Forgetting your wallet at home is slowly becoming a problem of the past – as long as you have your phone.
Last year, a handful of Canadian banks, telecom companies and some large retailers pushed into the Canadian mobile wallet technology scene, all trying to corner the market on getting consumers to pay for goods and services with the tap of their smartphones.
Not surprisingly, surveys show that younger generations are more eager to use mobile payment technology, seeing it as faster and more efficient.
According to a 2014 Deloitte global mobile consumer survey prepared for Thomson Reuters, half of young people aged 18-24 said that they would use their phones for in-store payments if it was an option, while a third of those aged 25-34 responded the same.
The report also found that although only 7 per cent of respondents across all age groups said that they had made an in-store payment with their phones in the past, half had already used phones to check bank balances, while over a third had made an online purchase.
"Canadian smartphones are already being used to check balances, transfer funds and transact online, which indicates that consumers are comfortable with using their phones to handle money," said Duncan Stewart, a director at Deloitte Canada in a similar report, adding that 2015 could be the "tipping point" for smartphone in-store payments.
"2015 will be the first year in which all of the requirements for mainstream mobile payments - satisfying financial institutions, merchants, consumers and device vendors - have been sufficiently addressed."
The launch of Rogers' Suretap Wallet last April and TD Bank Group and PC Financial's unveiling of the UGO Wallet are just two of the Canadian players who have come out alongside the entrances of Google Wallet and Apple Pay in the U.S., both of which are unavailable in Canada.
According to a 2013 PricewaterhouseCoopers survey, the number of users of mobile payment solutions in Canada will reach 448 million by 2016, up from 160.5 million back in 2011. In the same time period, transaction value of mobile payments in the country is expected to balloon over 500 per cent to $617 billion.
But while the growth has been exponential, adoption hasn't been as quick as some anticipated.
Mobile payment still faces hurdles, such as having to grapple with limitations to near-field communication (NFC), the technology that enables smartphones to communicate with merchant point-of-sale machines.
According to a study on mobile payments released by Technology Strategies International, the lack of smartphones with NFC, along with the scarcity of mobile wallets that offer credible payments solutions to consumers, has continued to be a problem.
Only one in six smartphones in use today have NFC capability, said the report, though those numbers are expected to rise to half of all Canadian smartphones by 2018.
There are also lingering concerns about the security of mobile payment transactions, which makes trust of payment providers a key issue. A GfK study showed 55 per cent of Canadian respondents across generations were worried about the security of their personal information with mobile payments.
"As usual, Canadians are much more conservative with financial matters, including payment technology. In order to encourage widespread acceptance, financial services companies and device makers will need to come to terms with Canadians' concerns about security and their sense that mobile payments may just be a gimmick," GfK Canada vice president Stephen Popiel stated in releasing the survey.
Experts say part of the reluctance among some consumers and merchants is the growing number of mobile wallet options. Many are unsure which service to use and are holding off until a clear winner emerges.
In the U.S., for example, Apple Pay has entered partnerships with major American banks and retailers such as Chevron and McDonald's. However, another group, called Merchant Customer Exchange, which includes retailers such as Wal-Mart and Best Buy, are shunning Apple Pay in favour of their own system. In the meantime, Samsung signaled its entrance into the arena earlier this year when it acquired mobile wallet startup LoopPay.
Another hurdle is the hardware. Some systems are only available on certain operating systems, such as Android or BlackBerry. Smartphones are also known to run out of battery quickly, which can make leaving home without a traditional wallet a risk, said Doug Stephens, a retail consultant and founder of Retail Prophet.
"Mobile payments sound like a great idea in many respects, but suffer from these nagging hardware issues," he said.
Mobile wallet systems also need to offer extra value such as rewards and loyalty points, especially as consumers need a compelling reason to consistently use the technology when plastic cards work just as easily.
"The card isn't broken," said Stephens.
But despite some trial and error, Mike Bradley, managing director of NorthCard Inc, believes the mobile wallet will become more common in Canada.
In the near-term, focus will be on cloud-based technology and more integration that will enable various mobile payments on a broader range of devices.
"That vision of being able to point any cell phone at any terminal to be able to make any payment and collect any loyalty points – we are going to get there, but it's going to come in fits and starts," Bradley said.
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