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Canadian Mobile Payments - May 2012

The Canadian mobile payments market has been relatively slow to develop compared to other developed countries. To date, mobile payments, broadly defined, have been mainly centered around contactless credit and debit cards using near-field communications (NFC), although the technology is slowly migrating to mobile phones. This migration is likely to be facilitated by the fact that, unlike the country’s banking business which is controlled by five large banks, the mobile payments business is open to payments network operators, payment processors, technology companies, mobile network operators (MNOs) and even retailers. More competitors means more competition and therefore, more innovation. So far, NFC technology is seen by many to be a “bridge” technology, not the ultimate solution, and no standard system has yet to win market acceptance. As for the Canadian consumer, they are likely to embrace new financial services technologies over the longer term, as they have online banking and bill payment, but they must be shown that mobile payments are superior to existing credit and debit cards.

This study is a comprehensive report on the Canadian mobile payments industry, with a particular spotlight on market drivers, the competitive landscape, consumer behaviors and attitudes, and the regulatory and legislative environment.

What you need to know:

  • How big is the potential market for mobile payments in Canada?
  • What are the primary factors driving the development of mobile payments?
  • Who are the key players in mobile payments?
  • What challenges will developers face in 2012 and beyond?
  • What are some of the new innovations in the Canadian mobile payments industry?

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Table of contents

  1. Scope and Themes

      • What you need to know
        • Data sources
          • Consumer study data
            • Abbreviations
              • Terms
              • Executive Summary

                • Industry overview
                  • The Canadian mobile payments consumer
                    • Early adopters: Asians are most interested in mobile payments
                      • Who are the innovators?
                      • Insights and Opportunities

                          • Key points
                            • Make sure the best potential customers have smartphones
                              • Consumers need incentives to pay with their phones
                                • Offer phone theft and loss insurance to alleviate security fears
                                • Inspire Insights

                                    • Trend: FSTR and HYPR
                                      • What we’ve seen
                                        • Industry application: No more queues
                                          • Trend: Let’s Make a Deal
                                            • What we've seen
                                              • Industry application
                                              • Market Size

                                                • Key points
                                                  • Canadian payments market totals C$638 billion, cash at C$144 billion
                                                    • Figure 1: Canadian payments market, by dollar value, 2009-10
                                                    • Figure 2: Canadian payments market, by transaction volume, 2009-10
                                                  • Canadian population expected to grow 1% a year, driven by immigration
                                                      • Figure 3: Canadian population, by province, 2007-11
                                                  • Competitive Context

                                                    • Key points
                                                      • Mobile payments market is wide open to all players, not just banks
                                                        • Contactless is today, mobile payments the future
                                                          • NFC may only be a bridge technology
                                                            • Significant contactless and mobile payments providers in Canada
                                                              • Visa payWave
                                                                • MasterCard PayPass (Tap & Go)
                                                                  • Interac Flash
                                                                    • Zoompass
                                                                      • Government regulation
                                                                      • Segment Performance

                                                                        • Key points
                                                                          • Canada lags other developed countries in mobile payments
                                                                            • Consumers may be reluctant to part with credit and debit cards
                                                                            • Market Drivers

                                                                              • Key points
                                                                                • Mobile payments start slowly, but expected to grow quickly in next few years
                                                                                  • Canadian researcher expects 85% CAGR in volume over next four years
                                                                                    • Asian immigration wave is a boon to mobile payments in Canada
                                                                                        • Figure 4: Canada: Permanent residents, by source country, 2005-10
                                                                                    • Leading Companies

                                                                                      • Key points
                                                                                        • Visa
                                                                                          • MasterCard
                                                                                            • Interac
                                                                                              • EnStream
                                                                                                • Rogers Communications Inc.
                                                                                                  • Moneris Solutions
                                                                                                    • Intuit
                                                                                                      • PayPal
                                                                                                        • Starbucks
                                                                                                          • Royal Bank of Canada
                                                                                                            • TD Bank (Toronto-Dominion)
                                                                                                              • Bank of Nova Scotia (Scotiabank)
                                                                                                                • Bank of Montreal (BMO)
                                                                                                                  • CIBC (Canadian Imperial Bank of Commerce)
                                                                                                                    • Desjardins Group (Fédération des Caisses Desjardins du Québec)
                                                                                                                      • President’s Choice Financial (PC)
                                                                                                                        • Canadian Tire Financial Services
                                                                                                                          • American Express
                                                                                                                          • Innovation and Innovators

