Only 12 per cent of Canadian smartphone owners have used their phones to make an NFC payment, according to Visa Inc.
Numbers like that indicate mobile payment technology isn’t catching on with Canadians to the extent that its most bullish supporters believe, but interviews with executives from Visa, the Interac Association, Mastercard Inc., Moneris Solutions, Toronto-Dominion Bank, and Royal Bank of Canada (RBC) suggest the platform is likely to grow.
Debbie Gamble, Interac’s head of digital strategy, echoed the majority of her counterparts when she said that her organization’s number-one goal is helping Canadians securely pay for whatever they want wherever, whenever, and however they please, though she noted that the “incredible” adoption rate of mobile devices across the world and in Canada has made them a leading channel in the emerging payments space for quite some time.
“Mobile has very much been a key part of how we look at enabling our partners, including financial institutions, merchants, and probably most importantly, Canadian consumers,” she said. “It needed to be a core component of our roadmap, and has been for awhile.”
Interac’s support for near-field communication (NFC)-based mobile payment technology, and more importantly Interac Flash, its card-based predecessor introduced in 2014, might also be a key reason Canada is better equipped than other countries for the technology to eventually take off: according to Visa head of technology and digital innovation Derek Colfer, 70.7 per cent of purchases in Canada are made electronically, including credit card, debit card, and mobile payments.
Compare that to the U.S., where only 48.3 per cent of purchases are made electronically, and Japan, where credit, debit, and mobile account for only 20.9 per cent of payments, according to Visa.
Few details, but poised for growth
In a study conducted in June, Google Inc. found that one in three Canadians had used their smartphones to pay for something, though the report’s accompanying infographic did not indicate whether these payments included, say, e-transfers, paying an Uber driver, or using a mobile device to order from an online retailer such as Amazon.
Most of the companies interviewed for this story were similarly vague: only Interac, Visa, Moneris, and RBC offered concrete numbers, and most of their numbers blended mobile with other types of payments, including mobile banking.
Visa remains the exception in segmenting out NFC payments via smartphones from other contactless transactions. It shows that 12 per cent of Canadians have made such a payment at least once, based on Visa Digital Commerce Index Research conducted this year.
Malcolm Fowler, Moneris’s chief product and partnership officer, could not provide mobile payment numbers but told IT World Canada that contactless spending – essential for the technology to function – increased in the second quarter of 2017 by about 36 per cent over last year.
“Tapping’s rate of acceptance has seen triple-digit growth over the last three years,” he said. “So for Apple Pay and Android Pay and other digital wallets, it’s like the railway tracks have been fully laid out and people are comfortable using them.”
Interac’s Gamble said that more than 70 per cent of Canadians are using their mobile devices to send and receive e-transfers.
In an email Sean Amato-Gauci, executive vice president of RBC’s cards, payments, and banking division wrote that more than 84 per cent of the company’s Canada-based transactions are now performed on self-serve channels, including digital and mobile, and that it’s seen a 23 per cent increase in active mobile users over the past year.
Visa’s research as part of its Visa Digital Index Research (comScore – Mobile Wallet and Transactions 2017) indicates that of the 83 per cent of Canadians who own a smartphone, 47 per cent have used them to make a purchase either in-app or in-store.
“We’re seeing healthy increases in payment uses,” Colfer says. “The way that people pay for things at the till is going to change and change very quickly.”
Colfer also noted that Visa’s tracking software doesn’t currently recognize whether a purchase is made on a mobile device, card, or IoT device, though the company’s contactless payment network, payWave, is growing quickly. Since going live in 2012, Visa has added five banks, two operating systems, and 24 mobile devices to the payWave network, and the platform’s penetration in the Canadian market has grown from about 31 per cent last year to more than 41 per cent, he said. That’s according to VisaNet data tracking domestic face-to-face transactions, updated in March 2016 and March 2017.
“That’s a tonne of movement in a very short period of time, and it’s unique to Canada,” he said.
Visa and Interac: A key focus for new programs
Each of the companies interviewed was considerably more eager to discuss exactly how mobile payments are guiding their future plans: Interac’s Gamble, for example, noted that her organization followed up Interac Flash with a mobile version in 2016, and has since followed that with token service provider (TSP) support, which allows businesses to deliver mobile solutions to customers using a financial institution’s wallet app, Apple Pay, Android Pay, “or whatever OEM solution is coming down the pipe,” she said.
Gamble also emphasized that much of the widespread adoption of e-transfers is payment-related: “It’s all payments to consumers, whether you’re paying your friend back for coffee, paying your babysitter for the night or paying for an Uber,” she said.
