Mobile and Alternative Payments in Canada

  • December 2012
  • -
  • Packaged Facts
  • -
  • 146 pages

Mobile payments are gaining a foothold in Canada: Of an estimated 22 million Canadian adult mobile phone users, some 17% have made a mobile payment in past 12 months, according to Packaged Facts' survey results. But in this very nascent-stage market, the issue comes down to the method of payment. Despite Canada's solid contactless point-of-sale base, we see significant challenges for NFC-based mobile payments. However, mobile P2P has already taken hold, and we expect mobile P2P to continue to lead Canadian mobile payments growth, thanks in large part to PayPal and Zoompass, already popular P2P methods straddling online and mobile payments. While QR code awareness is low, our consumer survey results suggest that mobile payers are twice as likely to use a barcode scanning apps during the next 12 months than during the last 12 months. And with Starbucks' Canadian rollout of its barcode scan-based mobile payment application, usage—and interest—could rise.

Packaged Facts expects Canadian E-Wallet and electronic P2P payments to grow at a compound annual growth rate of 62% during 2012-2015, on the heels of recent and expected mobile payments launches and subsequent consumer uptake.

Mobile and Alternative Payments in Canada provides industry participants with the wealth of analysis and guidance they need to stay abreast of this quickly evolving market. Report coverage includes market sizing and forecast for Canadian mobile payments, as well as a comprehensive evaluation of competitor dynamics:

- Canadian contactless and mobile payment strategies employed by American Express, Interac, MasterCard and Visa.
- Mobile payments strategies employed by non-banks: carrier-based payment strategies, led by Rogers Communications and Zoompass; alternative payments & emerging wallet payment strategies, led by Google, PayPal and Square; direct carrier billing, provided by Bango and Text2pay; and emerging mobile payment acceptance options, led by NetSecure Technologies and Payfirma.
- Mobile banking and mobile payment solutions of Canada's Big 5 banks (Bank of Montreal, Canadian Imperial Bank of Commerce Royal Bank of Canada, Scotiabank and Toronto-Dominion Bank)
- Merchant perspective on Canadian mobile payments and analysis of the diverging mobile payment paths taken by Canadian QSR playersTim Hortons and Starbucks.
- Macro trends shaping the Canadian mobile payments landscape, including internet and mobile phone use trends; eCommerce and online merchant adoption trends; Payment method trends; mobile banking and payments usage versus future interest; and security and fraud.



In addition, Proprietary Packaged Facts consumer survey data provide the basis for a detailed analysis of the consumer context:

- Mobile phone and smartphone ownership trends, feature usage, app usage, and tablet ownership
- Mobile payment methods (i.e. P2P, bill payment, etc.) and payment funding choices by demographic
- Mobile payers' current and intended use of mobile payment, deposit and communication methods, broken out by smartphone users, non-smartphone users, mobile bankers, and mobile payers
- Mobile banking by demographic group; feature usage uptake among mobile bankers and mobile smartphone bankers.
- Current and intended use of mobile phone financial, promotional & shopping tools

Table Of Contents

Executive Summary
Report Scope
Overview
Market Size and Forecast
- Macro trends shaping Canadian mobile payments landscape
- Internet and mobile phone use trends
- eCommerce and online merchant adoption
- Payment methods
- Mobile banking and payments usage versus future interest
- Security and fraud concerns
Canadian Mobile Phone Usage Trends
Canadian Mobile Banking Trends
- Summary analysis
Canadian Mobile Payments Trends
- Summary analysis
Canadian Interest in Mobile Financial, Promotional and Shopping Tools
- Summary analysis
Canadian Mobile Payments Strategies: Card Associations
- American Express
- Interac
- MasterCard
- Visa Canada
Canadian Mobile Payments Strategies: Nonbanks
- Carrier-Based Payment Strategies
- Alternative Payments and Emerging Wallet Payment Strategies
- Emerging mobile payment acceptance options
Mobile Payments Strategies: Canadian Banks
Tim Hortons and Starbucks Canadian Mobile Payment Strategies
- Retailer perspective
- Tim Horton's opts for NFC
- Starbucks Canada takes the barcode route

Chapter 1: Overview
- Canadian payments infrastructure
- Payment methods
- Canadian payment laws
- Payments industry undergoing significant change
- The Task Force for the Payments System Review
- Code of Conduct for the Credit and Debit Card Industry
- Application to mobile payments
- Merchant payment choice
- Competing domestic debit applications
- Principle of equal branding
- Debit and credit comingling
- CBA Mobile Payments Reference Model
- Competition Bureau
- Huge discrepancy between credit and debit fees
- Challenging practices as anti-competitive

