Royal Bank of Canada has become the second Canadian bank to launch a mobile wallet at the end of 2012, following Canadian Imperial Bank of Commerce’s mobile payments launch. Canada’s largest bank, RBC sees a great opportunity to use mobile wallets to gather highly valuable data about its customers’ shopping decisions. Robin Arnfield reports.
So far, Royal Bank of Canada (RBC) and Canadian Imperial Bank of Commerce’s (CIBC) are the only Canadian banks to announce plans for mobile wallets. In May 2012, CIBC and Rogers Communications, Canada’s largest mobile operator, announced an alliance to enable CIBC customers to make purchases using NFC-enabled Rogers BlackBerry smartphones. US processor TSYS is providing NFC mobile account creation, device identification and card credential provisioning technology for the CIBC mobile wallet.
CIBC and Rogers’ Suretap m-payment service, which involves CIBC Visa and MasterCard credit cards being stored on BlackBerry SIM cards’ secure elements, went live on 2nd November 2012. Canadian Olympic gold medallist Simon Whitfield bought a coffee at a Tim Hortons restaurant in Toronto using CIBC’s Mobile Payment app on an NFC-enabled Rogers BlackBerry smartphone.
From 16 November 2012, CIBC and Rogers customers have been able to download the CIBC Mobile Payment app to BlackBerry Bold 9900 and BlackBerry Curve 9360 devices. As of 2nd November, customers can order NFC-enabled SIM cards from Rogers’ website for these smartphones. Rogers says the service will support additional smartphones including Android devices and Windows 8 Phones in 2013.
"Over the next two years, I expect all Canadian banks to launch mobile wallets," says Christie Christelis, president of Canadian consultancy Technology Strategies International (TSI).
Rogers, which applied for a banking licence in September 2011, is planning to launch its own mobile wallet in early 2013, which will contain a Rogers-branded credit card. This wallet will be separate from the wallet Rogers launched with CIBC.
However, Rogers’ plans to launch its own credit card are dependent on it receiving a banking licence. "There’s quite a lot of opposition from stakeholders to the Department of Finance granting Rogers a banking licence," says Christelis.
Go deeper with GlobalData
Access deeper industry intelligence
Experience unmatched clarity with a single platform that combines unique data, AI, and human expertise.
Two wallets
"RBC will be introducing two different wallets," says Dave McKay, RBC’s group head of Canadian banking. "At the end of November 2012, we will launch a mobile wallet for NFC purchases. In addition, during November 2012, we will launch a digital wallet based on Visa’s V.Me platform, which is designed for online payments on PCs and browser-enabled mobile devices."
Initially, RBC will only store its customers’ RBC cards in the V.Me wallet and the NFC mobile wallet, McKay says. "But, soon after launch, we will enable our customers to store their cards from other issuers in the two wallets," he says. "We’re talking to a number of Canadian mobile network operators, as we want our mobile wallet to be on all the Canadian telcos’ smartphones."
While RBC will allow customers to store the virtual Visa debit card that it launched in May 2012 in the V.Me wallet, they won’t be able to store the virtual card in the mobile wallet. The virtual card is used for Internet and telephone shopping.
For physical point-of-sale transactions, RBC offers an Interac-only debit card which includes proprietary Canadian debit scheme Interac’s Flash contactless technology.
The Canadian government’s Code of Conduct for the Credit and Debit Card Industry doesn’t allow Canadian debit cards to contain both a Visa or Maestro domestic point-of-sale application and an Interac application. Interac debit cards can contain a Visa or Maestro application for foreign POS purchases and for Internet/telephone shopping, along with a Plus or Cirrus ATM application.
"To avoid contravening the Code of Conduct, we will store our Interac debit card in our mobile wallet, not our virtual Visa debit card," says McKay.
Capturing spending habits
"The reason for letting customers put all their cards from different issuers into the V.Me wallet and the mobile wallet is because RBC wants to see all the spending that passes through their wallet, whether it involves RBC or other issuers," says McKay. "We want to see not just the actual payment transaction but also the shopping data and demographic information."
Capturing information on consumers’ shopping preferences will enable RBC and its retail partners to provide targeted offers to wallet-holders. "As cellphones provide geo-location data, we’ll be able to provide location-specific offers to mobile wallet-holders," says McKay. "For example, if they are within 50 feet of a store where they shop regularly, they could get a message offering them discounts. If mobile wallets are just another way of paying for purchases, they don’t add any value to customers, banks or merchants. But any offers sent to wallet-holders have to be relevant, or they will simply turn the feature off."
