Is Canada ready for mobile payments

Mobile & Apps

In Germany, mobile payment is in the early start-up phase. Canada is significantly further ahead in comparison, the preparations here have been completed and the first companies will have solutions shortly before the market launch. Wait - Canada? The surprising answer is that the country provides the perfect conditions for mobile payment, according to the spokesman for the Chamber of Commerce in Ontario: "Toronto is a metropolitan area for the three relevant sectors. This is where the headquarters of banks, mobile phone providers and IT companies are located housed. "

There is also a cultural interest: According to another spokesman, Canadians are fans of drive-through food (a Canadian colleague confirms this, but only under protest). Since it is also very cold in the country, Canadians prefer to pay with cards rather than cash in the drive-through. 31 percent of all Canadians own a smartphone. For comparison: In the USA this value is 16 percent, in Germany we achieved almost 40 percent distribution in 2012, according to Bitkom data. An interesting parallel: As in Germany, Canadians clearly prefer EC cards to credit cards. The Canadian government also created the prerequisites for different companies to develop a common standard without fear of antitrust problems.

Canada's solution is called EnStream

The result is EnStream: The company sees itself as a service provider as well as an intermediary between banks and companies. EnStream not only provides the necessary IT infrastructure for checking and forwarding payments, the company also arranges the space on SIM cards in telephones required for payments. Unlike the Americans, Canadians recently switched to the Chip / PIN procedure, which is also used in Germany. The process saves the data on the golden chip instead of just on the magnetic strip.

According to EnStream, they needed between 50 and 100 Kbytes for the data on a credit card. Individual apps, for example for loyalty programs, are three to four KBytes. Practical side effect of the switch: Most payment terminals have recently been replaced and mostly already support the contactless payment systems that have already been introduced by Visa (PayWave) and MasterCard (PayPass). "A quarter of all sales terminals support wireless payment systems," said the EnStream spokesman. According to MasterCard, 11 percent of all credit card payments were made in August 2013 using "Tap to Pay".

This lays the foundations for the first expansion stage: First, providers such as the mobile communications company Rogers or MasterCard want to bring a virtual credit card into smartphones. This means that the smartphone is initially a de facto credit card with no additional functions. Interesting for the topic of security: Since the smartphones have a constant feedback channel to the banks via the infrastructure, they can dynamically change the CVC number with each transfer. Older numbers become invalid and can no longer be used - a clever protection against skimming, i.e. the illegal access to credit card data.

As the third player, Interac wants to get into wireless payment, a counterpart to EC payment in this country. Unlike credit cards, the payment is debited directly from the account. According to the spokesman, Canadians use Interac instead of credit cards for six out of ten card payments - the potential is correspondingly great. The technology will be called Interac Mobile and is about to be launched. Here, too, a replacement for cards is initially planned. In further expansion stages, even a P2P payment system should then be possible; In other words, users can transfer money from one account to another using smartphones.

Card emulation is only the first step

Everyone involved is counting on emulating a card to be the first step. New functions are planned for the next expansion stages. The provider Rogers has secured a banking license for this purpose, the company wants to offer customers their own credit cards. Rogers wants to bundle these in one app that, in addition to all credit cards, also manages customer cards or credit for various services.

It is interesting that all variants of contactless payment offer a kind of PIN limit. If the amount purchased is below this limit, the system does not ask for additional confirmation when making the payment. Regardless of whether it is cards or mobile payment, the payment systems behave like cash below these limits. MasterCard is currently setting this at 50 Canadian dollars, but plans to raise the limit to 100 Canadian dollars in October. Interac also draws the line at 50 Canadian dollars.

Risk PIN limit

While this is extremely convenient (the author himself has tried the function several times with a contactless credit card in a US coffee chain), it still leaves an uncomfortable feeling
Feeling. What if the card or smartphone is lost or stolen? If you want to safely use this function, which is now active on many credit cards, you should always keep a close eye on your account statements.

Still, the concept - and especially the progress in Canada - is interesting. The technology makes sense, especially when the smartphones couple the payment systems with intelligent additional functions. Loyalty programs or constantly updated information about the account balance are suitable for this. In any case, the Canadian model is well thought out and provides a solid foundation. It remains to be seen whether customers share the company's enthusiasm.