The story so far: Last week, India’s central bank announced cardless cash withdrawals at ATMs in the country. The feature will let consumers use Unified Payment Interface (UPI) on their smartphones to withdraw cash from ATMs. All ATMs across the country must enable this feature in their cash-dispensing machines, the Reserve Bank of India (RBI) said.
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How will this system work?
Cardless cash withdrawals are to be authenticated via UPI. So, ATMs are expected to show an option for withdrawing cash using UPI. Once an user selects this option, they can input the amount to be withdrawn. A QR code will be generated on the ATM. Users will then need to scan that code via their UPI app, and enter password to withdraw cash from the ATM. Until now, only fund transfers between accounts were enabled via UPI. With this option, consumers can take cash out from ATMs without a card.
What issues does this tech solve?
According to the RBI Governor Shaktikanta Das, cardless cash withdrawals will enhance security of cash withdrawal transactions. Besides, it would help prevent frauds like card skimming and card cloning.
Currently, only existing customers of a few banks are allowed to withdraw cash without cards, and from specific bank’s ATM networks. However, RBI’s move to allow interoperability in cardless withdrawals will enable users to take cash from any all bank’s ATM.
RBI’s move will invite more players into the payment ecosystem in India to innovate and solve further problems of customers, Swapnil Bhaskar, Head of Strategy, Niyo, a millennial- focused neo-banking platform, said.
What is card skimming?
Criminals steal data from credit or debit cards by tracking a card swiped at ATMs. They pick this information from using a skimming device that reads the card’s magnetic strip. These devices are surreptitiously installed on ATMs. And once the device picks up the data, it can be used to gain unauthorised access to the user’s banking records.
The stolen information can be coded onto a new card, a process called cloning, and be used to make payments and transact with other bank accounts. Problematic ATMs that function intermittently, and the ones located in isolated areas are often used to install such skimming devices.
Fraudsters also install scanning devices on point of sale machines. These devices can stealthily scan a card before it is swiped at the payment counter at a departmental store. This is especially tough to spot if the billing counter is not in the line of sight of the card owner.
These devices are difficult to identify as they appear to be a legitimate part of an existing ATM, or like a regular in-store card reader. It is skilfully fitted to the payment machines.
What are the limitations and challenges of card-less cash withdrawal feature?
Currently, ICICI Bank, Kotak Mahindra Bank, HDFC Bank and SBI allow cardless cash withdrawals for their users.
But, accessing the feature is cumbersome. And the feature has certain withdrawal limits, and the transaction is charged. The cardless feature at these banks work with each specific bank’s app.
HDFC Bank customers are allowed to withdraw up to ₹10,000 per day and ₹25,000 per month using the cardless cash method. And these withdrawals also have a service fee of ₹25 per transaction.
At the moment, it is not clear whether UPI-based cash withdrawals will have the same restrictions and service fee.
Scalability of this feature might be a challenge as it has to be seen how many banks quickly roll it out to their customers, Kumar Shekhar, VP, Member Operations, Tide (India) said.
In cardless withdrawal, the security vulnerability of a card is minimised, but the risk will soon transfer to a mobile-enabled feature. The mobile can now become epicentre of transactions, making it the next target for the fraudsters, Bhaskar said.
What is the future of debit cards?
Issuing cards will not be stopped, as they have several other utilities beyond cash withdrawals. They can be used at a restaurant, shop, or for payments in a foreign country, Das said in a statement.
Debit card is a very evolved financial product and has already gone through a lot of iterations to its perfection. In its further evolution, we are seeing new use cases for debit cards like having standing instructions or EMI payments, Bhaskar said.
“There is still a lot of time for UPI to come to the level of sophistication of a debit card. Moreover, the debit card will continue to serve some segments of the economy which are not comfortable with pure digital payment solutions like UPI or who want to have higher transaction limits,” Bhaskar added.
Published - April 12, 2022 03:54 pm IST