                                                                                                                            • Key points
                                                                                                                              • Four companies offer mobile card readers for small, on-the-go merchants
                                                                                                                                • ROAM Data to Launch Mobile NFC and Magnetic Card Reader Combo
                                                                                                                                  • BMO adds MasterCard’s PayPass function to mobile phones
                                                                                                                                    • Starbucks rolls out mobile payments in Canada
                                                                                                                                      • Interac money transfer service adds mobile phone capability
                                                                                                                                        • Mobile phone app lets consumers create virtual wallets
                                                                                                                                          • CIBC introduces mobile banking app for iPad
                                                                                                                                            • Filing tax returns is as easy as snapping a photo
                                                                                                                                              • Scan a product barcode, then buy the stock
                                                                                                                                              • Marketing Strategies

                                                                                                                                                • Mobile payments slow to roll out in Canada
                                                                                                                                                  • Representative direct and email advertising
                                                                                                                                                    • Statement Mailing from TD Bank Financial Group
                                                                                                                                                      • Figure 5: TD Canada direct mail ad, January 2012
                                                                                                                                                    • Statement Mailing from RBC
                                                                                                                                                      • Figure 6: RBC statement insert direct mail ad, September 2011
                                                                                                                                                    • Statement Mailing from RBC
                                                                                                                                                      • Figure 7: RBC mobile banking direct mail ad, December 2011
                                                                                                                                                    • Statement Mailing from RBC
                                                                                                                                                      • Figure 8: RBC Interac Flash direct mail ad, October 2011
                                                                                                                                                    • Customer Notification from Scotiabank
                                                                                                                                                      • Figure 9: Scotiabank shareholder notification with QR code, January 2012
                                                                                                                                                    • A Slice of Orange Fall 2011 Newsletter from ING
                                                                                                                                                      • Figure 10: ING direct mail ad offering mobile banking app, October 2011
                                                                                                                                                  • The Consumer: Types of Mobile Devices Owned

                                                                                                                                                    • Key points
                                                                                                                                                      • Standard cell phones are most common, but a quarter have smartphones
                                                                                                                                                          • Figure 11: Type(s) of mobile device owned, December 2011-January 2012
                                                                                                                                                          • Figure 12: Type(s) of mobile device owned, by gender, December 2011-January 2012
                                                                                                                                                        • Most young people have a cell phone
                                                                                                                                                          • Figure 13: Type(s) of mobile device owned, by age, December 2011-January 2012
                                                                                                                                                        • Higher earners more likely to have smartphones
                                                                                                                                                          • Figure 14: Type(s) of mobile device owned, by household income, December 2011-January 2012
                                                                                                                                                        • French speakers less likely to have smartphones
                                                                                                                                                          • Figure 15: Type(s) of mobile device owned, by language spoken, December 2011-January 2012
                                                                                                                                                        • People who have smartphones are most likely to buy another one
                                                                                                                                                            • Figure 16: Intentions for purchasing a new smartphone, December 2011-January 2012
                                                                                                                                                          • Men are more likely to want smartphones than women
                                                                                                                                                            • Figure 17: Intentions for purchasing a new smartphone, by gender, December 2011-January 2012
                                                                                                                                                          • Cost is a major reason why many don’t have smartphones
                                                                                                                                                              • Figure 18: Reasons for not owning a smartphone, December 2011-January 2012
                                                                                                                                                              • Figure 19: Reasons for not owning a smartphone, by gender, December 2011-January 2012
                                                                                                                                                            • Cost is a bigger deterrent among younger people
                                                                                                                                                              • Figure 20: Reasons for not owning a smartphone, by age, December 2011-January 2012
                                                                                                                                                            • High earners more put off by cost of service than expense of phone
                                                                                                                                                              • Figure 21: Reasons for not owning a smartphone, by household income, December 2011-January 2012
                                                                                                                                                          • Most Consumers Have Never Used Mobile Banking

                                                                                                                                                            • Key points
                                                                                                                                                              • Few conduct banking activities on their mobile phones
                                                                                                                                                                  • Figure 22: Banking activities in the last year on a mobile phone, December 2011-January 2012
                                                                                                                                                                  • Figure 23: Banking activities in the last year on a mobile phone, by gender, December 2011-January 2012
                                                                                                                                                                • Majority of young people have done at least some mobile banking
                                                                                                                                                                  • Figure 24: Banking activities in the last year on a mobile phone, by age, December 2011-January 2012
                                                                                                                                                                • French speakers less likely to bank using mobile technology
                                                                                                                                                                  • Figure 25: Banking activities in the last year on a mobile phone, by language spoken, December 2011-January 2012
                                                                                                                                                                • Higher-income people more likely to do mobile banking
                                                                                                                                                                    • Figure 26: Banking activities in the last year on a mobile phone, by household income, December 2011-January 2012
                                                                                                                                                                • Quick Response (QR) Codes Still Unfamiliar