Chapter 2: Market Size and Forecast
- Summary analysis
- Mobile payments are gaining a foothold in Canada
- E-Wallet and electronic P2P payments growing robustly
- But represent a tiny sliver of retail payments
- Zoompass and PayPal
- Going forward: 62% 2012-2015 CAGR
- Table 2-1: Canadian E-Wallet/P2P Transaction Value, 2011-2015
- NFC mobile payments at POS: significant challenges ahead
- NFC mobile payment growth inhibitors
- Limited acceptance
- Limited access
- Limited transaction value amounts
- Limited payment flexibility; no loyalty flexibility
- Fee and competition concerns
- Payment growth context
- Cash and check garner largest value share
- Credit and debit gain
- Contactless card growth
- Prepaid use also rises aggressively, but total value remains very small
- Graph 2-1: Canadian Retail Payments Value, by Payment Type, 2008-2011

Chapter 3: Macro Trends Shaping Canadian Mobile Payments Landscape
- Internet and mobile phone use trends
- Mobile phone usage nears saturation
- Mobile phone coverage virtually universal
- Table 3-1: Canadian Wireless Subscribers, Revenue, Availability and Penetration, 2010 and 2011
- Smartphone share nears 60%
- Graph 3-1: Quarterly Canadian Smartphone/Feature Phone Share, 2011
- Smartphone share passes 50%
- 100% penetration by 2014
- Apps and more apps
- Graph 3-2: iTunes Music and App Store Downloads
- Tablet penetration exceeds U.S. rate
- Broadband internet availability nearly universal
- Table 3-2: Residential Internet, Broadband and High-Speed Broadband Metrics, 2011
- Household internet access at 80%
- Graph 3-3: Percentage of Canadian Households with Home Internet Access, 2010
- Online banking highly penetrated
- eCommerce and online merchant adoption
- E-commerce lags
- Table 3-3: Canadian Electronic Commerce, Number and Value of Orders
- Credit cards dominant online payment option, but online payment services have foothold
- Small- and midsize- businesses
- Small business online penetration very high
- Online banking penetration high; online selling is low
- PayPal leading internet payment choice
- Table 3-4: Internet payment solutions used by SMEs
- Less than half can accept online payments
- Table 3-5: Small- and Medium-Size Business Payment Acceptance Rates, Preferred Payment, and Share of Dollar Sales
- And mobile platform adoption very low
- Social networking not significant
- Justifying cost of electronic payment equipment a challenge
- Graph 3-4: Obstacles to Accepting Electronic Payments
- Payment methods
- NFC and contactless
- Is 80,000 enough to drive a revolution?
- PayPass merchant adoption passing 20,000
- But only 5% terminal penetration?
- An urban skew
- Table 3-6: MasterCard PayPass Terminals and Terminals per Capita:
- Top 10 Canadian Cities by Population, 2012
- payWave skewed heavily to major chains; narrow retail segment scope
- Table 3-7: Visa payWave Merchant Category Penetration: Top 10 Canadian Cities by Population, 2012
- Don't count out QR codes
- Eyeing P2P
- Lots of checks and cash left to convert
- Online/mobile opportunity: P2P transactions skew to cash
- Table 3-8: Percentage of Consumer Transactions by Method of Payment and Payment Channel
- Card-and phone-based opportunity: Most micropayments made in cash
- Table 3-9: Percentage of Consumer Transactions by Transaction Value Range and Method of Payment
- Mobile banking and mobile payments use and interest
- Awareness is relatively high
- Usage foundation is forming
- Mobile payments gaining a foothold
- NFC and wallet penetration is low
- But mobile P2P has taken hold
- Future intent suggests pent up demand for mobile payments. . .
- . . . and for more holistic mobile financial and promotional organization tools
- Security and fraud concerns
- Need for robust digital identification and authentication
- Research In Motion to address mobile wallet security

Chapter 4: Canadian Mobile Phone Usage Trends
- Summary analysis
- Mobile phone usage and smartphone usage share
- Smartphone share well above 50%
- Youth and non-Europeans lead the way
- Table 4-1: Canadian Mobile Phone and Smartphone Usage Penetration, 2012
- Operating system: still RIM territory
- Graph 4-1: Quarterly Canadian Smartphone Operating System Share, 2011
- Smartphone users v. non-smartphone users: feature usage, bill and downloads
- Texting carries across smartphones and non-smartphones
- Strong feature-driven user base for mobile payments providers to target
- Table 4-2: Table Feature Usage, Phone Bill and App Download Frequency: Smartphone Users V.Non-Smartphone Users, 2012
- Demographic analysis
- Table 4-3: Smartphone User Feature Usage, Phone Bill and App Download Frequency: By Gender, 2012
- Table 4-4: Smartphone User Feature Usage, Phone Bill and App Download Frequency: By Age, 2012

