The simple act of using the mobile phone to make a payment opens up an entire new world of commerce, says Brian McCabe, vice president of day to day banking at Scotiabank. Mobile payment tech is advancing quickly in Canada, and the Toronto-based Scotiabank is building out its strategy.
In the near-term, the payments industry must resolve the nagging issue of whether to use Near Field Communication technology, QR codes or another system. The industry must also satisfy the economic concerns of telecoms, banks and mobile device manufacturers. Like other card issuers such as BMO, Scotiabank is hedging until these final barriers drop.
The following interview has been edited for length and clarity
PaymentsSource: What kinds of mobile services does Scotiabank offer?
McCabe: We have a full mobile banking application, but in terms of payments, we’re still in the development stage. We’re still working on how the mobile phone will be used as a payment device.
PaymentsSource: What makes using smartphones as a payments device attractive?
McCabe: Smartphone adoption is increasing significantly in Canada. We’re seeing smartphone devices becoming an integral part of life. People are using [phones] for all kinds of e-commerce and mobile commerce, and it’s becoming a key resource for transacting. Using smartphones to make payments is a natural extension of the other uses of mobile phones.
PaymentsSource: When it comes to mobile payments, are U.S. card issuers challenged because the U.S. is so far behind in chip-and-PIN migration?
McCabe: With the advance of chip-and-PIN cards in Canada, we are moving to using contactless cards to make payments. We are seeing people using their contactless plastic and that’s very much a precursor mobile pay, so people are becoming predisposed to using the phones. People are already doing a ‘tap and pay.’
PaymentsSource: Are you a QR code guy or an NFC guy?
McCabe: We’re looking at all tech. NFC does seem to have an edge because of the high percentage of contactless terminals in the retail world that have technology that lend themselves to NFC payments.
PaymentsSource: Outside of developing markets, mobile payments tech has advanced faster than users' appetite to use that tech. What makes mobile payments so much better than plastic cards that people will move away from the plastic cards they’ve been using all their lives?
McCabe: Getting cards on the smartphone is just the start of this. The ability to utilize a digital wallet can be extremely powerful. It’s not just about debit or credit cards or loyalty cards on a phone.
PaymentsSource: What is it about?
McCabe: In British Columbia, we’re starting to see people using smartcard tech to manage healthcare, to get their driver's licenses. We use a card to enter a building, why not use a smartphone? For payments, there’s the ability to link all of your activities to your purchases or shopping in some way, and all in the same place. As a banker, I see the digital wallet as means for two-way communication between a consumer and client. From there, you can add all kinds of other value-adds and services, merchant offers, and a host of other things.
PaymentsSource: Mobile payments have long been considered a gateway to broader mobile commerce. What has to happen to make that true?
McCabe: From where we are right now, there needs to be an ecosystem for mobile payments. There are multiple players that are part of that. The easiest way for NFC to expand is to store the card credentials on a ‘secure element’ or a SIM card that’s attached to the mobile device. The issuing bank is a trusted service manager [in this model], and the telecom and carrier own the SIM card and the mobile device. There’s an economic situation that needs to be resolved there.
PaymentsSource: How do banks generate income in that environment—where the different stakeholders are all jockeying for ‘ownership’ of the user’s credentials?
McCabe: There will be challenges for sure. The carriers and the banks and the other players will have to figure it out. I think we’ll figure it out, but it would take a little longer than we may have thought 18 months ago.
PaymentsSource: What else do you find interesting about mobile payment technology?
McCabe: There’s tech that allows the provisioning of credit and debit card credentials on the smartphone that’s pretty interesting. There are also markets outside of Canada that are using non-card based payments solutions, that tie to your phone bill or a prepaid phone card or something like that. The phone number in this case is your identifier instead of your credit-card account number.