Mobile and Alternative Payments in Canada


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Mobile and Alternative Payments in Canada

  1. 1. Mobile and Alternative Payments in CanadaReport Details:Published:December 2012No. of Pages: 146Price: Single User License – US$3995Mobile payments are gaining a foothold in Canada: Of an estimated 22 million Canadian adultmobile phone users, some 17% have made a mobile payment in past 12 months, according toPackaged Facts’ survey results. But in this very nascent-stage market, the issue comes down tothe method of payment. Despite Canada’s solid contactless point-of-sale base, we see significantchallenges for NFC-based mobile payments. However, mobile P2P has already taken hold, andwe expect mobile P2P to continue to lead Canadian mobile payments growth, thanks in large partto 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 aretwice as likely to use a barcode scanning apps during the next 12 months than during the last 12months. And with Starbucks’ Canadian rollout of its barcode scan-based mobile paymentapplication, usage—and interest—could rise.Packaged Facts expects Canadian E-Wallet and electronic P2P payments to grow at a compoundannual growth rate of 62% during 2012-2015, on the heels of recent and expected mobilepayments launches and subsequent consumer uptake.Mobile and Alternative Payments in Canada provides industry participants with the wealth ofanalysis and guidance they need to stay abreast of this quickly evolving market. Report coverageincludes market sizing and forecast for Canadian mobile payments, as well as a comprehensiveevaluation 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.
  2. 2. •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 detailedanalysis 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 toolsGet your copy of this report @ points covered in Table of Contents of this report includeTable of ContentsExecutive SummaryReport ScopeOverviewMarket Size and ForecastMacro trends shaping Canadian mobile payments landscapeInternet and mobile phone use trendseCommerce and online merchant adoptionPayment methodsMobile banking and payments usage versus future interestSecurity and fraud concernsCanadian Mobile Phone Usage TrendsCanadian Mobile Banking TrendsSummary analysisCanadian Mobile Payments TrendsSummary analysisCanadian Interest in Mobile Financial, Promotional & Shopping ToolsSummary analysisCanadian Mobile Payments Strategies: Card AssociationsAmerican ExpressInteracMasterCardVisa Canada
  3. 3. Canadian Mobile Payments Strategies: NonbanksCarrier-Based Payment StrategiesAlternative Payments & Emerging Wallet Payment StrategiesEmerging mobile payment acceptance optionsMobile Payments Strategies: Canadian BanksTim Hortons & Starbucks Canadian Mobile Payment StrategiesRetailer perspectiveTim Horton’s opts for NFCStarbucks Canada takes the barcode routeChapter 1: OverviewCanadian payments infrastructurePayment methodsCanadian payment lawsPayments industry undergoing significant changeThe Task Force for the Payments System ReviewCode of Conduct for the Credit and Debit Card IndustryApplication to mobile paymentsMerchant payment choiceCompeting domestic debit applicationsPrinciple of equal brandingDebit and credit cominglingCBA Mobile Payments Reference ModelCompetition BureauHuge discrepancy between credit and debit feesChallenging practices as anti-competitiveChapter 2: Market Size and ForecastSummary analysisMobile payments are gaining a foothold in CanadaE-Wallet and electronic P2P payments growing robustlyBut represent a tiny sliver of retail paymentsZoompass and PayPalGoing forward: 62% 2012-2015 CAGRTable 2-1: Canadian E-Wallet/P2P Transaction Value, 2011-2015NFC mobile payments at POS: significant challenges aheadNFC mobile payment growth inhibitorsLimited acceptanceLimited accessLimited transaction value amountsLimited payment flexibility; no loyalty flexibilityFee & competition concernsPayment growth contextCash and check garner largest value share
  4. 4. Credit and debit gainContactless card growthPrepaid use also rises aggressively, but total value remains very smallGraph 2-1: Canadian Retail Payments Value, by Payment Type, 2008-2011Chapter 3: Macro Trends Shaping Canadian Mobile Payments LandscapeInternet and mobile phone use trendsMobile phone usage nears saturationMobile phone coverage virtually universalTable 3-1: Canadian Wireless Subscribers, Revenue, Availability and Penetration, 2010 and 2011Smartphone share nears 60%Graph 3-1: Quarterly Canadian Smartphone/Feature Phone Share, 2011Smartphone share passes 50%100% penetration by 2014Apps and more appsGraph 3-2: iTunes Music and App Store DownloadsTablet penetration exceeds U.S. rateBroadband internet availability nearly universalTable 3-2: Residential Internet, Broadband and High-Speed Broadband Metrics, 2011Household internet access at 80%Graph 3-3: Percentage of Canadian Households with Home Internet Access, 2010Online banking highly penetratedeCommerce and online merchant adoptionE-commerce lagsTable 3-3: Canadian Electronic Commerce, Number and Value of OrdersCredit cards dominant online payment option, but online payment services have footholdSmall- and midsize- businessesSmall business online penetration very highOnline banking penetration high; online selling is lowPayPal leading internet payment choiceTable 3-4: Internet payment solutions used by SMEsLess than half can accept online paymentsTable 3-5: Small- and Medium-Size Business Payment Acceptance Rates, Preferred Payment,and Share of Dollar SalesAnd mobile platform adoption very lowSocial networking not significantJustifying cost of electronic payment equipment a challengeGraph 3-4: Obstacles to Accepting Electronic PaymentsPayment methodsNFC and contactlessIs 80,000 enough to drive a revolution?PayPass merchant adoption passing 20,000But only 5% terminal penetration?
