A journey into mobile payments: Convergence, innovation and financial inclusion

I had the opportunity to be a keynote speaker at The International Payments Conference held in Toronto, which was attended by an international audience with participation from Europe, the Americas, and Africa. The following are excerpts from my presentation on Innovation in Mobile Payments.

What we are talking about is how long before we become a wallet-less society in the same way we are becoming a cheque-less society. You know the bigger names like Square and Paypal; however, it is the many payment and loyalty apps that will continue to disrupt the payment landscape.

I have been engaged in the financial services industry long enough to have manually calculated “test Keys” to send SWIFT (Society for Worldwide Interbank Financial Telecommunication) Payment Messages, Chaired National Treasury Management Conferences and been on the paying end of billion dollar transactions. However, as a consumer, those activities will pale in comparison to the payment changes we will see in the coming years as a result of mobile payments.

Consumers are increasingly warming to the idea of using their smartphones to make purchases. Who would have thought you would be able to collect, store and spend Canadian Tire Money from your smartphone? Not to make light of it, it’s “a digital currency” the consumer trusts.

In the next five years, insiders expect a majority of bricks and mortar retail transactions to take place on mobile devices. That is a big change for a $5.5 trillion marketplace. In Oct 2014, for example Starbucks said that about 15 per cent of purchases in its U.S. stores were paid through its mobile app.

In the next six months 31 per cent of customers anticipate an increase of 5-25 per cent in payments through mobile phones, as cited by Trimetric at Discounts and fee reductions will encourage customers to increase use of mobile payments. In this same survey the highest percentage of survey respondents from North America purchase music, video and entertainment products through mobile phones. This payment is invisible to the user and this may be one of the first beachheads for Apple Pay.

Some trends we will continue to observe:

1. Adoption of mobile payments will continue to rise. Merchants will see it as a way to sustain loyalty.

2. Ease of use and lower cost will drive adoption of NFC – Near Field Communication.

3. Legacy payment apps will transition to cloud-based mobile solutions.

4. Security will remain a top priority.

Banks were initially concerned of big retailers such as Walmart entering the financial services vertical. Now the concerns are for Google, Amazon, and Apple who have no costs of bricks and mortar and who have ample capital to invest in the disruption of this and other consumer services.

An article in the Globe and Mail on April 1 cited disruption from technology companies offering mobile payments as the biggest threat to Canadian banks. TD CEO went further to say “New technologies are raising consumers’ expectations of what banks can do and how they can do it.”

Apple Pay could destroy the credit card as we know it. It has the capability to disrupt the payment business in the same way they disrupted the music business. The payment process as an experience has become invisible to consumers for apps like Uber, Airbnb, Hotel Tonight, etc. The magnetic strip has high-security issues and mobile payments through these apps and previously mentioned vendors will move the payment process into the cloud or within the mobile device itself. This has the potential to be more secure for consumers and financial institutions alike.

Canadian banks are responding with their own version of mobile wallets which include UGO Wallet backed by TD and PC Financial and BMO Mobile Cash.

On Tuesday, Oppenheimar took a long look at AMEX and although some recent bad news may be one offs, there are deeper problems at the company. That some of those problems are resulting from the disruption of new entrants into the mobile payment space that will include upstarts like Square and PayPal and established companies like Apple. Moving the payment process to invisibility and behind the screen for the consumer will drive the price per transaction down and therefore the profitability for traditional credit card companies like AMEX, Visa, and MasterCard if they don’t adapt.

As reported in The Economist, some analysts think wearables’ killer feature may eventually be that they will provide the user with a “persistent” digital identity, melding the functions of a driving licence, credit card, house key, car key and computer in one small gadget worn on the wrist or neck. Disney has invested a $1 billion in a wristband called “MagicBand” to get on rides, pay for food and enter their hotel room. The frontier for wearables will be security, medical, fitness and payments that is already being demonstrated in the marketplace.

It is with this competitive threat in mind that Scotiabank developed an app for the Samsung smartwatch Gear last fall, giving users the ability to check their accounts from their wrists. Mobile payments from your wrist will not be too far into the future.

