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RBC, Moneris and Interac have teamed up to offer Canada’s first mobile payment system using debit.

The mobile payments race is on.

Telecom companies, banks and payment networks are all rushing to stake their claim to Canada's budding mobile-payments market as more consumers make the switch to smartphones. Shoppers already use their phones to compare prices or photograph merchandise, but that's just the beginning. There is pent-up demand for mobile payments, leaving the wireless and payment industries vying for customer loyalty.

With consumers already in the habit of using contactless debit and credit cards to make small purchases at retailers such as quick-serve restaurants and gas stations, the competition is fierce. The market for cash transactions under $20 is estimated to be worth more than $90-billion a year.

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On Wednesday, another player entered the fray.

Interac Association, a national provider of debit-card services, completed Canada's first-ever mobile-based debit transaction in partnership with Royal Bank of Canada and payment processor Moneris Solutions Corp.

Until now, only credit-card-based mobile payments have been possible, through a joint venture between Rogers Communications Inc. and Canadian Imperial Bank of Commerce.

"Canadians tend to pull out their debit cards and they do it more frequently than, frankly, all the payment types combined," said Avinash Chidambaram, director of mobile programs at Interac.

"Now they are starting to make purchase decisions using their smartphones when they are in a store, and the natural evolution of that is they want to be able to use that smartphone to actually make that purchase."

A broader rollout of Interac's mobile debit service, called Flash, will occur over the coming year. Last year, Canadians choose debit 56 per cent of the time when not paying with cash, according to Interac.

Wednesday's mobile-based debit payment was made at a McDonald's restaurant in downtown Toronto using a BlackBerry smartphone that is enabled for near-field communications (NFC), meaning it can emit a signal to a contactless payment terminal.

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But unlike the credit-card-based mobile payment service being offered by Rogers and CIBC, Interac's Flash application was designed to work for all wireless carriers. As a result, consumers should be able to use the debit app on any NFC-enabled smartphones – just as long as their bank offers Flash's mobile service.

Currently, RBC, Bank of Nova Scotia, Toronto-Dominion Bank and Sunova Credit Union offer Flash-enabled debit cards. In addition to McDonald's, contactless debit card payments can already be made at retailers including Tim Hortons Inc., Petro-Canada, and liquor and beer stores in Ontario.

Last week, Rogers announced that it is offering a broader array of smartphones certified for mobile payments, including some BlackBerry models and Android-based devices.

"We are working with Interac as well to try to see what we can do to get them enabled. We think that [mobile Flash] is a killer app," Jeppe Dorff, vice-president of transaction services at Rogers, said in a recent interview. "Not many other countries have got this kind of product that everyone has. You can't get a bank account without an Interac card. It is something that we are looking at."

Telus Corp. has also confirmed plans to offer a so-called digital wallet, while BCE Inc. is in talks with a number of banks. As for RBC, it plans to offer all Flash transactions free to its personal banking customers. Scotiabank, meanwhile, hinted that it, too, could support mobile Flash transactions in the near future.

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