The push for universal adoption of mobile payment systems, the emergence of the mobile wallet, and Near Field Communications (NFC), have made for some of the biggest stories in mobile this year.
Handset makers like Samsung and Research In Motion (RIM) have released their first smartphones with built-in NFC capabilities in anticipation of potential glide-and-go payment infrastructures.
The prospect of using smartphones as a way to pay and, beyond that, as a replacement for various ID, transportation, discount and rewards cards, isn't only timely, it seems like a natural progression of technology.
But technology is only one piece of a larger whole. Smartphones and supporting mobile payment terminals need to be rolled out. The systems need support and backing from financial institutions, including both banks and credit card companies.
Darrell MacMullin, Managing Director, PayPal Canada: "Customers are not just looking to adopt a new shiny piece of technology. They may try it, but to truly adopt something and embrace it as kind of the norm, it needs to provide a lot more convenience, a lot more value to them."
Mobile payment initiatives also need to gain the confidence of retail outlets, which will have to make investments in upgrading to NFC mobile payment terminals, the software and payment infrastructure that these run on, and retraining of staff to support the new system. And customers also need to get on board.
Why bother? Aside from the convenience of being able to use a smartphone that's always with you to transact, and the extra security, there's also the speed benefits for retailers. A typical mobile-payment purchase takes about six seconds; two-thirds faster than the time it takes to complete a traditional credit card or debit purchase.
David Heatherly, Vice President of Payment Products at The Bank of Montreal, predicts that overall, mobile payments can improve sales between 25 and 40%.
"Retailers want to move customers on quickly and move on to the next customer," he explains.
BMO introduced its own touch-less payment technology last September, which allows for "mobile" payments through a MasterCard PayPass sticker that's adhered to the exterior of the phone. "This is the future, and that future is approaching quite rapidly," Heatherly declares.
The ideal, of course, is to eventually do away with stickers and cards and embed NFC technology right into the handsets themselves; a move that, as earlier noted, many manufacturers are already working towards.
MasterCard's PayPass Gains Adoption in Canada
Heatherly says enabling mobile payments can reduce retailers' costs for handling cash or credit cards. Retailers can spend between 1.5% and 2% of their sales on handling, storing and depositing cash.
Osama Bedier, Vice President of Payments, Google: "I believe there will be multiple wallets, and I think that's good for consumers, good for the space."
There are also some security benefits for users. Through MasterCard's inControl platform, PayPass contactless tag users can monitor their spending by opting to receive e-mail notifications that report the merchant and exact location of each PayPass purchase they make.
"Canadians tell us they prefer simplified, electronic payment methods," says Scott Lapstra, Vice President, Emerging Payments for MasterCard Canada. "Given the prevalence of smartphones, and a quickly expanding network of PayPass merchants, we think mobile PayPass is poised to take off as a popular payment method for Canadians."
Lapstra adds that PayPass transactions now account for almost 10% of all MasterCard credit card transactions in Canada, with the average PayPass transaction costing just over $40. Fifty per cent of those transactions are for purchases of $25 or less.
Retailers On Board
Bookseller Indigo, which runs Chapters, the World's Biggest Bookstore, Coles, Indigo, IndigoSpirit, SmithBooks, and the Book Company, recently added the ability to accept card or phone payments through the MasterCard PayPass contactless technology in its stores.
"Our goal is to enrich the lives of our customers through the service we offer and our unparalleled assortment of books, toys, gifts and lifestyle products," says Kay Brekken, CFO at Indigo Books & Music Inc. "This partnership with MasterCard will allow our customers to enjoy greater convenience when making their in-store purchases."
"We know that Canadians' use of cash for smaller-value purchases is based on their desire to get in and out quickly when buying day-to-day items like gas, a quick lunch or a coffee," Heatherly says. "PayPass is part of the movement toward a 'cashless' society. It is faster and more convenient than cash or debit, which requires a swipe and PIN."
Michael Abbott, CEO, Isis: "While mobile payments will be at the core of our offering, they are only the beginning. We plan to create a mobile wallet that ultimately eliminates the need for consumers to carry cash, credit and debit cards, reward cards, coupons, tickets and transit passes."
Several other retailers already offer, or have recently added, contactless payments to their stores. Some of the most recent additions include Starbucks, hmv Canada, and Sears Canada; the former through its own app-based system (more on this later), and the latter two via the Visa payWave system.