The mobile wallet sector in Canada is only in its infancy, but as with other markets around the world a range of players are lining up to grab a slice of what is expected to be a lucrative segment of the payments sector.
Some of Canada's leading wireless carriers, Bell, Rogers, TELUS, Koodo and Virgin Mobile, have united to offer their customers a mobile wallet known as suretap.
The Suretap Wallet enables smartphone owners to make secure mobile payments using a wide range of virtual and encrypted credit cards and gift cards. Suretap – which was developed by the Rogers telecommunications carrier but is now independently owned – says its mobile wallet can be used at any retailer in Canada or around the world that accepts contactless payments.
The release comes ahead of the launch of Apple Pay in Canada, which after some delays is now expected later this year or early next.
The mobile payments sector in Canada is highly fragmented with several different banks offering their own solutions and only one bank, CIBC, backing suretap.
Duncan Stewart, director of technology, media and telecommunications research for Deloitte Canada, says the Canadian mobile wallet sector is “not merely fragmented, it is not even nascent, it is pretty much non-existent”. Deloitte estimates that fewer than 1 in 1000 Canadians would be using mobile payments in stores once a month or more.
Stewart says the entrance of Apple Pay into the market could change that. “We believe that Apple Pay is very much a part of what will drive mobile payments in Canada,” he says.
This is because 40 per cent of Canadians use an iPhone and they tend to be younger and more technologically savvy, placing Apple in a strong position.
“Those people who are heavy phone users, who have their phones surgically attached to their hands, will pay with the device that is at hand merely because it’s easier to reach out and tap with their phone than it is to go into your pocket and retrieve your wallet,” says Stewart.
“And we are not suggesting that in 2016 that means they replace the wallet, but it is the first step on the journey to the digital wallet – get people used to paying with their phones and it becomes easier to do it and then you have one less reason to carry that wallet around.”
Banks to compete, then cooperate
Deloitte had initially forecast that by the end of this year about 5 per cent of Canadians would be paying with their phones once a month or more, but Stewart says that with Apple Pay pushing back the date it enters the local market “there’s no way that’s going to happen”.
“Is that number possible by the end of 2016? Yes, I would say. We may have to shift it back one year but it’s still certainly within the realm of possibility, if not probability,” he says.
Stewart says it won’t be suretap and Apple battling it out for supremacy. “We see new technology adoption as almost always being driven by multiple platforms, each of them finding their own niche, driving adoption, driving usage, competing with each other. It will be both suretap and Apple and Android, all working together to make mobile payments popular, habitual, and successful,” he says.
Robert Smythe, an associate at tech researcher IDC Canada, says the phone companies originally thought they would have control over mobile wallets because they owned the telephone SIM cards. However, host card emulation – which provides exact virtual representation of various electronic identity cards using only software – changed all that. Suretap is their attempt to try to gain control of the mobile wallet before Apple enters the market.
However, Smythe thinks it unlikely that banks will give up their customers easily.
“The banks will play around, compete with each other, but eventually at the end of the day they’ll work together and come up with a solution. I think they will conclude that they need to integrate with their mobile banking application,” he says.
He expects banks will work with Apple, Google, Samsung and others who control the hardware and they might use Suretap as a lever in negotiations with the tech companies.
The banks have another advantage in Canada. Surveys show that consumer trust levels of banks sits at around 80 per cent, compared with 23 per cent for their mobile phone companies.
Source: IDC Canada Financial Inisghts, 2015
Source: IDC's Global Consumer Banking and Payments Channels Survey, December 2014
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