Jesse Brown: Will smartphones make cash and credit cards obsolete?
With just one tap, you’ll soon be able to use your smartphone to make a purchase, redeem a coupon, earn Air Miles and receive a digital receipt. The telecom giants say it’s the next big thing. But is it the thing we need?
Last fall, a crowd of reporters gathered at the Tim Hortons at Bay and Wellesley to watch the Olympic triathlete Simon Whitfield buy a cup of coffee with his BlackBerry. He tapped his phone against a payment terminal, and commerce occurred invisibly. “Mobile payments have arrived!” declared a VP from Rogers. The company had orchestrated the event to unveil Suretap, a service that, in partnership with CIBC, allows customers to use phones to wirelessly pay for stuff.
Suretap was then just a pilot project, with a somewhat limited scope—only for CIBC account holders, only for people with Rogers wireless service, only compatible with BlackBerry phones and restricted to transactions of $50 or less. By the spring, fewer than 10,000 Canadians had given it a try. But leaders in telecommunications anticipate a rapid, widescale embrace of wireless payments, resulting in phones that act as full-service digital wallets that store everything—credit cards, debit cards, TTC passes, government-issued ID, gift cards and library cards. In a recent survey of bankers and retailers, 80 per cent said they expect the digital wallet to go mainstream in the next few years.
At a daylong financial technology conference at the Toronto Board of Trade in late March, representatives from Samsung, Visa, Rogers and Interac gathered to map out this bold new future, salivating over its possibilities. One Telus executive on a panel at the conference called it the Holy Grail of 21st-century commerce. Bell, Telus and Rogers are so optimistic about this business that they have put aside their differences and teamed up to form EnStream, a system that will enable banks to issue virtual credit cards onto our smartphones.
Pawel Chrobok, EnStream’s director of business development, predicts that with a single tap at checkout, all transactions will occur simultaneously: the customer will make a purchase that will be charged to a credit card or direct to a bank account, be credited the value of digital coupons or gift cards stored on the phone, earn Air Miles and receive a digital receipt. The prospect delights retailers because lines in stores will move quicker and more people will buy more things. The banks will be happy because they’ll issue tons of new cards, all at a fee. The phone companies love that they’ll get to charge banks for access to the phone owner’s SIM card.
CIBC has spent roughly $25 million supporting the development of a technology called Near Field Communication. It’s a chip that now comes with new models of BlackBerry and Android phones, and it lets the user make secure transactions when placed within a few centimetres of an NFC-compatible terminal, thousands of which have been installed in Canadian stores—at great expense to card companies, banks and merchants. Any machine that accepts a tap payment from a credit card will also take NFC transactions from a smartphone. (Rumour has it the iPhone 6 series, expected out in 2014, will include an NFC chip, lending hope to frustrated Apple fans who dubbed the technology “Never Fucking Coming.”)
Our infrastructure for smartphone payment has quickly become so robust that an international study conducted by MasterCard ranked Canada the number two most “mobile-payment ready” nation in the world, just behind Singapore and just ahead of the United States. The technology is here, lying dormant. Do we have the will to use it? A recent financial industry research paper applauded Canada’s technological readiness for mobile payments, but added this caveat: “For Canadians, the benefits are not fully understood.”
That might be an understatement. The problem is that we don’t have a problem. Our current payment systems work just fine. Buying things is not particularly difficult in Canada, or in most developed nations. In Japan, for example, mobile payment has been an option for years, but less than 10 per cent of the population uses it in any given month. Kenya, on the other hand, has embraced mobile payment, because banking stinks in Kenya. ATMs are scarce and few people carry credit cards. M-Pesa, a mobile payment system that piggybacks on the cellular network, has registered more than 17 million Kenyan accounts since it launched in 2007. For many Kenyans, it’s the only way to do a cashless transaction. Necessity is a stronger motivation than convenience, especially when the level of convenience is debatable. Is tapping really much quicker than inserting a credit card—or swiping? Is the wallet really endangered?
Zilvinas Bareisis is a senior analyst with Celent, a Boston-based financial services research firm. He’s been studying payment technologies for 10 years, and while he expects digital wallets to catch on, he doesn’t think they’ll ever do away with cash. Digital wallets will be, he thinks, a payment choice among many. “We still have cash. We can’t get rid of cheques. Barter still exists in some societies!” Even though consumers have been carrying credit cards for over half a century, most of us don’t leave the house without a few bucks.
That doesn’t necessarily mean digital wallets will fizzle out. They will be popular, and you will use one. Your conversion will happen much in the same way that you came around to smartphones. At a certain point they became so ubiquitous that you just gave in. There will soon come a day when you’ll be in line at the supermarket and the three people ahead of you will all tap their phones to pay. One of these people will be a little older than you. On this day, your platinum Visa will feel like a clamshell flip phone, and you’ll hook yourself up with a digital wallet the next chance you get. Then you’ll hit the ATM, because you don’t feel comfortable without a little walking-around money. Plus, cash never runs out of batteries.
The tech is emerging in fits and starts, but if you have a smartphone, you’re halfway there. Here are some of your mobile payment options
iPhone people: No fully fledged digital wallet apps available yet, but you do have some mobile payment options via Passbook and apps for loyalty cards, coupons and gift cards. Rumour has it iPhone 6 will up security with sci-fi-esqe fingerprint scanning.
Android people: Lemon Wallet lets you store your credit and debit card information (by snapping photos of the cards) and then access it at the checkout via a scannable barcode. (Not fully available here yet.)
BlackBerry people: Suretap, the first real digital wallet option in Canada, has been available on some BB phones since the fall, but you need Rogers Wireless and a CIBC credit card to qualify.