McKay says RBC wallet-holders would need to provide their consent for RBC to have access to their purchasing data. "The Canadian NFC Mobile Payments Reference Model guidelines published by the Canadian Bankers Association in May 2012 require customers to explicitly give permission for the wallet provider to see their shopping information," says McKay. "RBC will keep its mobile wallet users’ privacy top of mind."
McKay says RBC will partner with merchants on offers on a bilateral basis. "We will let retailers provide offers to our customers, and we can work with them to decide which offers to provide to their customers," he says. "Mobile wallets and digital wallets are a new channel for retailers. They are a very different way of reaching a retailer’s customer base than traditional advertising channels such as TV, websites and newspapers."
"RBC is not unique in wanting access to mobile wallet users’ shopping data," says Christelis. "This information is extremely valuable. RBC could either provide the shopping data service itself to retailers for a fee, or use a third-party service provider. I think it’s more likely that RBC will outsource the data service, and that its role will be to set up the business relationships around its mobile wallet. RBC could charge fees for putting these relationships in place."
"The assets we bring to our mobile wallet include being the largest retail bank in Canada and being the co-owner, with Bank of Montreal, of Moneris Solutions, Canada’s largest merchant acquirer," McKay says. "We can offer Moneris’ merchant clients a closed-loop platform for mobile offers."
Identifying the hurdles
McKay says there will be significant hurdles to overcome to ensure consumers’ have a good experience of using mobile wallets for shopping. "Users will have very high expectations," he warns. "If they aren’t satisfied with their customer experience when using mobile wallets, they will revert to using contactless cards."
"A lot will have to be done to the mobile wallet infrastructure to ensure marketing messages are relevant," Christelis says. "The early mobile wallet launches will be more like trials than commercial rollouts. There will be several years of tinkering with mobile wallet services before we get to reasonable levels of adoption."
"Initially, it will be the early adopters, representing under 10% of the population, who will use mobile wallets," McKay says. "These are the people who’ve bought NFC-enabled smartphones."
"Research we carried out in 2011 found that people are willing to trade off their privacy for specific benefits such as mobile offers," says Christelis. "In association with Hotspex, TSI interviewed a nationally-representative sample of 1,000 Canadian cellphone users, of whom 39% said they would be interested in using mobile wallets. Among this 39%, a significant number were interested in mobile wallets that allowed them to store loyalty cards, receive targeted offers, and instantly redeem loyalty points. However, they said mobile wallets must not become just another source of spam."
A 2011 survey carried out by Quorus Consulting Group on behalf of the Canadian Wireless Telecommunications Association (CWTA) came to a similar conclusion. "Three in ten Canadian cellphone users (32%) showed interest in having a service that would send information or coupons to their cellphone based on where they are at the time," the CWTA says. "Half of respondents between 18 and 34 years of age (49%) were interested in this service."
Contactless cards
"In terms of infrastructure, Canada is already well advanced in its migration to mobile payments," says McKay. "Going from contactless cards to mobile payments will essentially be a form substitution. Although there is currently a lack of NFC-enabled smartphones in Canada, the telcos predict that 80% of Canadian smartphones will be NFC-enabled in five years’ time."
"The majority of Canadian credit cards now have a contactless capability, although the rollout of Interac debit cards containing the Interac Flash contactless application is still in progress," says Christelis. "It will be fairly painless for retailers that have contactless card readers to accept NFC mobile payments. They won’t have to install any additional infrastructure."
The first Interac Flash cards were launched at the end of 2011, with three banks, Scotiabank, RBC Royal Bank of Canada and TD Canada Trust, offering the cards.
US Tariffs are shifting - will you react or anticipate?
Don’t let policy changes catch you off guard. Stay proactive with real-time data and expert analysis.
By GlobalDataCode of Conduct
In September 2012, the Department of Finance launched a 60-day consultation on adding NFC mobile payments to the Code of Conduct. It published a set of proposed amendments that are designed to ensure that the Code of Conduct’s rules apply equally to mobile payments as to plastic card-based payments.
"The government will finalise the mobile amendments to the Code of Conduct in a few months’ time," says Christelis. "The significance of the amendments is that they will remove regulatory uncertainty and risk from mobile payments in Canada. Regulatory uncertainty is a significant barrier to companies launching mobile payments services. If a bank issues a mobile wallet in the absence of clear mobile payments regulations, it might discover later on that its offering is counter to the regulations that are subsequently introduced."
"The fact that the Code of Conduct is being amended to include mobile payments, that the banking industry has published mobile payments guidelines, and that CIBC and Rogers are developing a mobile wallet, shows Canadian banks, telcos and regulators are working together to create a mobile payments ecosystem," says Bhavna Kaushal, director of partnerships at Canadian prepaid card program manager Berkeley Payment Solutions.
