Looking to create a way to digitize more payments? Why not hold a contest?

Canada is doing just that.

The Royal Canadian Mint’s MintChip Challenge represents a first step toward the Canadian government’s goal of bringing its financial system into the digital age.

The government launched a Task Force for Payments System Review in June 2010, and its final report in December 2011 said a thoroughly modernized payments system could save the Canadian economy 2% of gross domestic product in productivity gains, equivalent to C$32 billion. It also said Canada was behind Peru and Romania in its transition to digital payments.

“We still rely largely on old-fashioned methods of payment such as paper-based processing and cash and [checks],” the report stated. “In addition, Canada is falling behind in the international push to generate a secure mobile ecosystem, the revolutionary agent that will deliver extraordinary new commercial and public services to consumers via their smart phones.”

A recent sign of the progressive push was Royal Canadian Mint’s MintChip Challenge, an invitation to software developers to compete to create innovative digital-payment applications using a research-and-development technology named MintChip–a way to load value into phones, USB devices, tablets or the cloud¬. While the contest is seeking a way to use MintChip to facilitate transactions as low as a penny, a Mint spokesman tells PaymentsSource if a MintChip had $30 on it, there would be no obstacle to spending it or transferring it all at once.

The response to the April 4 announcement and call for applications was so strong, it only took a week to reach the limit of 500 entrants, according to the contest website.

Gold valued at C$52,700 is available to the winners in eight categories, including Best Overall Application Grand Prize ($17,000), Second Prize ($10,200), Third Prize ($5,100), Best Peer-to-Peer Application ($5,100), Best Business-To Consumer Application ($5,100), Best MicroPayment Application ($5,100) and Popular Choice Award ($5,100). There is also a Large Organization Recognition Award for organizations with more than 50 members for which recognition is the prize.

Accepted entrants get a software-development kit, two microSD MintChips and access to two remote MintChip accounts.

Under the rules, applicants must create a working software application that runs on Android, Blackberry, iOS, Windows, or a desktop or mobile browser, and it must use either local microSD MintChips or remote MintChips to transfer digital currency.

Developers must turn in their entries by Aug. 1, and eight judges, including executives from Google Inc. and eBay Inc., will have from Aug. 15 to Sept. 12 to score them. The public can vote for a Popular Choice Award winner during the judging period.

The Royal Canadian Mint will announce winners Sept. 24.

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