Smartphones have become an integral part of one's life and do more than simply allowing one to make and receive calls. With the arrival of digital payment services, people often use their smartphone for conducting cashless transactions.

However, when people need to withdraw money, they are still required to use their debit card. This may soon change as several banks are looking to adopt new systems such as cardless ATMs. These ATMs could redefine the way the banking sector functions as it would allow users to withdraw cash using their smartphone.

Leading the way is Wells Fargo, which may soon be followed by other major banks in the United States.

Smartphones Replacing ATM Cards?

Starting Monday, March 27, Wells Fargo ATMs will undergo this modification in the United States.

"The new feature allows customers to withdraw cash at any time, even when they don't have their cards on them," stated Jonathan Velline, head of ATM and branch banking at Wells Fargo.

The bank will be updating all of its 13,000 cash machines with the new smartphone functionality. The bank has already tested this function in select locations. This feature is expected to not only increase the convenience of cash withdrawal but also provide heightened security.

The New Process Of Transaction: How Will It Work?

Customers will need to have the Wells Fargo mobile app installed on their smartphone to use the new functionality. Reportedly, 20 million people already use the Wells Fargo mobile app.

Wells Fargo account holders will have to enter their PIN along with an eight-digit code, which is generated automatically by the bank's app. These codes have a one-time validity and a new one has to be generated for the ensuing transaction.

Those who are unsure about migrating to the new system need not fret as for the time being, bank authorities are not doing away with the debit cards. Therefore, ATMs will still be accepted and one can use them freely.

How Security Would Be Improved

According to Velline, the cardless ATM functionality will help decrease the cases of criminals using credit card skimming methods to conduct fraudulent transactions. These methods aid criminals in not only reading but also storing the data on the cards that have been keyed into an ATM.

To beef up security measures in the cardless system, Wells Fargo has rigid authentication protocols in place.

"Security certainly was a big aspect of the cardless feature and the two-step identification helps reduce the risk of fraud," added Velline.

In 2016, Wells Fargo was embroiled in a scandal, which alleged that the bank's employees had created over 2.1 million fake customer accounts to boost sales figures. This incident affected the bank's reputation and resulted in a sharp drop in new customers who would open a credit card or checking account with the bank. With the new feature, Wells Fargo is optimistic that it will regain lost ground.

Wells Fargo is not alone in this transition to cardless ATMs. Both Bank of America and JP Morgan Chase & Co. are also working toward bringing this functionality customers' way.

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