks are realising this. The smartphone is moving on from being just a hub of personal communication to be the central control point for payments too. But will this spell the end of card transactions and cash?
Cash is certainly becoming harder to use in many locations. Anecdotally, I have found several small businesses, like coffee shops, that actively discourage customers from using cash. They don’t want to be managing floats for change so they ask people to use their debit or contactless card instead. But many banks are looking beyond the cash against card question and are exploring how the phone might completely replace both cash and card.
There is a convenience for customers. If you lose your wallet or leave it at home when you go to work, it’s likely that you will still have your phone. Making phone payments easier can reduce the size of your wallet, and possibly make the idea of carrying a wallet redundant. But then, it’s possible that you might also lose your phone.
Moving card payments to phones eliminates card fraud, such as skimming, where cards are cloned by criminals and accounts cleared out. This was largely controlled by moving to cards with chips and in some markets there are two-stage authentication systems for cards, rather than just a single PIN. However, any visitor to the USA knows that many card transactions there still rely just on the magnetic stripe and a signature.
Several banks have been exploring how to use near field communications (NFC) to remove the need for an ATM card to access cash. By using NFC, the cash machine can connect to the phone of the customer and security verification can be applied using several questions – not just a PIN. Bank of America and Chase have both seen considerable customer interest from happy customers who no longer have to carry a card to access their cash.
Wells Fargo offers a one-time PIN system where the customer uses their phone to request a PIN, which is then valid for just 30 minutes at an ATM. At Banco Bradesco in Brazil, the ATM scans the hand of the customer, dispensing the need for a card or phone system to verify the identity of the customer. Bradesco has reported over 700mn ATM uses without a single case of fraud.
The end of the bank card era might be coming soon, not just because customers find it easier to just carry their phone, but also because all the security issues associated with cards and fraud vanish once customers move to very secure phone-based payment systems. The chance for fraud is reduced and the customer has a better, and easier, payment experience. Perhaps, it really is the end for cards in the near future.
What do you think? Will fraud and smartphone payment systems really end the bank card era or do they still have uses that cannot yet be replicated on phones? Look forward to your comments.