                                                                                                                                                                  • Key points
                                                                                                                                                                    • Figure 27: Familiarity and mobile activity using QR codes or barcodes, December 2011-January 2012
                                                                                                                                                                  • Men more likely to have scanned QR codes
                                                                                                                                                                    • Figure 28: Familiarity and mobile activity using QR codes or barcodes, by gender, December 2011-January 2012
                                                                                                                                                                  • Oldest group least familiar with QR codes
                                                                                                                                                                    • Figure 29: Familiarity and mobile activity using QR codes or barcodes, by age, December 2011-January 2012
                                                                                                                                                                  • Higher-income people more likely to have scanned QR codes
                                                                                                                                                                    • Figure 30: Familiarity and mobile activity using QR codes or barcodes, by household income, December 2011-January 2012
                                                                                                                                                                  • Respondents from Quebec are less familiar with QR codes
                                                                                                                                                                    • Figure 31: Familiarity and mobile activity using QR codes or barcodes, by language spoken, December 2011-January 2012
                                                                                                                                                                • Mobile Payments Get a Lukewarm Reception

                                                                                                                                                                  • Key points
                                                                                                                                                                    • Respondents unenthusiastic about mobile payments
                                                                                                                                                                      • Figure 32: Interest in conducting mobile banking and payments activities, December 2011-January 2012
                                                                                                                                                                    • Men are slightly more interested than women in mobile payments
                                                                                                                                                                      • Figure 33: Interest in conducting mobile banking and payments activities, by gender, December 2011-January 2012
                                                                                                                                                                    • Younger people may need incentives to pay with phones
                                                                                                                                                                      • Figure 34: Interest in conducting mobile banking and payments activities, by age, December 2011-January 2012
                                                                                                                                                                    • Higher-income people may need incentives, too
                                                                                                                                                                      • Figure 35: Interest in conducting mobile banking and payments activities, by household income, December 2011-January 2012
                                                                                                                                                                    • French speakers are less interested in incentives for paying by phone
                                                                                                                                                                      • Figure 36: Interest in conducting mobile banking and payments activities, by language spoken, December 2011-January 2012
                                                                                                                                                                    • Users show interest in cell phone for medical data storage
                                                                                                                                                                      • Figure 37: Interest in using mobile phone for various activities, December 2011-January 2012
                                                                                                                                                                    • Men more interested than women in increased phone functionality
                                                                                                                                                                      • Figure 38: Interest in using mobile phone for various activities, by gender, December 2011-January 2012
                                                                                                                                                                    • Younger people interested in more phone functions
                                                                                                                                                                      • Figure 39: Interest in using mobile phone for various activities, by age, December 2011-January 2012
                                                                                                                                                                    • Higher-income people also more interested in additional functions
                                                                                                                                                                      • Figure 40: Interest in using mobile phone for various activities, by household income, December 2011-January 2012
                                                                                                                                                                  • Consumers Have Big Concerns About Mobile Payments

                                                                                                                                                                    • Key points
                                                                                                                                                                      • Respondents more worried about using mobile vs. cards
                                                                                                                                                                          • Figure 41: Degree of concern about using phone vs. card as a payment device, all respondents, December 2011-January 2012
                                                                                                                                                                        • Women more worried about using mobile—and cards, too
                                                                                                                                                                          • Figure 42: Degree of concern about using phone vs. card as a payment device, by gender, December 2011-January 2012
                                                                                                                                                                        • Younger respondents have more concerns than older people
                                                                                                                                                                          • Figure 43: Degree of concern about using phone vs. card as a payment device, by age, December 2011-January 2012
                                                                                                                                                                        • Concerns about mobile payments rise with income
                                                                                                                                                                          • Figure 44: Degree of concern about using phone vs. card as a payment device, by household income, December 2011-January 2012
                                                                                                                                                                        • Security is biggest worry, but so are theft and loss of phones
                                                                                                                                                                          • Figure 45: Reasons for concern about using phone as a mobile payment device, December 2011-January 2012
                                                                                                                                                                          • Figure 46: Reasons for concern about using phone as a mobile payment device, by gender, December 2011-January 2012
                                                                                                                                                                        • Youngest more worried about theft and loss
                                                                                                                                                                          • Figure 47: Reasons for concern about using phone as a mobile payment device, by age, December 2011-January 2012
                                                                                                                                                                          • Figure 48: Reasons for concern about using phone as a mobile payment device, by household income, December 2011-January 2012
                                                                                                                                                                      • Custom Consumer Groups: Asians

