Merchants wary of mobile-payment costs

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Canada's wireless industry is deepening its push into the nascent market for mobile payments, fuelling tensions with merchants over the prospect of higher fees.

The Canadian Federation of Independent Business, which represents more than 109,000 small business owners, warned Wednesday that mobile payments are poised to become the "next big fee palooza" for banks, credit-card companies, payment processors and wireless carriers.

Citing a "breakdown of trust" between small businesses and the payments industry stemming from the introduction of premium credit cards that slap merchants with higher processing fees, CFIB is pushing for amendments to the federal code of conduct governing payments to give retailers a choice to refuse mobile-based transactions.

The group wants a requirement for "express consent" – meaning that merchants would not be obliged to accept mobile payments just because they have signed up for so-called contactless credit-card transactions. Canadians are already in the habit of using contactless terminals to make low-amount credit card purchases with MasterCard PayPass and Visa payWave.

Those same devices are also equipped to process mobile payments. CFIB worries the industry eventually will introduce new mobile-based fees, making it hard for merchants to later remove it as a payment option.

Banks and telcos, however, say they have no plans to introduce new mobile fees but worry that an express consent provision would slow down the adoption of mobile payments. Discord between the two sides is growing because Finance Minister Jim Flaherty is close to unveiling final code provisions that will cover mobile payments.

"We believe strongly that there will be soon mobile fees attached to this – that mobile players are going to want to get a slice of the revenue as well," said Dan Kelly, chief executive officer of CFIB, at a payments conference in Toronto.

Rogers Communications Inc., which has more than nine million wireless subscribers, became the first telecom to announce a digital wallet partnership with a major bank last year. But Mr. Kelly argues the current fee model being used by Rogers and the Canadian Imperial Bank of Commerce (whereby the bank pays the carrier "rent" to store credit card credentials on SIM cards) is unlikely to be the long-term revenue sharing model for the industry.

"I am convinced that the mobile players will soon have their own fee, which will be a fourth hand in the merchant's pocket and ultimately the consumer's," he said.

That heightened concern came on the same day that Rogers announced it is offering a broader array of smartphones that are certified for mobile payments, while Telus Corp. confirmed that it, too, has plans to offer a digital wallet.

Jeppe Dorff, vice-president of transaction services at Rogers, said it is supportive of the merchants' concerns, adding the fees for mobile payments should not get any higher. Still, express consent is a "worrying kind of notion" because it could slow the roll out of mobile payments– a view echoed by the Canadian Wireless Telecommunications Association.

Todd Roberts, senior vice-president of business innovation and growth at CIBC, said he is confident that Mr. Flaherty will adopt a "reasoned" position on express consent.

"If we see explicit charges that merchants have to pay for, of course they should have the right to exercise their judgment. But if we're not actually changing the costs to process [mobile payments], express consent, from our perspective, doesn't make as much sense," said Mr. Roberts.