Visa’s Colfer said that his company’s mobile payment strategy doesn’t focus on mobile devices so much as it does with the Internet’s mobility in general: that is, smartphones might be excellent conduits for payments, but so are other Internet of Things (IoT) devices such as automobiles. And between mobile and IoT devices, the company expects to have between 20 and 30 billion endpoints at its disposal over the next few years.
“It’s already digitized and it’s very easy to port that digital card into another form factor, be it a smartphone or a car,” he said.
When it comes to mobile NFC payments, Interac’s Gamble acknowledged that Canadians are only at the start of the journey, though she added that the company is “really happy with how well the stage has been set for consumers to transact at the point of sale,” and “with how consumers are embracing that opportunity.”
In fact, Interac will be releasing its own mobile solution later this year, she said, and sooner than later is planning to support in-app and browser purchases.
“That really is the next strategic play for us,” she said. “Helping customers order their coffee ahead of time and pick it up in one seamless in-app experience.”
When asked to share numbers, Gamble said it was too early to do so.
“We have only been on the market for months on Android Pay, and a year on Apple Pay, so it’s much too early,” she said. “But the growth we are seeing is really promising.”
Colfer believes that the more often Canadian consumers experience the advantage of mobile payments, the more likely they’ll be to adopt the technology. For example, when Visa launched NFC payments in Canada in 2012, they had a value limit of $50, which was later raised to $100. On mobile devices, that ceiling can disappear, since the digital wallet services such as Apple Pay include consumer identity verification features.
“Because we have that biometrics CV, that $100 limit goes away and instead of $100 at the grocery store, it’s a $9,000 TV at the electronics store,” Colfer said. “It’s not about cups of coffee and burgers anymore, it’s about everything.”
Mastercard: An opportunity to be seized
For Pablo Cohan, Mastercard’s senior vice-president of digital payments and labs, mobile payments lie on the same continuum as the Mastercard-ready refrigerator; digital payment-enabled vending machines; and Mastercard-enabled smart devices like Softbank’s Pepper the Robot.
“The proliferation of new devices is really leading the global consumer to shop wherever and however they want,” he said. “And at Mastercard we’re thinking differently, and designing products differently, and innovating faster than before to accommodate them.”
Calling digital payments – including mobile payments – the company’s biggest opportunity since the introduction of plastic, Cohan said Mastercard’s goal is twofold: To ensure that every device capable of making a payment is enabled to do so, and that it can do so securely.
“We want to make sure that paying digitally is as safe as using your chip card,” he said.
Though Mastercard could not share exact numbers, Cohan said that between the Canadian banks’ support for Masterpass, Apple Pay, and to a lesser extent, Android Pay, Canada has the right infrastructure in place for mobile payments to “grow significantly.”
Globally, he said, the company is seeing growth in what he calls “everyday use cases,” such as transit, taxis, and parking. Another area of growth, he says, is in quick service restaurants, where many customers use their mobile devices to order ahead.
“Canada has never been in a better position than it is now to support mobile payments,” he said. “It’s been a leader in the category by having NFC-enabled terminals for awhile, and now it has the right partners along with the right technologies in the market to move forward. I’m really excited about what’s going to happen in Canada in the next couple of months.”
TD: When mobile knocks, Canada answers – slowly
Like Visa’s Colfer, Hisham Salama, the Toronto-Dominion Bank’s vice-president and head of emerging payments and innovation, was quick to note the advantage Canada’s NFC infrastructure has over his home country, the U.S.
“Having grown up there, I can tell you that many American consumers don’t understand anything except swiping a card and signing,” he said. “But in Canada, NFC has been around for close to a decade, and tapping a card has come to feel natural to Canadian consumers, which is why I think usage here has picked up quite a bit.”
More importantly, Canadian merchants and retailers understand how NFC technology works, Salama said, whereas in the U.S. Apple Pay has only just sparked the movement and, in his experience, confused many American retailers and their staff.
“I still see it firsthand when I go back home,” he said. “You try to use contactless payment and the clerks just don’t get it – they don’t fundamentally understand the process because it’s still not pervasive.”
Like Mastercard, TD could not share specific numbers, though Salama said the company has been “very happy” with adoption and usage rates, and emphasized that it’s important to distinguish between the two.
“Adoption is great, but are customers using the product?” he said.
Low adoption could also be part of the reason TD has yet to join Android Pay in Canada, though both Salama and RBC’s Amato-Gauci, whose bank also has not yet signed up with Google’s mobile payment service, noted that TD and RBC customers can still conduct mobile payments on Android devices using their banks’ respective mobile apps.
“Mobile payments aren’t going to be a fly-by-night banking capability,” TD’s Salama said. “They’re here for the long haul, and are going to proliferate across multiple channels at their own pace.”
With files from Brian Jackson.