Bank of America entering the cardless ATM competition

Eliminating the plastic card from ATM transactions is expected to save on security and attract millennials.

Bank of America is looking be the next U.S. consumer bank to take the plastic card out of the ATM transaction.

The company is developing automated teller machines that customers will be able to withdraw cash from using their smartphones instead of plastic cards, according to a person familiar with the bank's plans.

"We're going to spend a lot of money on the ATM network this year," the person said.

BofA isn't focusing on cardless transactions alone in its 2016 ATM upgrade.

It includes enabling ATMs to accept payments from BofA's credit card customers and cashing checks from the machines. It also wants to allow customers to get varying denominations of cash from its ATMs.

The bank acknowledged the cardless initiative and said the pilot program for cardless ATMs will kick off next month in San Francisco and Silicon Valley in California; Charlotte, North Carolina; Boston; and New York. A broader launch is expected in mid-2016.

BofA increased its total number of ATMs more than 1 percent during 2015, to 16,038. Its brick-and-mortar locations fell 2.65 percent, to less than 4,800.

Bank of America is joining the fray of consumer banks that aim to provide better security and quicker transaction times by taking the plastic card out of the transaction.

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In 2015, BMO Harris Bank, the U.S. affiliate of Toronto-based BMO Financial Group, launched cardless ATMs for its customers, and Illinois-based Wintrust Financial began testing an app-based program with its ATMs in 2013. The BMO Harris Bank program has customers accept a QR code on their phone, which they then scan at an ATM to withdraw cash.

On Tuesday, JPMorgan Chase revealed it would pursue a similar initiative, which utilizes near-field wireless communication technology to allow customers to access cash through a code provided to them via smartphone. Other banks to pilot cardless ATMs include Massachusetts-based Avidia Bank and Salem Five Bancorp.

For big banks, the move is also sure to appeal to millennials, who, in greater numbers than other age cohorts, have shunned carrying plastic cards for payments. But the prospect of eliminating the repeatedly used identification code and plastic card consumers rely on to extract cash means banks are reducing the risk to their top line from digital fraudsters.

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"Cardless cash access provides added security to standard ATM use by dramatically reducing the threat of skimming," a process through which thieves use "skimmers" to copy card and ID numbers, an industry report from Javelin Strategy & Research states.

BofA's stock has struggled in what has been a choppy 2016, to date, losing about 20 percent of its value. However, it was up nearly 1.7 percent late morning Wednesday.

Correction: The cardless ATM program will kick off in San Francisco and Silicon Valley in California. An earlier version misstated the location in the state.