Banks use ATM apps to entice millennials

Salem Five became one of two banks in Massachusetts to launch  cardless ATMs this month. Transactions are conducted through a mobile app.
Barry Chin/Globe Staff/file 2010
Salem Five became one of two banks in Massachusetts to launch cardless ATMs this month. Transactions are conducted through a mobile app.


The granddaddy of banking technology, the ATM machine, is getting the hip, mobile treatment as financial institutions try to shake off their stodgy image and appeal to younger customers.

Banks across the country, including two in Massachusetts, have started to upgrade their machines to dispense cash using a mobile application instead of a debit card.

The cardless ATM technology is the latest attempt by banks to persuade customers under 35 to open an account with them instead of migrating to their traditional competitors or the latest Silicon Valley startup that promises to help consumers borrow, manage, and invest money through their phones.

Hudson-based Avidia Bank said earlier this week that it had introduced the new technology to the ATMs at its eight branches in Central Massachusetts. Salem Five Bancorp launched cardless ATMs this month at its 30 ATM machines, primarily on the North Shore.

Twenty banks across the country, mostly regional and community banks, also have gone mobile, although the ATMs still accept traditional debit cards, said Doug Brown, senior vice president and general manager of mobile at FIS, the Florida banking technology firm that makes the mobile software for the ATMs.

More banks will follow in coming months, Brown said, though he declined to comment on the number that FIS has in the pipeline.

The technology allows customers to set the amount of an ATM withdrawal on their phone using the bank’s mobile application. Customers then receive a code on their phone, which is scanned by the bank’s ATM when they get there. The ATM dispenses the cash and sends a receipt over the phone, or it can be printed at the machine.

The technology not only makes ATM transactions faster, but also safer, bankers said.

Banks lose an estimated $1 billion a year globally through skimming fraud, according to industry experts. Thieves install skimmers, tiny devices the size of matchboxes, on ATMs enabling them to read card and PIN numbers and steal them.

Without the need for a debit card, banks expect to see a decline in this kind of fraud.

For smaller institutions, which are seeing customers age and dwindle, offering the latest technology early on can be crucial, industry analysts said. It’s a way to stand out before big, national banks bring the services into the mainstream, said Mary Monahan, research director for Javelin Strategy & Research, a California consulting firm.

“By offering different capabilities that aren’t at the big banks yet, it’s a way for them to fight back, and that’s what they’re doing,” Monahan said.

But it still promises to be an uphill battle for banks to hold onto the next generation of customers. A recent survey by a subsidiary of the media company Viacom Inc. found that three out of four millennials, defined as 18-to-34-year-olds, were more excited about companies like Apple and Google offering new financial products than their own banks.

Still, when they do bank, millennials prefer the larger, national institutions, in part because of the digital and mobile options; more than half use the nation’s four largest banks, according to Javelin.

CarrieAnne Cormier, director of retail operations and strategy at Avidia Bank, said she hopes the cardless ATMs will help the community institution compete for younger customers.

“I’ll be honest, our millennial base is really small, and that’s something we struggle with,” Cormier said. “It’s hard. We’re not cool. We’re an old community bank. We have to change.”

It’s unclear when and if large banks will introduce cardless ATMs. Bank of America declined to comment on whether it will adopt the technology.

“We watch consumer behavior closely and will adapt to it,” said Tara Burke, a company spokeswoman. “We’re always looking at new technologies to make banking easier for our customers.”

Ultimately, cardless ATMs are about ensuring the bank provides potential customers with the tools and services they want, said Dawn Dillon, chief information officer and senior vice president of strategic change management at Salem Five.

“It seems to me everybody is becoming more reliant on their phone,” Dillon said. They’re becoming more a part of our day.”