McDonalds' foray into mobile debit in Canada is helping spark a national expansion that includes broader adoption of the technology by issuers and merchants.
"As cashless payments have evolved, debit has become our customers' preferred form of ... payments," says Dave Hederson, senior vice president and chief financial officer for McDonalds Canada, noting about 40 percent of McDonalds' payments in Canada are cashless.
"As we see cashless evolve from swipe cards to chip cards to the mobile wallet, we need to position ourselves for what the consumer wants," he says.
McDonalds, Interac Flash, Moneris and RBC partnered to test Near Field Communication mobile debit payments at the fast food chain, one of the first such deployments of NFC debit in Canada. Consumers hold their mobile phones in front of an Interac Flash point of sale terminal and have funds deducted from their RBC account.
"The project effectively takes the debit card and puts it into a mobile wallet," Hederson says.
An initial pilot ran during the fall of 2012 in the Toronto area, and McDonalds held a public demonstration of the payments technology at the end of March. The parties did not release specific details of the pilot, but said they consider it successful enough to justify expanding mobile debit's use beyond the four parties that participated in the test.
The McDonalds transactions use BlackBerry smartphones, and Moneris acts as the payment service provider. The shift from PIN-based debit to mobile should work well with similar quick service retailers, says Jeff Guthrie, chief sales and marketing officer for Moneris Solutions.
"It's just the tip of the iceberg," he says. "We see an opportunity to grow mobile debit where quick service is provided, and where the debit transactions are all PIN right now."
Smaller retailers such as convenience stores and dry cleaners are also a good fit, Guthrie says.
RBC will offer mobile Interact Flash after the technology's full market wide rollout, scheduled for later this year. Interact Flash debit transactions will be free for RBC account holders
"We know that our [customers] like the flexibility and control over their personal finances that Interac debit makes possible," says Doug Collins, vice president of payments and banking services for RBC.
About 5 million RBC customers use Interac Flash contactless cards, Collins says. The tech is a central part of the bank's mobile wallet strategy.
"We are currently enhancing our mobile payment suite and will be providing clients with the ability to pay for goods and services through their mobile phone with Interac debit and credit options, enhanced peer-to-peer transfer options and other services," says Linda Mantia, executive vice president of cards and payments for RBC.
RBC's payments and merchant acquiring businesses are increasing the number of NFC terminals in the marketplace "to ensure widespread adoption for our solution," she adds.
The maturity of EMV compliance in Canada should facilitate the expansion of mobile debit across the country. Interac has also deployed mobile debit at the coffee chain Tim Hortons, Shell gas stations and at multiplexes, says Avinash Chidambaram, director of mobile for Interac.
"In Canada, the chip and PIN migration is almost complete. There are almost no merchants that accept only magnetic-stripe cards," says Chidambaram. "NFC and mobile contactless payments are a natural extension … Canadians are already used to making contactless payments at the point of sale."
Toronto-based Interac remains focused on Canada, where it enjoys a substantial market advantage due to a favorable regulatory environment for its debit card technology—though American-based card networks have attempted to bore in on Interac's market share. Interac sees a market for mobile debit in the U.S. as chip-and-PIN cards circulate, Chidambaram says.
"Over time the terminals will be in place to accept NFC payments, but they are not as widely deployed in the U.S. now as they are in Canada," Chidambaram says.
McDonalds is also active in mobile payments in other markets, such as Ireland. Other fast food outlets, such as KFC, and Dunkin Donuts have also adopted mobile payments. Burger King is a participant in a mobile rewards program with First Data and Foursquare.