Canadian Banks Intent on Mobile Payment Systems

In Canada, the game to corner mobile payment systems and the Digital Wallet is being played seriously. PayPal and Square are present but the 800 pound gorilla may have just entered the ring. Canadian banks are presenting merchant accounts  capable of handling tap to pay transactions competing directly with Square and PayPal. Royal Bank of Canada has launched a mobile payment solution to provide contactless payment using Near Field Communication (NFC) enabled smartphones and tablets. Shoppers can simply wave their smartphone over a cash register or payment terminal and be on their way. No more swiping a credit card into a terminal or punching keys into a terminal and no more fumbling with cash or coins to settle a payment.

It’s not just banks looking to get in on the action, Canadian Imperial Bank of Commerce or CIBC and  Rogers Communications Inc. entered a venture last November to replace credit cards with smartphones. The digital wallet prototype from RBC will appear on devices from Rogers Communication rival BCE in Toronto. Dominion Bank and Scotia Bank are testing their own mobile payment solutions, Scotia’s is called My Mobile Wallet. CIBC and Rogers launched their own mobile wallet service in November as well. With carrier based transactions coming to the field Rogers and CIBC could be a force to reckon with.

Banks seem to be the most natural fit to dominate mobile payment solution offerings because of their longstanding relationship with customers and a sense of trust and security have been formed. Their traditional dominance in electronic payment networks that includes online banking and financial services. There is a culture of trust in our banks in terms of security, financial stability and viability. Additionally, banks are on the cutting edge of technology security and encryption advancements and often invest in those areas to strengthen themselves.

Canadians, like Americans have become familiar and comfortable using physical credit cards and that familiarity along with security makes adoption of mobile payments slower to take hold. In more rural areas where access to a bank is scarce, mobile payments are the preferred method of payment. Canada has a unique opportunity to see mobile contactless payments as a preference of payment methods. Much like in America, Canada has yet to see that magic potion take off in the payment industry leaving an opening for companies to provide winning product and service to take a commanding lead.

eBay’s PayPal and Jack Dorsey’s (of Twitter fame) Square are vying for top spot in Canada’s mobile processing playing field. Square offers a mobile credit card reader for laptops and tablets including Apple’s iPhone and iPad through the headphone jack of the device. PayPal announced that it expects to process $20 Billion globally in mobile payments this year alone. Although more costly than other merchant account service offerings, PayPal has shown dominance in Canadian credit card processing, perhaps even globally. In Canada PayPal also offers Here. A thumb sized credit card reader and an app for iPhones as well as Android smartphones and tablets. Retailers can also offer a mobile point of sale solution that incorporates near-field communication (NFC) or short range wireless interaction to initiate the transaction at the register. iPhones and iPads currently lack NFC communications so they currently can’t participate in NFC based payments. To accommodate this weakness some merchants are enabling the scanning of 2D barcode in the form of a QR Code enabling both iOS and Android devices as well as BlackBerry smartphones and tablets.

Canadian travel agency agents also stand to gain as ticketless travel and mobile check in becomes a norm. Public transit are releasing new apps that show routes and the current location of buses, trains and car services. Mobile users booking travel itineraries are also seeing growth as more users adopt the second screen mentality. Travel agents in Canada can expect the trend to continue well into 2017 when mobile payments for travel is expected to peak. Canada based travel agency agents should be gearing for the mobile revolution by adopting mobile payment solutions to provide travelers more convenient ways to pay for their travel tickets face to face or across the globe.

Analysts say that PayPal and Square don’t stand a chance long term with Canadian banks because of the longevity and nature of relationships Canadians have with their financial services institutions. The more fragmented companies become the less adoption you have and banks know when emerging technology is ripe, and they know when to strike. The Canadian Bankers Association released their mobile payment guidelines last year and set the rules for banking services to capture the new market. They debated and agreed on a set of open standards that include inter-bank transactions which are set to circumvent draft agreements with the telecom industry. One thing is sure, Canadians are becoming more comfortable and secure in a cashless world and consumers are just beginning to whet their appetite.