The mobile wallet wars are ramping up, just in time for the holiday shopping season.
Rogers Communications Inc. is elbowing its way into the burgeoning market with plans to unveil its own mobile wallet, the next evolution of a strategy that kicked off last year, when it agreed to work with Canadian Imperial Bank of Commerce on its mobile payments product.
A mobile wallet is an application that lets customers store credit card and banking information on their smartphone, allowing them to pay for purchases by waving these hand-held devices at a point-of-sale machine. With this product, Rogers is taking a small step into financial services, putting it in competition with the banks, which are launching apps of their own.
The announcement comes one day after Toronto-Dominion Bank teamed up with PC Financial to launch its own mobile wallet, following similar offerings from Royal Bank of Canada and Bank of Montreal. Credit card companies are also looking for partners as they develop mobile payment platforms in their growing innovation hubs. MasterCard teamed up with Rogers for its new product.
The flurry of activity is creating tension among the players.
"I call it the wallet wars," Betty DeVita, president of MasterCard Canada, said in an interview.
There is particular friction between the banks and the telcos, both of whom are jockeying for the upper hand.
While the banks have close relationships with credit card providers and already handle payments on their own, the telcos claim control of mobile phone SIM cards, which store the financial information, as well as wireless networks.
"Adding a fourth player – mobile service providers – into the mix has the potential to make a bad fee problem into a disaster," said Dan Kelly, chief executive officer of the Canadian Federation of Independent Business, who worries that corporate jockeying leaves out concerns of the merchants, who must invest heavily to upgrade their technology in order to accommodate mobile wallets. "I do not expect that banks will be happy to share their share of the fees with mobile companies for long."
Although the banks and telcos all talk a big game about their products, they also acknowledge that this is just the first stage of a multiyear process. Canadians are just getting used to "flash" payment, where a plastic credit or debit card can be used by simply scanning it over the payment terminal.
The vision, though, is enticing: a customer pays for a product by waving a phone and once the purchase is approved, the merchant immediately sends a digital receipt that is stored in the app. Retailers are especially keen to tie their loyalty programs to mobile wallets – something PC Financial is doing with its PC Plus program. In the future, customers could get notifications about weekly promotional deals, or reminders of prescriptions they need to pick up.
At this point, most of that is just a dream, and customer adoption is tepid. Rogers said that the take-up of its original app with CIBC has been "slow," but is picking up.
"No one has really built the killer app," said Linda Mantia, head of credit cards and mobile payments at RBC, adding that until they do, customers understandably don't see much reason to switch from their plastic credit cards.
And merchants are not yet sold on the idea, either. While major retailers, such as Loblaw or Canadian Tire, can see the benefits of tying their loyalty programs to the mobile wallets, it's a harder sell for small businesses. "Merchants are already paying massive fees to card brands, issuing banks and card processors," Mr. Kelly said.
TD is optimistic. "We think merchants will, over time, be quite able to accept [the change], and we think consumers will drive this convenience need," said Teri Currie, a senior executive at the bank.
Rogers' latest move into the payments arena is expected to include the launch of its own MasterCard. The telco's long-term plan is to allow a customer to store a variety of other information on the SIM cards in a smartphone, including payment cards from a wide range of banks, loyalty cards, and government-issued identification, such as driver's licence and health card.