Chapter 5: Canadian Mobile Banking Trends
- Summary analysis
- Mobile banker definition
- 18-29s a pivotal demographic
- Table 5-1: Mobile Banking: Canadian Usage Penetration, 2012
- Mobile banking features and services
- More than 4 million using phone to check account balance/recent transactions
- Mobile bill payment catching on
- Table 5-2: Mobile Banking Features and Services Usage Penetration and Population:
- Canadian Population, Mobile Phone and Smartphone Users, 2012
- Mobile bankers = smartphone users
- Moderate usage frequency
- Table 5-3: Mobile Banking and Mobile Banking Frequency: Mobile Phone, Smartphone
- and Non-Smartphone Users, 2012

Chapter 6: Canadian Mobile Payments Trends
- Summary analysis
- Mobile payer definition
- Gaining a foothold
- Table 6-1: Mobile Payments: Usage Penetration, 2012
- But marked by infrequent use
- Mobile payment methods
- Bill payment has widest usage footprint
- P2P taking hold
- Online purchasing more prevalent than most mobile payment methods
- Less than 1 in 10 tapping phone at POS; even fewer using virtual wallets
- Table 6-2: Mobile Payment Methods, 2012
- Payment cards prevailing funding option, followed by bank account and PayPal
- Wallet solutions not relevant yet
- Carrier direct billing and iTunes
- Table 6-3: Mobile Payments: Payment Sources, 2012
- Past vs. next 12 months: mobile payment, deposit and communication methods
- In light of current use, NFC mobile payment interest is pronounced
- Picture check deposit and bill payment
- Graph 6-1: Mobile Payers' Mobile Payment, Deposit and Communication Methods:
- Current v. Intended Use, 2012
- Interest during next 12 months
- Interest more prevalent among smartphone users
- Table 6-4: Interest in Mobile Phone Payment, Deposit and Communication Methods in Next 12 months:
- Mobile Phone, Smartphone and Non-Smartphone Users, 2012
- Mobile bankers more apt to express interest in mobile payment and deposit methods
- Table 6-5: Interest in Mobile Phone Payment, Deposit and Communication Methods in Next 12 months:
- Mobile Phone Users, Mobile Bankers and Mobile Payers, 2012

Chapter 7: Canadian Interest in Mobile Financial, Promotional and Shopping Tools
- Summary analysis
- Introduction
- Mobile Phone Financial and Promotional Organization
- Mobile Financial and Promotional Organization Tools: Current Use and Future Use
- Graph 7-1: Mobile Payers: Current and Future Use of Mobile Financial and
- Promotional Organization Tools, 2012
- Non-smartphone users interested, too
- Table 7-1: Interest in Mobile Financial And Promotional Organization Tools in Next 12 months: Mobile Phone, Smartphone and Non-Smartphone Users, 2012
- Mobile bankers most apt to express interest in variety of methods
- Table 7-2: Interest in Mobile Financial And Promotional Organization Tools in Next 12 months:
- Mobile Phone Users, Mobile Bankers and Mobile Payers, 2012
- Mobile Phone Shopping Enhancements
- Mobile Shopping Tools: Current Use and Future Use
- Path to purchase
- An online shopping laggard
- Mobile purchase apps
- Comparing prices while shopping a popular phenomenon
- Barcode scanning demand
- Graph 7-2: Mobile Payers: Current and Future Use of Mobile Shopping Tools, 2012
- Non-smartphone users interested, too
- Table 7-3: Interest in Mobile Shopping Tools in Next 12 months: Mobile Phone, Smartphone and Non-Smartphone Users, 2012
- Mobile banker interest suggests platform development route
- Table 7-4: Interest in Mobile Shopping Tools in Next 12 months: Mobile Phone Users,
- Mobile Bankers and Mobile Payers, 2012