                                                                                                                                                                        • Key points
                                                                                                                                                                          • Asians are much more likely than whites to have smartphones
                                                                                                                                                                            • Figure 49: Type(s) of mobile device owned, by race, December 2011-January 2012
                                                                                                                                                                          • Asians ahead of whites when it comes to mobile banking
                                                                                                                                                                            • Figure 50: Banking activities in the last year on a mobile phone, by race, December 2011-January 2012
                                                                                                                                                                          • Asians more likely to have scanned QR code than whites
                                                                                                                                                                            • Figure 51: Have or have not scanned a QR code or barcode in the past, by race, December 2011-January 2012
                                                                                                                                                                          • With or without incentives, Asians more interested in mobile payments
                                                                                                                                                                            • Figure 52: Interest in conducting mobile banking and payments activities, by race, December 2011-January 2012
                                                                                                                                                                          • Asians more interested than whites in phone storage options
                                                                                                                                                                            • Figure 53: Interest in using mobile phone for various activities, by race, December 2011-January 2012
                                                                                                                                                                          • Asians have more concerns about mobile and plastic payments
                                                                                                                                                                            • Figure 54: Reasons for concern about using phone as a mobile payment device, by race, December 2011-January 2012
                                                                                                                                                                          • Asians are more worried about theft, whites more concerned about security
                                                                                                                                                                            • Figure 55: Reasons for concern about using phone as a mobile payment device, by race, December 2011-January 2012
                                                                                                                                                                        • Appendix: Trade Associations and Agencies

                                                                                                                                                                          Companies Covered

                                                                                                                                                                          • American Express Company (The)
                                                                                                                                                                          • Apple, Inc
                                                                                                                                                                          • Bank of Montreal
                                                                                                                                                                          • Bank of Nova Scotia
                                                                                                                                                                          • Canada Deposit Insurance Corporation (CDIC)
                                                                                                                                                                          • Canadian Banker’s Association (CBA)
                                                                                                                                                                          • Canadian Imperial Bank of Commerce
                                                                                                                                                                          • Canadian Payments Association (CPA)
                                                                                                                                                                          • Canadian Tire Corporation, Limited
                                                                                                                                                                          • Capital One Financial Corporation
                                                                                                                                                                          • CIBC World Markets Inc.
                                                                                                                                                                          • Coca-Cola Company (The) (USA)
                                                                                                                                                                          • Costco Wholesale Corporation
                                                                                                                                                                          • Foursquare
                                                                                                                                                                          • Google, Inc.
                                                                                                                                                                          • Groupon, Inc.
                                                                                                                                                                          • Home Depot (USA)
                                                                                                                                                                          • ING Group
                                                                                                                                                                          • Interac Association
                                                                                                                                                                          • Intuit Inc.
                                                                                                                                                                          • J.D. Power and Associates
                                                                                                                                                                          • JPMorgan Chase & Co
                                                                                                                                                                          • Loblaw Companies
                                                                                                                                                                          • MasterCard Incorporated
                                                                                                                                                                          • MBNA Corporation
                                                                                                                                                                          • McDonald's U.S.A.
                                                                                                                                                                          • Microsoft USA
                                                                                                                                                                          • National Bank of Canada
                                                                                                                                                                          • PayPal Inc.
                                                                                                                                                                          • Research In Motion (USA)
                                                                                                                                                                          • Royal Bank of Canada
                                                                                                                                                                          • Royal Bank of Scotland Group plc
                                                                                                                                                                          • Sears Holdings Corporation
                                                                                                                                                                          • Sobeys
                                                                                                                                                                          • Staples, Inc
                                                                                                                                                                          • Starbucks Corporation
                                                                                                                                                                          • Starwood Hotels & Resorts Worldwide, Inc.
                                                                                                                                                                          • TD Ameritrade Holding Corporation
                                                                                                                                                                          • Tim Hortons (USA)
                                                                                                                                                                          • Toronto-Dominion Bank
                                                                                                                                                                          • Visa U.S.A. Inc.
                                                                                                                                                                          • Walmart Stores (USA)
                                                                                                                                                                          • Wells Fargo & Company

                                                                                                                                                                          Canadian Mobile Payments - May 2012

                                                                                                                                                                          £3,174.67 (Excl.Tax)