PHOENIX – There are two possible outcomes of the push for mobile payments: it could succeed, like Canada's rollout of chip and PIN; or it could fizzle, like its push for contactless cards.

The key difference between those two initiatives was the payments industry's decision to collaborate on chip and PIN, said Linda Mantia, executive vice president of cards and payment solutions for Royal Bank of Canada, in an Oct. 21 presentation at SourceMedia's PayThink conference.

With chip and PIN, also known as EMV, "the entire ecosystem collaborated to drive the experience at the point of sale," Mantia said. But with contactless, "it became a competitive environment," with Visa, MasterCard and Interac coming to market with separate products, she said.

As a result, even though contactless cards are more widely used in Canada than in other markets, "it's nowhere near the penetration we would want for the investments we made," she said. Consumers were frustrated with the inconsistent experience from store to store, and merchants shut off their contactless card readers to stem the frustration, she said.

But with chip and PIN, merchants had an interchange incentive to fund their upgrades, banks collaboratively advertised the technology, and there was a drop-dead date for adoption after which a liability shift kicked in, Mantia said.

"The critical nature of driving an ecosystem did not play out with contactless," she said. "Mobile payments [aren't] going to work either without that."

There are a few exceptions, Mantia said. Fast food companies like Tim Hortons and McDonald's have good contactless adoption because it benefits them. If fewer cashiers are swiping cards, there is less chance they will accidentally get food into the point of sale hardware.

With mobile or contactless, "you need the engagement of that retailer to also educate their cashiers, because [they're] the people who make the difference in these business models," Mantia said.

Issuers should pay attention to recent moves by Apple and PayPal to become the go-to brand for in-app payments, she said. If banks ignore these efforts, they may find themselves displaced.

One response would be to create a "pay by my bank" option for online and mobile commerce with a focus on customer experience and security, she said.

"Merchants would love that solution, but it would require all banks to participate to make that work," Mantia said. If banks develop separate, independent products, they force merchants to clutter their checkout pages with payment options and the result would look like a flea market, she said.

If banks can't collaborate and remove friction, newcomers like Bitcoin companies might, she said.

RBC is already actively encouraging mobile payments. It developed a mobile wallet in January for Blackberry and Android devices (at the time, iPhones did not have the same capabilities for contactless mobile payments, but RBC looking at ways to duplicate its offering on iOS). RBC uses a cloud-based system to prevent sensitive data from being accessible on the user's phone.

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