Canada’s Consumers Not Yet Ready to Abandon Cash

Canadian banks and telecommunication companies are rapidly introducing smartphone digital wallets, but it will take several years for consumers to fully abandon cash in favour of the smartphone according to speakers at the Mobile Money Canada 2012 e-commerce conference in Toronto.

Digital wallets will allow consumers to make cash and credit card transactions using their smartphones by swiping the phone past a sensor and then entering a PIN number to complete the payment.

Apple’s decision to not embed chips in its new iPhone 5 that would have allowed the phone to communicate with retail payment devices disappointed industry players presenting at the conference, who cited it as one of many barriers to full acceptance of the payments technology. Apple said it had decided to not include the technology as it was not obvious that it was the proper solution for contactless payments.

Also influencing the adoption of the digital wallet is a slow take-up of payment technology by retailers, questions about which technology will become dominant in the industry, and the time it will take for banks and telecoms providers to agree the deals necessary for consumers to switch over from cash payments.

“Mass adoption will happen when every bank in Canada and every single mobile network operator have an agreement on secure (access),” said Derek Colfer, business leader of global mobile product innovation at Visa Canada. “That means every large financial institution, that means every small financial institution.”

Canada’s banking industry is dominated by six major players, but hundreds of smaller foreign and domestic lenders and credit unions also offer payment products.

The country, however, is considered an ideal test case for the mobile wallet technology, with high smartphone penetration, users who upgrade frequently, and widespread use of systems such as Interac, a debit payment network owned by a group of Canadian financial institutions.

Allen Wright, vice-president of product and service management at Interac, agreed that ubiquitous integration will take time, and said the onus will be on providers to come up with products that will lure customers over to the new technology. “I think that the notion that the consumer is looking for a different way to pay is a bit of a flawed logic,” he added.

Canadian banks are already preparing to compete in the nascent market. Canadian Imperial Bank of Commerce is in an advanced field test of a digital wallet it is developing with Rogers Communications, and plans to launch it this year, said Todd Roberts, a senior vice-president (SVP) of card products at Canada’s fifth largest bank.

Bank of Nova Scotia plans to have a platform out next year, the bank’s head of emerging payments, Heather MacMillan said. Royal Bank of Canada, which was not represented at the conference, has said it expects to launch a wallet next month.

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