Near Field Communication technology is regaining its momentum as a payments tool with Desjardins Group's planned mobile payments rollout.
NFC chips allow wireless communication of payment details, but they are not built into all phones and not supported by all merchants. However, Canada's contactless payment infrastructure has prepared the country well for a shift to mobile NFC payments.
"Canada is in a good position for NFC to gain traction because of the number of NFC terminals in the market," says Patrice Degenais, vice president of payment solutions and business partnerships for Desjardins Card Services.
Contactless technology, a payments predecessor of sorts to the two-way communication of NFC, has also enjoyed good results in Canada, says industry analyst Todd Ablowitz, president of Centennial, Colo.-based Double Diamond Group, LLC.
Canada has enjoyed "the best contactless rollout in the world" with consumer and merchant adoption of Visa PayWave, MasterCard PayPass and Interac Flash, Ablowitz says.
Because the country has a limited number of telcos and banks, it is easier to forge partnerships in Canada than in the U.S., Ablowitz says.
"The companies and financial institutions in Canada have a history of collaborating with each other as well," Ablowitz adds. "When a contactless rollout closely matches an EMV rollout, support for NFC is going to be more likely."
The country's migration to EMV-chip card technology over the past five years has further contributed to the deployment of the first wave of NFC-enabled terminals, Degenais says.
And Desjardins Group is seeing firsthand that more new NFC terminals are being deployed, Degenais says. "Because Desjardins is also an acquirer, we can confirm this trend," he says.
With that knowledge in hand, Desjardins Group, a Quebec-based cooperative financial institution, announced separate deals with mobile banking provider Monitise Plc and telco joint venture EnStream last week. Those deals will allow Desjardins Group members to download payment card data to NFC-enabled smartphones on the Bell, Rogers, Telus, MTS and SaskTel mobile networks across Canada.
U.K.-based Monitise will supply the mobile payment application for Desjardin's NFC system. Desjardins Group chose Monitise to enable "a scalable approach to the delivery of a mobile payment application that could evolve into a more comprehensive offer with time," Degenais says.
EnStream's standards-based NFC technology, designed through the joint venture of Canada's wireless providers, simplifies the delivery of credentials for financial institutions, card issuers and others, Degenais says.
Degenais is banking on consumer and merchant awareness of NFC in Canada to fuel the Desjardins Group initiative.
Still, consumer adoption historically takes time, he adds.
"People forget that the first chip cards were developed in the 1980s, but mass adoption did not happen before 2000," Degenais says.
EnStream will operate as the trusted service manager in deploying Desjardins' Visa credit card credentials to cardholders' smartphones. In the future, the mobile payment application will include loyalty and rewards cards.
"EnStream's business model was particularly interesting for Desjardins because they act as an aggregator for multiple carriers," Degenais says. By working with EnStream, Desjardins will be able to offer its mobile payment service to more clients, he says.
In working with a telco joint venture to provide the mobile payment system, Degenais does not foresee the Desjardins Group getting caught in the middle of a competitive stalemate between phone companies or wallet developers. For example, Verizon Wireless has blocked Google Wallet from its handsets over security and technical issues. Verizon is one of the companies behind the Isis mobile wallet venture in the U.S., and there has been a Federal Communications Commission inquiry over the matter.
"We feel that creating an open market, where all telcos support all issuers, is the only way to drive adoption and build a sustainable ecosystem where all parties will thrive," Degenais says.
Desjardins Group plans to deploy its NFC payment system next year, but it faces competition. Royal Bank of Canada expects to launch its RBC Secure Cloud NFC-based mobile payment service by the end of this year.
In addition, the MasterCard MasterPass digital wallet made its debut in Canada in April with an emphasis on e-commerce sites, but with an eye on the point of sale.
Payments providers, in general, have found Canada to be an appealing location for new technology initiatives.
Desjardins Group was involved in the Canadian Mobile Working Group, in which banks and credit unions developed guidelines last year to accelerate mobile payment growth in Canada. The group developed the NFC Mobile Payments Reference Model, which outlines the various participants providing or integrating NFC in Canada, Degenais says.