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"It's the most novel thing anyone will see at the conference."
That's a bold statement, to be sure, but one that Richard Crone makes without a moment's hesitation. Crone is CEO and founder of Crone Consulting LLC, a firm that helps companies convert payments from a cost of business into new revenue-producing lines of business. In the opening session at the ATMIA US conference, not only will Crone present that "most novel thing" — Mobile Cash Access — but he'll also give attendees an opportunity to try out the technology for themselves in simulated ATM transactions and live POS transactions.
In a telephone interview last week, Crone provided a fly-by of his session, "Mobile Payments and Mobile Cash Access: How Smartphones Activate Advanced Functionality at ATMs." The following is a slice of the mobile spectrum he'll address in the session. At the end of three hours, he says, "They will know all the ins and outs of [mobile] … Everyone's been asking where the current stakeholders of ATMs play in mobile payments. And this session will answer that question for them definitively."
Q: What problem does Mobile Cash Access address?
A: Well, if you think about cash access today or really ATM access, it is controlled by a magnetic stripe and pin. It's identifying the personal account number and the personal identification number for the strong authentication of the consumer before they access cash. It could be a chip and pin as well.
The thing that most ATM deployers take completely for granted and don't even think about is that the 16 digits are owned and licensed by Visa and MasterCard … or the other cards — Discover and American express. Every card issuer pays a royalty for the use of those numbers. On top of that every issuer is the merchant of record for cash withdrawal. They're the ones that actually pay the interchange to the network.
Q: Okay, so it solves the problem of paying an ATM interchange fee. How?
A: All right. So here's where mobile cash access comes in. We're actually going to demonstrate for the first time in the marketplace technology (from a company that's in ultra-stealth mode) that will allow you to access the ATM using a mobile smartphone app. It does not require any new hardware on the ATM and it doesn't require the use of Near Field Communications or NFC in the phone. It's a software only approach. And the disruptive aspect of this is that a bank can now use their mobile banking application to open up their ATM and provide not just cash access but a whole list of other advanced functionalities, like tapping into the processing power and the network connectivity and the strong authentication of the mobile application rather than relying on a dumb card.
Q: No bankcard, no interchange fee? Nice.
A: Right. The key here is that you're leveraging the strong authentication of the mobile banking app and the fact that the bank owns the authentication credentials themselves, so that they actually do an "on-us" transaction. They cut the networks out for cash access. The other thing is that they can provide cash access to accounts that would never issue a debit or a credit card and actually bring in a whole new set of customers for using their ATMs.
That is huge because the ultimate utility for a funded account of any kind is cash access. But there's a bunch of accounts that are landlocked and don't have access to cash. And so here we have the ultimate win-win. We have banks with hundreds if not thousands of ATMs that are not a break-even because they just need more transaction activity and we have a bunch a funded account holders who want access to cash from either their brokerage or their mutual fund or their gift card or their payroll account, or even their Internet payment scheme which have idle balances resting. And the banks now provide access by using the mobile app and not having to issue a royalty-based debit or credit card in order to get access to cash.
Q: Oh … so I could actually get ATM access to that money I've had sitting in PayPal forever?
A: Terrific example, because our guesstimate is that about half of those PayPal accounts have idle funds in them. And PayPal makes it very hard to get the money out. So here's the win-win. PayPal could provide more utility to the account and people are more likely to use it for funding if they know they can get the cash out.
And so if I was Citibank and I wanted to make mobile cash access available to PayPal accounts (and we're speaking in hypotheticals here and not implying that any of these brands are doing any of this) so if I wanted to make that available to them I could say, "PayPal, we'll make this service available to you completely for free. All we want to be able to do is charge the convenience fee, the surcharge that we charge now for anybody that's a foreign ATM cardholder. And you charge whatever you want." So PayPal could decide to give it surcharge-free or they could charge a fee on how they wanted to regulate the demand and the velocity of funds out of their account. It's a really big idea and something that the card associations cannot limit, cannot control.
Q: And it lets banks out of the mobile wallet slugfest with everybody fighting over what piece of the action they get ...
A: Good observation. In fact, think about it from the bank's perspective. They're working very hard to sign up customers to use their own mobile banking app. In fact, mobile banking is growing two to five times faster than Internet banking. We have some clients who, by the end of next year will have more customers connecting with them through the mobile banking interface than through the wired Internet interface.
So this is the new touchpoint for them and obviously there's big advantages for signing up their customers for their own mobile banking app. They can reduce calls to the contact center, more self-service, but as interesting as that is, the big benefit is injecting mobile payments and self-marketing into the mobile banking app. That's where they're going to make the big money. In fact, we project that they'll make at least two, maybe three times more than they're making on a total revenue basis from interchange and overdraft fees and interest income from the advertising and offers that come before, during and after every payment.
And so what the bank wants you to do is use your mobile banking app to locate an ATM, use your mobile banking app to check your balances. Use your mobile banking app to get offers and self service. But the last thing they want you to do is to close their app and open up a Google wallet or an Isis wallet or a PayPal wallet right before purchase. If that's the case then they lose the impression and interaction of making their customer contactable right before, during and after the transaction.
Q: This could go beyond just cash access, then, right?
A: You're using your mobile phone first to get cash. Cash is not going to go away any time soon. The first and foremost use gate is authentication and opening up the machine. What we're using this to do is to facilitate advanced functionality through the ATM, but doing it in a way that doesn't require a hardware upgrade.
The last thing the ATM deployer wants to do after being wounded by ADA for the last several years is to upgrade their ATMs with NFC readers. They just don't want to do it, and the fact of the matter is that they don't have to. Because what I'll show you is an approach that uses the existing capabilities of the phone, doesn't require any new hardware and it's a minimum disruption to the current infrastructure that gives them maximum capability. The same approach can be used at the physical point of sale.
Q: It sounds great, but how do you get people to adopt it? That's always the issue isn't it?
A: It is. All new payment types start first with merchant acceptance. The key here is that the banks can actually lead the charge because they're the merchant of record for the ATMs. That's where mobile cash access comes into play for them. It's a unique opportunity for them to lead their merchant base into mobile payment by using mobile cash access and prove the concept for themselves. And at the same time, saving the cost and effort and delay of having to do truck rolls to their ATM fleet to update it with NFC.
For more on this visit the ATM research center.
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