For every popular device or trend, there was a tipping point where sales or adoption surged upward or hit critical mass to enable a number of related technologies and practices. In Canada, the tipping point for mobile payments is swiftly approaching, as smartphone adoption and Near Field Communication (NFC) enabled point-of-sale systems grow in popularity.
The way already paved for mobile wallets
The path for mobile payments was opened when companies integrated NFC technology into cards such as MasterCard's PayPass. Customers could conveniently tap their card to complete a transaction and quickly continue on their way. According to TelecomLead, the majority of Canada's major merchants have already added the technology to their stores.
With a growing number of smartphones possessing NFC capabilities, Canada is well positioned for mobile wallets to take off by using the NFC terminals many shops already have in place. Ten percent of MasterCard payments use PayPass, and the majority of Canadians will soon upgrade to smartphones – TelecomLead noted that 47 percent of the population now owns the devices. In light of only 34 percent of citizens possessing smartphones in 2012, considerable growth should be expected to continue into 2014.
Furthermore, mobile payments aren't new to the country, with TelecomLead noting that 3.4 million Canadians paid for goods and services with their phones in 2011. As more consumers become accustomed to this option, it will be used with greater frequency by additional shoppers.
"[Consumers] are looking for fast, convenient and secure payment options. This demand for shopping convenience is driving a shift to digital payments," said Moneris Chief Sales & Marketing Officer Jeff Guthrie, according to TelecomLead.
Moving toward widespread adoption
NFC-capable terminals aren't quite as popular in other countries, but that may soon change. In the United States and United Kingdom, 16 percent of point-of-sale terminals are NFC-capable, and both countries show steady rates of smartphone adoption. Meanwhile, companies such as Google are actively encouraging consumers to use mobile wallets, and Starbucks generated 10 percent of its U.S. revenue from mobile payments, TelecomLead noted. These factors will likely work together to increase the technology's adoption throughout other nations. Given the popularity of Starbucks' mobile payments solution, U.S. residents have already proved willing to use it for low-value transactions.
Companies may need to overcome some perceptions about security, though. No one wants to believe that their financial information is at risk, and with online shopping fraud amounting to more than $20 billion annually, these fears have some justification. However, mobile payments may be more secure than regular credit card transactions. Smartphones can be locked with a PIN, which adds another layer of protection to the devices. Implementing multi-factor authentication methods that require the NFC-capable hardware and another credential can also alleviate some concerns about the innovation. Stu Vaeth, vice president of products at SecureKey, also noted that the company provides strong authentication for mobile payment transactions by using the briidge.net Connect service.
While $12.8 billion was spent via mobile payments in 2012, this is expected to increase dramatically in the next few years. Citing Forrester Research, TelecomLead noted that by 2017, smartphone ownership should reach 1.5 billion users worldwide and transactions using NFC-capable phones may reach $90 billion.
In light of this level of growth, organizations should prepare for the coming mobile payment landscape. Those retailers that provide the most versatile options for purchasing items will have a distinct advantage over competitors that are slower to adopt the practice. Convenience remains critical to how consumers engage with businesses, and the ability to quickly complete a transaction will be a compelling option to many customers.