Mobile Payments Heat Up in Canada

Toronto-based CIBC Bank (393.4 billion Canadian dollars in assets) was the first Canadian bank to roll out a mobile banking app in February 2010 and was first to market with a near field communication-based mobile payments app, released this past November. Bank Systems & Technology asked Steve Tyers, VP of e-channels products and marketing, about some of the differences he sees in the mobile banking and payments markets in Canada compared with the U.S. and what the innovative financial institution, one of five major banks in Canada, is working on moving forward.

Is Mobile Banking Ready for Business?Bank Systems & Technology's February issue looks at the state of corporate mobile banking, including how banks are overcoming the security and functionality concerns that have kept businesses from moving faster toward mobile banking adoption. To read more, check out Bank Systems & Technology's February 2013 digital issue.

There are services such as mobile check deposit and mobile peer-to-peer payments that U.S. banks refer to as the second generation of mobile banking. Is there the same demand for those services in Canada as in the U.S. and does CIBC Bank offer those services?

Tyers: There are some differences in the Canadian market in regards to the services you cite compared to the U.S. market. We have great smartphone adoption in Canada, but with respect to mobile check deposit, the regulations that you have in place in the U.S. are not in place in Canada. So the Check 21 Act that went into place a couple of years ago that facilitated that capability is not in place here. There is a group called the Canadian Payments Association -- the CPA -- that is working with all of the banks and the consumer organizations to get those regulations put into place. The view is that the regulation will be coming later this year, at which point I think you'll see banks start to contemplate those services. We think the demand is there. There is awareness among our client base because of what has been done in the U.S.

With peer-to-peer we have the Interac system here in Canada, a bank-owned debit system. All of the banks are board members of it, and it is effectively a set of rails that debit transactions go back and forth on. That system has an ability called e-Transfer that originally allowed money to be sent by email from any bank account to any bank account. It's now capable on mobile as well, so we added that capability to our mobile offerings. We've had that capability for a while now, and that's fairly well established.

How does that affect nonbank companies such as PayPal that do peer-to-peer payments? Is the adoption of those companies' services not as high because you already have this bank-owned system in place?

Tyers: I think that's a fair statement. The adoption of those services is not as wide [as in the U.S.] because there is already a good system in place. The opportunity for them is smaller here.

Looking down the road, what are some mobile products and services that CIBC Bank is looking at or working on?

Tyers: Just this past November we launched a mobile payments app, which uses NFC capability with a BlackBerry Bold phone. We partnered with Rogers, which is a major telco here in Canada. This allows our customers to use their credit card to make purchases at merchants. Similar to contactless cards, where you would tap and go at a terminal with your card, we have clients who are now doing that with their smartphones. It's relevant to note that in the future we have a robust build-out plan for that.

As a provider of banking and payments apps, what we want to do is to build out and enrich those client experiences. We want to take advantage of the capabilities of the smartphone. The NFC is an example of that. We've seen people migrate from checking their balances and just sort of looking [at their accounts] to actually conducting transactions. At the end of last year we found that 8% of all bills being paid by CIBC clients were being paid through mobile. To us that represents the comfort that people have now with using their mobile device to conduct banking. So we'll be leveraging that down the road.

Can you talk more about what is involved with the mobile payments app?

Tyers: There's a simple registration process for authentication. The card is then brought down to the phone through the telco; within a minute your phone is enabled. You open the app and there's an optional passcode for additional security. And you just tap and go. Terminalization of NFC in Canada is actually quite high. I don't know the numbers off the top of my head, but the technology is readily used right away, and we're seeing that with our clients.

Are many of your competitors in Canada looking into mobile payments as well?

Tyers: I think everybody is quite keen on looking at this space. There's been discussion in various forms with the CPA at an industry level on how to facilitate mobile payments in Canada.

As with many folks in the mobile space, our customers are demanding convenience and a great experience, and that's why we've invested in this space. We've chosen strategically that being first to market is important for us. That's why we were ahead of the curve on mobile banking, and we saw a lot of clients of other banks here say that they wanted mobile banking, too. We're not expecting the payments side of it to unfold any differently.

[Security is Final Hurdle to Mass Mobile Payments Adoption ]

Do you think banks are more out in front on mobile payments in Canada compared to the U.S., where tech companies and telcos are more on the leading edge?

Tyers: We've certainly watched the developments in the U.S. market. Square just recently moved into Canada. PayPal's been here with their solution for a while. But Google Wallet, for instance, is not available in Canada. In this case you see a bank taking the lead in partnership with a telco to offer a new service, unlike in the U.S. where there appears to be more fragmentation of the approach.

Is keeping up with the pace of innovation a significant challenge in the mobile space?

Tyers: That's certainly a challenging aspect to this business. In today's world things just move faster than they did 10 years ago. It's an exciting but demanding aspect to this. We launched mobile banking into a nascent market in Canada, and when we did it just took off. It went quickly from a delightful experience to an expected experience. So it moves quickly, we know that, and we need to be prepared to move quickly as well. It's a challenge and an opportunity all in one.

Does the banking environment in Canada, which is dominated by the big banks, make competition in the mobile space tougher in your opinion than in the U.S.?

Tyers: There are fewer banks in Canada than in the U.S. There's really five or six large national banks. We don't have the regional and community bank phenomenon that you have in the U.S. We feel that makes the competition tougher, because clients have a much better view across the different banks. We need to earn our clients' business across all aspects of banking, as opposed to with a single geography. Clients want to bank where and when they want, and you have to offer the whole package to stay competitive. As soon as someone offers something new you have to respond, because it's just so competitive here. That drives a lot of comparisons in capability and a lot of competitiveness.

Jonathan Camhi has been an associate editor with Bank Systems & Technology since 2012. He previously worked as a freelance journalist in New York City covering politics, health and immigration, and has a master's degree from the City University of New York's Graduate School ... View Full Bio