  5. 5. An urban skewTable 3-6: MasterCard PayPass Terminals & Terminals per Capita:Top 10 Canadian Cities by Population, 2012payWave skewed heavily to major chains; narrow retail segment scopeTable 3-7: Visa payWave Merchant Category Penetration: Top 10 Canadian Cities by Population,2012Don’t count out QR codesEyeing P2PLots of checks and cash left to convertOnline/mobile opportunity: P2P transactions skew to cashTable 3-8: Percentage of Consumer Transactions by Method of Payment & Payment ChannelCard-and phone-based opportunity: Most micropayments made in cashTable 3-9: Percentage of Consumer Transactions by Transaction Value Range & Method ofPaymentMobile banking and mobile payments use and interestAwareness is relatively highUsage foundation is formingMobile payments gaining a footholdNFC and wallet penetration is lowBut mobile P2P has taken holdFuture intent suggests pent up demand for mobile payments. . .. . . and for more holistic mobile financial & promotional organization toolsSecurity and fraud concernsNeed for robust digital identification and authenticationResearch In Motion to address mobile wallet securityChapter 4: Canadian Mobile Phone Usage TrendsSummary analysisMobile phone usage and smartphone usage shareSmartphone share well above 50%Youth and non-Europeans lead the wayTable 4-1: Canadian Mobile Phone & Smartphone Usage Penetration, 2012Operating system: still RIM territoryGraph 4-1: Quarterly Canadian Smartphone Operating System Share, 2011Smartphone users v. non-smartphone users: feature usage, bill & downloadsTexting carries across smartphones and non-smartphonesStrong feature-driven user base for mobile payments providers to targetTable 4-2: Table Feature Usage, Phone Bill & App Download Frequency: Smartphone UsersV.Non-Smartphone Users, 2012Demographic analysisTable 4-3: Smartphone User Feature Usage, Phone Bill & App Download Frequency: By Gender,2012Table 4-4: Smartphone User Feature Usage, Phone Bill & App Download Frequency: By Age,
  6. 6. 2012Chapter 5: Canadian Mobile Banking TrendsSummary analysisMobile banker definition18-29s a pivotal demographicTable 5-1: Mobile Banking: Canadian Usage Penetration, 2012Mobile banking features & servicesMore than 4 million using phone to check account balance/recent transactionsMobile bill payment catching onTable 5-2: Mobile Banking Features & Services Usage Penetration and Population:Canadian Population, Mobile Phone & Smartphone Users, 2012Mobile bankers = smartphone usersModerate usage frequencyTable 5-3: Mobile Banking & Mobile Banking Frequency: Mobile Phone, Smartphone& Non-Smartphone Users, 2012Chapter 6: Canadian Mobile Payments TrendsSummary analysisMobile payer definitionGaining a footholdTable 6-1: Mobile Payments: Usage Penetration, 2012But marked by infrequent useMobile payment methodsBill payment has widest usage footprintP2P taking holdOnline purchasing more prevalent than most mobile payment methodsLess than 1 in 10 tapping phone at POS; even fewer using virtual walletsTable 6-2: Mobile Payment Methods, 2012Payment cards prevailing funding option, followed by bank account & PayPalWallet solutions not relevant yetCarrier direct billing and iTunesTable 6-3: Mobile Payments: Payment Sources, 2012Past vs. next 12 months: mobile payment, deposit & communication methodsIn light of current use, NFC mobile payment interest is pronouncedPicture check deposit and bill paymentGraph 6-1: Mobile Payers’ Mobile Payment, Deposit and Communication Methods:Current v. Intended Use, 2012Interest during next 12 monthsInterest more prevalent among smartphone usersTable 6-4: Interest in Mobile Phone Payment, Deposit & Communication Methods in Next 12months:Mobile Phone, Smartphone & Non-Smartphone Users, 2012Mobile bankers more apt to express interest in mobile payment & deposit methods
  7. 7. Table 6-5: Interest in Mobile Phone Payment, Deposit & Communication Methods in Next 12months:Mobile Phone Users, Mobile Bankers & Mobile Payers, 2012Chapter 7: Canadian Interest in Mobile Financial, Promotional & Shopping ToolsSummary analysisIntroductionMobile Phone Financial & Promotional OrganizationMobile Financial & Promotional Organization Tools: Current Use & Future UseGraph 7-1: Mobile Payers: Current and Future Use of Mobile Financial &Promotional Organization Tools, 2012Non-smartphone users interested, tooTable 7-1: Interest in Mobile Financial And Promotional Organization Tools in Next 12 months:Mobile Phone, Smartphone & Non-Smartphone Users, 2012Mobile bankers most apt to express interest in variety of methodsTable 7-2: Interest in Mobile Financial And Promotional Organization Tools in Next 12 months:Mobile Phone Users, Mobile Bankers & Mobile Payers, 2012Mobile