Companies in Canada are racing to see who can motivate Canadians to start paying at the register with their cell phones. You are probably familiar with MasterCard's PayPass technology that allows people in many countries to make payments at checkouts by touching their credit card to a pad. The cards are equipped with a chip that supports near-field communication (NFC), passing credit card information to the receiver in the payment pad. Now vendors want to do away with plastic credit cards altogether by embedding NFC chips in cell phones and allowing customers to make payments by touching their cell phones to pads rather than credit cards. In Canada, MasterCard and Visa are rolling out mobile wireless payment pilot programs this year. However, credit card companies need the support of cell phone handset manufacturers and carriers to successfully launch the programs. MasterCard is working with carrier Bell Canada and using handsets from an unnamed vendor. Visa is working with the Royal Bank of Canada (RBC) and is determining who the carrier and handset manufacturer will be. MasterCard might have an advantage over Visa in that it already has significant penetration in this market with its PayPass technology. More than 28 million MasterCard PayPass cards are being used at more than 109,000 merchants worldwide. MasterCard is starting a trial with Bell Canada employees who will be paying with their phones and testing the benefits, which include faster checkouts and additional services. For example, financial services are provided that allow you to check your transaction history and bank balance and conduct online banking transactions. Another benefit is avoiding having to carry a wallet packed with plastic. The big question in this race is whether consumers are interested in paying with their phones. A 2007 survey of 15-29 year-old Canadians showed that only 8.8 percent of those surveyed were interested in contactless payments via cell phone. Some people have voiced concern over security and privacy issues surrounding wireless payments. The technology might also decrease battery life in cell phones. Providers are concerned about the legal risks of offering m-commerce services over near-field communication technologies. "Who's responsible for liability issues?" asked Anne Koski, head of payment innovations at the Royal Bank of Canada at a recent conference on the topic. If money is lost due to inefficiencies in the technology, who foots the bill-the handset manufacturer, the carrier, or the bank? Legal teams are devising the answer to this important question. Those in the industry know that convincing customers of the security of the new system is important in winning them over to the technology. Data reliability, authentication, fraud, theft, and privacy protection are all issues that these companies are confronting as they begin planning their marketing campaigns. Some believe that creating a standard for mobile payments is the most important factor in launching mobile payments. Being able to advertise the stability and security features of an agreed upon standard would help in winning over consumers. However, a standard might mean that companies such as MasterCard have to overhaul their entire PayPass network. Many believe that consumer education is also important. In the early days of Internet-based e-commerce, many people were afraid to purchase products and services on the Web due to concerns over privacy and security. Most of those people have overcome those fears in exchange for the convenience and opportunities that online shopping offers. Proponents of m-commerce and contactless payment systems are hoping that once educated, consumers will choose the convenience of paying by swiping your cell phone over any perceived risk.
Discussion Questions
1. What are the benefits and concerns associated with cell phone payments?
2. Why does MasterCard have a head start in the cell phone payment race taking place in Canada?
Critical Thinking Questions
1. What assurances would you need from the service provider prior to buying into a cell phone wireless payment system?