Canada might be a market with the ideal conditions for digital wallets to see widespread usage, but there’s still some major hurdles to be overcome before consumers can really opt to leave their leather wallets at home, according to a group of panelists with a stake in the success of digital wallets.
An event organized by the Information Technology Association of Canada (ITAC) saw perspectives on the digital wallet shared from a  telecommunications carrier, a bank, a credit card firm, and an analyst. The picture painted by the group shows just how complicated the path to create a digital wallet product can be – not only must players from across different industries collaborate to deliver a service that requires top-level security and access convenience for the user, but they must sometimes work with firms that are normally seen as the competition.
But it’s happening in Canada, perhaps more so than anywhere else, says Michael Bradley, NorthCard Inc. In particular because Canadians are avid users of online banking and studies show more than two-thirds of Canadians use financial apps on their mobile devices.
“Of any market around the world, Canada is uniquely positioned to be successful in this space,” he says. But “the buck stops at consumer adoption. It’s too early to say what consumer adoption is going to look like because of all the friction points.”
Those friction points include three main hurdles: technology enablement (phone must be able to act as transaction devices), merchant adoption (they must have the right POS to accept payments from smartphones), and consumers find enough value to be convinced its worth it stop using their normal wallet and start using a digital wallet.
Creating that value is something that Jeremy Bornstein, head of emerging payments and acquiring at Royal Bank of Canada (RBC) has been thinking about. In January, RBC launched a new version of its mobile app that added the option for customers to pay with their RBC Interac Debit or Visa Credit Cards. In Spring 2014 RBC added MasterCard to the RBC Wallet, providing customers with the choice of credit. The app’s payment functions are available for Android users on the Bell Mobility network.
He says the next version of that app will display the customer’s balance on the front screen, since RBC notices so many customers like to check their bank account balance before they use their debit card to make a payment.
“Although we can never really provide the value a retailer can provide… we can approximate that experience,” he says. “We don’t have anywhere near the adoption that Starbucks has. We think its phenomenal because it provides payment and loyalty.”
RBC sees that it’s becoming very important for every retailer to offer a mobile app to consumers, Bornstein says. But it thinks consumers will have a limit for how many of those apps get installed to their device, and will want to use RBC’s app to fill in the gaps for payments.
NFC is the mobile payments technology of choice – for now
Rogers Communications is considering the technology used to make mobile transactions possible. At the moment the carrier is leaning on near-field communications (NFC) to facilitate payments through its Rogers suretap app, which offers a connection to a prepaid MasterCard account. Since the payment method works at the touch-to-pay terminals installed at the majority of merchants in Canada.
Canadians are ready for the mobile wallet, says David Robinson, the senior vice-president of financial service for Rogers Communications. Two and a half million Canadians use mobile app for daily banking and 17 per cent have made a mobile payment in the past 12 months, he says.
“What we’re trying to do is make the smartphone the centre of everyday transactions,” he says. “This is being done with or without us.”
While NFC is the technology of choice for Rogers and other members of the panel, Robinson recognizes that new technologies will emerge and Rogers will need to adapt to them. “If we don’t embrace global technologies than we’re missing out on 90 per cent of the market.”
Brian Weiner, vice president of strategy and digital at Visa, also pointed out even contactless transactions on plastic cards are currently rarely used, constituting about 10 per cent of face-to-face transactions. “You’d hope it would be higher but it’s just not there, so it just goes to show how long the runway really is.”
But NFC shouldn’t be dismissed, Bradley says. “I wouldn’t say that just because it’s been around a long time and hasn’t found ubiquity, that necessarily spells its doom.
“Chip and PIN technology is from the 1970s and took eight years to roll out in Canada.”
Alternative methods in the market such as QR codes and bar codes represent more of a distraction than a real payments alternative, he says.