Phone Shopping EnhancementsMobile Shopping Tools: Current Use & Future UsePath to purchaseAn online shopping laggardMobile purchase appsComparing prices while shopping a popular phenomenonBarcode scanning demandGraph 7-2: Mobile Payers: Current and Future Use of Mobile Shopping Tools, 2012Non-smartphone users interested, tooTable 7-3: Interest in Mobile Shopping Tools in Next 12 months: Mobile Phone, Smartphone &Non-Smartphone Users, 2012Mobile banker interest suggests platform development routeTable 7-4: Interest in Mobile Shopping Tools in Next 12 months: Mobile Phone Users,Mobile Bankers & Mobile Payers, 2012Chapter 8: Canadian Mobile Payments Strategies: Card AssociationsSummary analysisAmerican ExpressInteracMasterCardVisa CanadaAmerican Express CanadaPayment diversificationPrepaid movesContactless chip technology migrationMobile banking websiteNo Canada Serve yet
  8. 8. InteracNon-profit status a boon and a baneProducts and servicesInterac Flash: Canada’s first contactless debit payment functionInterac OnlineInterac e-TransferLow, low, low feesMasterCardMaestro take a bow—then leaves the stagePayPassSecurityNew issuersPayPass Wallet ServicesPayPass global network remains smallBut Canada tells a slightly different storyBut only 3% terminal penetration?An urban skewTable 8-1: MasterCard PayPass Terminals & Terminals per Capita, Top 10 Canadian Cities byPopulation, 2012Visa CanadaVisa payWavepayWave skewed heavily to major chains; narrow retail segment scopeTable 8-2: Visa payWave Merchant Category Penetration, Top 10 Canadian Cities by Population,2012CIBC mobile payment appVisa digital walletZoompass prepaid card optionCo-badged debit footholdChapter 9: Canadian Mobile Payments Strategies: NonbanksCarrier-Based Payment StrategiesRogers CommunicationsGraph 9-1: Wireless Carrier Mobile Phone Subscriber Market Share, Q3 2012Direct carrier billingRogers-branded suretap solutionGemalto partnershipFinancial institution? A credit card?ZoompassMajor partnershipsZoompass TagZoompass functionalityEnrollmentLoading the wallet
  9. 9. Transferring moneyPrepaid card optionFee structureTable 9-1: Zoompass Account FeesTable 9-2: Zoompass Account Funding and Transaction MaximumsAlternative Payments & Emerging Wallet Payment StrategiesGoogle WalletPayPalSquareGoogle WalletNot in Canada, for some time we expectBut study it closelyWallet 1.0: lots of fanfare; little successWallet 1.5: putting it in the cloudCalling all cardsSave to Wallet featureOnline/offline integration: Enter the virtual prepaid cardOnline purchases: ubiquity, courtesy of MasterCardIn-store purchase limited by NFCSecurity enhancementWallet 2.0: Leapfrogging NFC with a physical cardThank you, DiscoverPayPal100 million accounts and countingOnline and mobile capabilityMobile payment appsIn-store payment launching in U.S.Already a strong Canadian online playerMobile checkout enabled for hundreds of thousands of Canadian merchantsPayPal Here: POS payment solutionPayPal Here delays holding it back?Square, Inc.How much it costsTable 9-3: Square Pricing Options & FeesHow it worksOpen tab featureLoyalty trackingSecurityToolsSquare Card ReaderSquare RegisterStarbucks U.S. relationship does not extend to Canada
  10. 10. Direct Carrier BillingText2payBangoEmerging mobile payment acceptance optionsNetSecure TechnologiesLike Square, but not like SquareKudos SlicePayfirmaNFC in the worksFee structureTable 9-4: Payfirma Mobile Payment PricingChapter 10: Mobile Payments Strategies: Canadian BanksSummary analysisBank of MontrealMobile PayPass TagCanadian Imperial Bank of CommerceMobile banking leadershipCIBC Mobile Payment AppWho can use itIncentive to use itHow they can use itRoyal Bank of CanadaMobex Mobile Payment provides learning curveMobile wallet launch on the horizonScotiabank/ING DirectPassive social network banking on FacebookRemote check depositToronto-Dominion BankMobile banking app launches met with strong demandChapter 11: Tim Hortons & Starbucks Canadian Mobile Payment StrategiesSummary analysis: retailer perspectiveA Tale of Two Chains: Starbucks and Tim Horton’sTim Horton’s opts for NFCStarbucks Canada takes the barcode route100 mobile million transactions and countingStored value card foundationBenefitsSquare partnership—a Square investmentBut Starbucks chooses PayPal in CanadaAppendixMethodologyConsumer survey methodology
  11. 11. U.S. Cell Phone Ownership/Use, by Demographic: 2012 Survey ComparisonPackaged Facts Canadian Survey DemographicsMarket size and forecastReport table interpretationAbbreviationsTerms and definitionsExplanatory tablesTable A1: Mobile Phone, Smartphone, Non-Smartphone, Mobile Banking & Mobile PaymentsUsers, 2012Contact: for more information.