Mobile Payments are strengthening relationships between those who sell and those who buy, as merchants are offering more convenience to customers. But merchants and customers alike are curious about who’s interested in mobile payments and just how the industry is shaping up.

  • Millennials – 18 to 26 yrs. – 39%
  • Gen X – 27 to 39 yrs. – 31%
  • Young Boomers 40 to 50 yrs. – 18%
  • Old Boomers 51 to 61 yrs. – 9%
  • Seniors – above 62 yrs. – 3%

Regardless of age group, customers view time and cost saving and ease of use as key drivers for payments through mobile phones. Male and female users are not concerned about the lack of knowledge about mobile payments while making payments through mobile phones as cited in the Trimetric research report.

It takes a matter of seconds for me to turn my phone into a merchant payment terminal using Square for my company Jaguar Capital. This and other services like it are disrupting the traditional POS – Point of sale merchant systems. For many small businesses these terminals are expensive and we are seeing telephone and tablets becoming the payment terminals of the future.

PayPal with its onset of giving payment terms has started to gain a share of merchant payments. Traditional credit cards will have to change their value proposition. I.e. AMEX – Front of the line and airport terminal services.

The greatest advantage of democratizing a technology is technologists and programmers start working on its “Open Source Code”; therefore, millions of programmers are contributing to the creation of more secure methods of payments instead of the 10’s of thousands that once work for bank and financial institution IT departments.

There are multiple conferences held yearly such as Money 2000, Finovate, The Future of Money and Technology that are dedicated to early stage Fin Tech Innovators including mobile payment companies. As an example at Finovate in San Jose this May 12 and 13th 72 companies will be presenting with many top FI’s in attendance. Many of these companies will be addressing mobile payment issues in addition to other disruptions in the FI space.

When we speak of mobile payments and new technologies people’s attention are often turned to Bitcoin and other cyber currencies. By this they are often confused considering the security breaches and valuation changes. I believe the focus of our attention should be on Block chain which has the potential to be a more secure method to make payments and for sure mobile payments. Confidence in cyber currencies as a holder and store of value should not be confused with the technological development of block chain as a secure platform to make payments.

The Angel group Maple Leaf Angels where I chair the board sees over 250 applicants per year for investment. There is an ever increasing number for Fin Tech Technologies and this is multiplied 1000 fold across other investment groups in North America. Therefore we are only seeing the leading edge of the wedge for future Fin Tech development. Here in Canada both MaRS and OCE are mounting initiatives focused on Fin Tech. With organizations such as Toronto Financial Services Alliance and Global Risk Institute in Financial Services Toronto has the potential to be a hub and leader in the development of further innovations including global payments.

Countries such as India where traditional institutions like banks are not trusted mobile payments have the potential to overtake other methods as a result of the traditional bank and telco infrastructure not being in widespread use in the country. This is also prevalent for other technologies such as electronic voting and wireless communications.

In summary, larger traditional bricks and mortar financial institutions will be challenged to keep pace with both the democratization of technology and consumer’s demand for simplified and less expensive financial institution experiences. The sad part is these institutions may use regulation and monopolies as their weapon of choice in this battle.

Gerard Buckley
Gerard Buckley
Gerard has been working in the financial industry for over 30 years, helping companies strategically plan for accelerated levels of growth at Scotia Capital, Maple Leaf Angels and Jaguar Capital where he is now Managing Director. Gerard, a Certified Management Consultant leads a management consulting practice with mandates focused on growth in entrepreneurial companies and is an expert in structuring companies to access financing by employing governance, financial management and funding strategies. Gerard has worked on Merger & Acquisition teams transacting over $10 billion of deal flow in his career. Read more about Gerard's advisory firm at

Would you recommend this article?


Thanks for taking the time to let us know what you think of this article!
We'd love to hear your opinion about this or any other story you read in our publication.

Jim Love, Chief Content Officer, IT World Canada

Featured Download

Latest Blogs

ITB in your inbox

Our experienced team of journalists and bloggers bring you engaging in-depth interviews, videos and content targeted to IT professionals and line-of-business executives.