Soon Canadians will be able to pay for purchases by waving their cell phone in front of a sensor. With both Visa and MasterCard currently running trials, experts say Canadians should become more aware of this technology – its potential and pitfalls.
Early in the race to get Canadians buying things with their mobile phones, MasterCard might be ahead by a nose, but Visa has unveiled a wiser partner choice, says an analyst.
The two credit card behemoths have adopted different tactics when introducing the concept of paying for purchases by waving your cell phone in front of a sensor.
Both are using Near Field Communications (NFC) technology already embedded in some cards, but the companies have announced different types of partners.
Visa has been working with the Royal Bank of Canada (RBC), since January 2007, as the main financial partner in bringing mobile payment platform to the Canadian market. MasterCard on the other hand, has highlighted its partnership with Bell Canada at the end of May.
“I’d lean towards the financial institution myself,” as a partner, says Mark Tauschek, senior research analyst with London, Ont.-based Info-Tech Research Group.
“If RBC says now you have an option of having your Visa tied to your mobile device, I think that their entire card base becomes an opportunity to get the mobile platform out there,” he says.
MasterCard probably doesn’t care which what financial institution is issuing the credit card, Tauschek says.
The Bell partnership ensures Canadians will have access to phones that carry the RFID chips needed for the technology. MasterCard calls their version of the system PayPass, while Visa has dubbed theirs payWave.
Visa and RBC have yet to unveil their telecommunications partner, but have been talking with the big three wireless providers, says Anne Koski, head of payments innovation at Toronto-based RBC.
“We’re in ongoing conversations… it is up to the industry to talk through and come up what the structure is going to look like in Canada, so at the end of the day the consumer wins,” she says.
RBC is the second-largest Visa card issuer in Canada, Koski adds. The bank has also converted more chip-to-chip transactions than any other bank, with a total of over 25 million.
Both credit card companies are in the pilot phase of their service rollout. MasterCard plans to conduct a closed trial with its own employees as well as Bell’s.
How Visa’s mobile payment platform will work.
With MasterCard’s PayPass infrastructure already in place at 109,000 merchants worldwide, the rollout may have an advantage over Visa.
Being first to market could be a prize for the credit company that manages it, Tauschek says. “They don’t want the other to have an opportunity, to get a leg up in that regard.”
Yet Visa isn’t shaken by its infrastructure shortfall, says Zack Fuerstenberg, director of new channels for Visa Canada. He calls the announcement with RBC the “first of its kind in Canada” and says merchants will be supporting both payment types anyway.
“A lot of different payment types have to be supported for this to reach critical mass,” he says. “It’s difficult for a merchant to accept just one form of payment.”
Visa is trying to play catch-up by deploying its payWave technology in a test currently underway in Ontario’s Kitchener-Waterloo region. That test will look at the migration of magnetic stripe cards to RFID chip cards for debit and credit.
Every merchant that installs a payWave terminal can also accept payments from a mobile phone.
“Because we’re putting chips on our cards, it opens the door to RFID technology,” Koski says. “We’ll be adding payWave to some of our cards in early 2009, so it makes sense to go down that path.”
A phone is an ideal device to carry the payment chips, Koski adds. It offers a point of interaction for the user to track their purchasing and other security features.
Visa employees have already been conducting tests on an alerts system that sends a message to your mobile phone when a transaction is made on your credit card, Fuerstenberg says. It’s one example of a value-added feature for phones.
He cites an example:
“Let’s say you go to a restaurant and you give your card to settle the bill, then your phone beeps and lets you know the transaction has been authorized.”
The system will also have other security features to soothe customer concerns over a new method of payment. The NFC chips must be within four centimeters of the reader to ensure nothing can intercept the message, Fuerstenberg says.
Even so, the data on the RFID chip must be encrypted, Info-Tech’s Tauschek says. One fraudster has already created a program that can transfer information on a chip to another chip for easy use.
“If you had a RFID terminal and you got the data, you could dump it to a laptop and see it if it’s not encrypted,” explains the analyst.
For absent-minded consumers who often misplace their phones, the payment feature could be password protected, Fuerstenberg says. So the customer could choose to set a dollar amount threshold for password-free access if they want more convenience.
“On the upside, what I’ve heard anecdotally in the industry that consumers know sooner [when] they’ve lost their handset than when they’ve lost their wallet,” he adds.
Visa is betting consumer uncertainty about the new payment method will be allayed once its product hits the market. At a mobile payment methods conference in Toronto tomorrow, the credit company will be citing a survey that shows more than half of Canadians are interested in using a phone with payment capabilities.
Moving the payment chip out of a card and on to a phone is enough of a leap for consumers to make for now, Tauschek says. Most people might feel more uneasy about other places the micro-chips could be embedded.
“[It's] the big brother thing – we’re all going to have chips with our identification embedded in our bodies – hopefully we don’t get to that,” he says.