Apple Pay is coming to Canada, and by the looks of it Canadian banks are keen to avoid the mistakes made by U.S. banks during the initial roll-out of the mobile payment service last year.
The Wall Street Journal is reporting that Canada's Big Six banks are negotiating with Apple Inc. about a potential launch of the service in November, but are stuck on issues related to fees and security.
The report also said that the banks have formed a consortium to deal with security issues and also give them greater leverage in their negotiations with Apple.
In a statement, Royal Bank of Canada said it would not comment on rumours or speculation: "At this time Apple Pay is available in the U.S. only. Apple has not yet announced plans for Apple Pay for the Canadian market."
Toronto-Dominion Bank provided a similar response.
Apple Pay gives customers the option of paying for items using credit and debit cards stored on their iPhones and Apple watches, making it a key technology for banks to attract new customers and hold on to existing ones.
But a recent report in the New York Times suggested that U.S. banks, desperate to satisfy consumer demand for Apple Pay, essentially rolled over to the company's demands prior to the service's launch in the United States.
As a result, the banks failed to insist on better fraud detection processes.
"Some bank executives acknowledged that they were were so scared of Apple that they didn't speak up," wrote New York Times columnist Andrew Ross Sorkin. "The banks didn't press the company for fear that they would not be included among the initial issuers on Apple Pay."
Canadian banks have the added threat of having to pay potentially higher fees to Apple every time a customer makes a purchase.
According to the Journal's report, the banks are facing estimated costs of 15 to 25 basis points on credit card transactions – or up to 25 cents on a $100 purchase.
U.S. banks pay an estimated 15 cents on a $100 purchase, according to the Journal.
A number of Canadian bank chief executives have expressed concerns this year about the competitive threat posed by Apple Pay and other other payment services.
The services not only disrupt traditional banking in terms of the fees they take, but they also lower the banks' relationship with customers.
"The last thing anybody wants is to have someone between you and your customer, and that's what we now have in the payments space," said RBC's chief executive Dave McKay to a New York audience earlier this year.
"We are on a collision course with the Googles and the Apples of the world," he said. "Would you ever pick a fight with those types of companies? No, but we are on that course."
In his remarks at Toronto-Dominion Bank's annual general meeting earlier this month, TD's chief executive Bharat Masrani pointedly avoided using Apple's name, but appeared to cast the company as a competitor.
"New technologies are raising consumer expectations of what banks do – and how they do it. And, in many cases, they are being deployed by non-traditional entities to compete in the banking space," Mr. Masrani said to shareholders.
"Many of them are household names – and generally they are not subject to the same regulatory rules as traditional banks."
The banks have been responding to the threat by initiating payment technologies of their own. RBC has developed its own Mobile Wallet for Android and BlackBerry users.
TD and PC Financial, a unit of Canadian Imperial Bank of Commerce, give customers access to UGO Wallet, which stores credit cards, debit cards and loyalty cards on smartphones.