Over the past week I participated in a tour of the fledgling mobile payments industry in Ontario, Canada. While the U.S. is bogged down on the path to mobile payments by complexity and fragmentation, Ontario has spent the last couple of years building a payments infrastructure that seems ready for the jump to mobile payments. We take a look at several factors that have helped Ontario take the lead in mobile payments readiness.
Canadians Are Getting Used to Tap-and-Go Payments
MasterCard and Visa led the way in introducing contactless NFC payments to Canada in the last couple of years, and the technology is already taking hold with merchants and consumers. MasterCard estimates that 11% of the point of sale card transactions that it processes are made with its PayPass NFC chip tap-and-go cards. PayPass is now accepted at 19 out of Canada's top 25 retailers, Will Giles, MasterCard Canada's SVP of emerging payments, says. And more than 30% of point of sale terminals in Canada are already NFC-equipped.
Ontario residents are also starting to get used to NFC card payments in their transit system. Presto, which provides fare cards for the region's various public transit systems, is also rolling out tap-and-go cards and terminals for transit users, Robert Hollis, Presto's EVP and interim CIO, said.
Now that Canadians are beginning to use tap-and-go payments with their cards, the rails and customer behaviors are being built to move to mobile NFC payments.
Interac Moving to NFC
Another reason why Canadians are learning to use tap-and-go payments is that Interac, Canada's nationwide debit network, is moving to NFC payments with its Interac Flash product. Canadians use debit far more than Americans do; about 56% of point of sale transactions in Canada are done with debit cards. Interac is owned by the five major banks that dominate the Canadian market and has rolled out NFC chip Interac Flash cards with four of those banks, according to Avinash Chidambaram, Interac's director of mobile.
Making the jump to mobile payments, Interac has already piloted mobile NFC chip payments with Interac Flash. The pilot, conducted earlier this spring with RBC and McDonald's, delivered promising results. "We found that a lot of people are comfortable using tap-and-go mobile payments for small transactions," remarked Chidambaram.
IT Talent Where It's Needed
Ontario is a hub for all of the industries that are needed to push mobile payments in Canada. All five of the major banks are headquartered in Ontario, as are two of the country's biggest telco providers. A number of major IT players like Intel, Microsoft and Oracle also have their Canadian research and development facilities or national headquarters in the region. And all of these companies have access to an impressive well of IT talent coming out of the universities in the region. Toronto and Waterloo, Ontario are home to several research and educational institutions that provide the talent needed for innovation in the mobile payments sector.
Along the tour I visited the Digital Media Zone at Ryerson University, a Toronto-based public research university. The Digital Media Zone is an incubator for graduates that aspire to be entrepreneurs, and several of the startups in incubation there are targeting mobile payments. One startup, called OnTab, allows merchants to accept various types of mobile payments, including NFC, QR codes, SMS and short codes, with a software upgrade, saving them the cost of a new terminal, said Behzad Malek, the company's founder.
"Over the last 6 months we're looking at financial services as a bigger focus. We see a lot of opportunities for disruption there," Valerie Fox, the Digital Media Zone's executive director, noted.
[To learn more about new opportunities in mobility in financial services, check out the agenda for the New Opportunities for Mobility: A Financial CIO/CTO Roundtablesession at the upcoming Interop event in NYC.]
Jonathan Camhi has been an associate editor with Bank Systems & Technology since 2012. He previously worked as a freelance journalist in New York City covering politics, health and immigration, and has a master's degree from the City University of New York's Graduate School ... View Full Bio