Canada's mobile wallet paradox: Too much infrastructure, not enough incentive

Due in part to the U.S.'s lackluster adoption of contactless cards, mobile wallets had a slow and difficult time gaining hold among consumers and merchants that were unfamiliar with the tap-and-pay process or didn't have the right technology. The opposite problem plagues Canada, where contactless cards are so widely used that mobile adds little value.

Canada’s largest banks began routinely issuing cards with Near Field Communications built in years ago, and merchants followed, creating a country with one of the highest penetrations of NFC-enabled terminals in the world. The majority of Canada’s transactions are now tap-and-pay with contactless cards, and experts say that may be a hard habit to break.

“Because Canada went the contactless card route a lot earlier in our history—before mobile payments came along—consumers have gotten used to using their contactless card, and it really is easier for some,” said Christie Christelis, president of Technology Strategies International, a Toronto-based payments consulting and research firm.

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For most consumers in Canada, using a contactless card is quick enough to make it even more convenient than paying with a smartphone, Christelis suggested. Mobile wallets typically require the user to unlock the device and/or authenticate with a fingerprint before approving a transaction. Needless to say, the simple plastic contactless card doesn't layer on these steps.

“Many (Canadian) consumers don’t like the mobile experience, partly because they don’t really understand it, and they don’t want to go through all the steps to enroll cards, unlock the phone and select a payment credential,” Christelis said.

While shortcuts exist to skip most of those steps, most consumers aren’t motivated to explore them when their existing habit to tap and pay with a card works fine, according to Oliver Manahan, a longtime payment network executive who is now director of business development at Infineon Technologies, which makes chips for mobile and card payments.

Manahan’s young daughter in Canada didn’t want to take the time required to enroll a card in her mobile wallet app; his son did, but only used it a few times, declaring his contactless card “more convenient,” Monahan said.

Merchants and banks that want to use mobile devices to engage consumers thus can't use convenience as the only selling point. “Until there’s a specific need or incentive being served by the phone, consumers may opt to continue to use their trusted plastic,” Manahan said.

The recent launch of Android Pay in Canada gives consumers more options for mobile payments, but not necessarily more incentive.

“For mobile payments to take off (in either market), consumers will need a better value proposition than just paying with a card,” Christelis said.

By contrast, contactless card use is on the rise globally, as markets like Canada, the U.K. and Australia report strong transaction numbers with tap-and-pay cards. So far in the U.S., only Citi has rolled out contactless cards on a large scale in recent years, with last year’s launch of the cobranded Costco Anywhere Visa card.