Explained | How will cardless cash withdrawal system at ATMs work?

Cardless cash withdrawals are to be authenticated via UPI.

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.

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 Once an user selects this option, they can input the amount to be withdrawn.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 .