Chapter 8: Canadian Mobile Payments Strategies: Card Associations
- Summary analysis
- American Express
- Interac
- MasterCard
- Visa Canada
- American Express Canada
- Payment diversification
- Prepaid moves
- Contactless chip technology migration
- Mobile banking website
- No Canada Serve yet
- Interac
- Non-profit status a boon and a bane
- Products and services
- Interac Flash: Canada's first contactless debit payment function
- Interac Online
- Interac e-Transfer
- Low, low, low fees
- MasterCard
- Maestro take a bow—then leaves the stage
- PayPass
- Security
- New issuers
- PayPass Wallet Services
- PayPass global network remains small
- But Canada tells a slightly different story
- But only 3% terminal penetration?
- An urban skew
- Table 8-1: MasterCard PayPass Terminals and Terminals per Capita, Top 10 Canadian Cities by Population, 2012
- Visa Canada
- Visa payWave
- payWave skewed heavily to major chains; narrow retail segment scope
- Table 8-2: Visa payWave Merchant Category Penetration, Top 10 Canadian Cities by Population, 2012
- CIBC mobile payment app
- Visa digital wallet
- Zoompass prepaid card option
- Co-badged debit foothold


Chapter 9: Canadian Mobile Payments Strategies: Nonbanks
- Carrier-Based Payment Strategies
- Rogers Communications

- Graph 9-1: Wireless Carrier Mobile Phone Subscriber Market Share, Q3 2012
- Direct carrier billing
- Rogers-branded suretap solution
- Gemalto partnership
- Financial institution? A credit card?


- Zoompass

- Major partnerships
- Zoompass Tag


- Zoompass functionality

- Enrollment
- Loading the wallet
- Transferring money
- Prepaid card option
- Fee structure
- Table 9-1: Zoompass Account Fees
- Table 9-2: Zoompass Account Funding and Transaction Maximums


- Alternative Payments and Emerging Wallet Payment Strategies
- Google Wallet
- PayPal
- Square
- Google Wallet

- Not in Canada, for some time we expect
- But study it closely
- Wallet 1.0: lots of fanfare; little success
- Wallet 1.5: putting it in the cloud
- Calling all cards
- Save to Wallet feature
- Online/offline integration: Enter the virtual prepaid card
- Online purchases: ubiquity, courtesy of MasterCard
- In-store purchase limited by NFC
- Security enhancement
- Wallet 2.0: Leapfrogging NFC with a physical card
- Thank you, Discover


- PayPal

- 100 million accounts and counting
- Online and mobile capability
- Mobile payment apps
- In-store payment launching in U.S.
- Already a strong Canadian online player
- Mobile checkout enabled for hundreds of thousands of Canadian merchants
- PayPal Here: POS payment solution
- PayPal Here delays holding it back?


- Square, Inc.

- How much it costs
- Table 9-3: Square Pricing Options and Fees
- How it works
- Open tab feature
- Loyalty tracking
- Security
- Tools
- Square Card Reader
- Square Register
- Starbucks U.S. relationship does not extend to Canada


- Direct Carrier Billing
- Text2pay
- Bango
- Emerging mobile payment acceptance options
- NetSecure Technologies

- Like Square, but not like Square
- Kudos Slice


- Payfirma

- NFC in the works
- Fee structure
- Table 9-4: Payfirma Mobile Payment Pricing


Chapter 10: Mobile Payments Strategies: Canadian Banks
- Summary analysis
- Bank of Montreal
- Mobile PayPass Tag
- Canadian Imperial Bank of Commerce
- Mobile banking leadership
- CIBC Mobile Payment App

- Who can use it
- Incentive to use it
- How they can use it


- Royal Bank of Canada

- Mobex Mobile Payment provides learning curve


- Mobile wallet launch on the horizon
- Scotiabank/ING Direct

- Passive social network banking on Facebook
- Remote check deposit


- Toronto-Dominion Bank
- Mobile banking app launches met with strong demand
Chapter 11: Tim Hortons and Starbucks Canadian Mobile Payment Strategies
- Summary analysis: retailer perspective
- A Tale of Two Chains: Starbucks and Tim Horton's
- Tim Horton's opts for NFC
- Starbucks Canada takes the barcode route

- 100 mobile million transactions and counting


- Stored value card foundation

- Benefits
- Square partnership—a Square investment
- But Starbucks chooses PayPal in Canada


- Appendix
- Methodology
- Consumer survey methodology

- U.S. Cell Phone Ownership/Use, by Demographic: 2012 Survey Comparison
- Packaged Facts Canadian Survey Demographics


- Market size and forecast
- Report table interpretation
- Abbreviations
- Terms and definitions

- Explanatory tables
- Table A1: Mobile Phone, Smartphone, Non-Smartphone, Mobile Banking and Mobile Payments Users, 2012



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