Is mobile payment the next big cash grab?

Canadian telecom giant Rogers Communications has expanded its mobile payment service to Android and BlackBerry 10 devices, allowing even more customers to use their smartphones to pay for purchases instead of traditional plastic credit cards.

The suretap service works with compatible terminals, allowing users to pay wirelessly or collect loyalty rewards points without having to produce a physical card. Currently tens of thousands of MasterCard PayPass and Visa payWave terminals across Canada are equipped for the service.

“To continue driving adoption and growth of mobile payments in Canada, it is essential that a strong ecosystem is established to include multiple devices, operating systems and payment networks,” said Jeppe Dorff, Rogers’ vice president of transaction services, in a recent press release. “We know our customers have strong affinity to the Android platform and we are thrilled to include Android devices amongst smartphones ready to support mobile payment applications built for suretap.”

Rogers was the first Canadian mobile provider to launch such a service utilizing the secure SIM card in a near field communication-enabled device. It announced its first major digital wallet partnership with the Canadian Imperial Bank of Commerce last year. The company has about nine million mobile subscribers.

While Rogers may be enthused about the program, the Canadian Federation of Independent Business (CFIB) is raising alarm that the mobile payment industry could be the next big cash grab that hurts merchants.

At a payments conference in Toronto this week, the CFIB cautioned mobile payments will be the “next big fee palooza.” But it’s not set to benefit consumers or business – it’s the banks, payment processors and wireless providers who will likely profit.

The organization, which represents nearly 110,000 small businesses across Canada, suggests a new mobile-based fee may be introduced and is calling for an option to allow merchants to opt out of accepting mobile payments.

On the other hand, the carriers and banks insist they have no plans to introduce such fees and are concerned an “express consent” clause could slow down industry growth. The federal government is currently working on a code to regulate mobile payments.

It’s not an issue that can be ignored. Gartner projected worldwide payment transaction values would exceed $171.5 billion last year, skyrocketing nearly 62 per cent over the year before.

“We expect global mobile transaction volume and value to average 42 per cent annual growth between 2011 and 2016, and we are forecasting a market worth $617 billion with 448 million users by 2016,” said Sandy Shen, research director at Gartner. “This will bring opportunities for service and solution providers who will need to cater to the local demand patterns to customize their offerings.”

Americans are slowly starting to warm up to the technology. A Harris Interactive poll found 66 per cent surveyed believe smartphone payments will eventually replace traditional card transactions, but only 32 per cent think it will happen within the next five years.

Thirteen per cent say they’ve made a mobile payment or have seen the technology in action. Though many are interested in using mobile payments on a regular basis, there are those keen to stick with more traditional methods. Of those opposed, just over half indicate they would prefer not to store sensitive information on their phones and 40 per cent don’t want to transmit that data wirelessly.

Harris points out that consumers didn’t realize they had a need when debit cards were introduced and suspects wireless payment will be similar.

“By combining the use-anywhere convenience of a credit card with the ability to draw from money in users’ checking accounts instead of incurring debt, this new product fundamentally changed how Americans paid for goods and services, eventually outpacing cash as the top payment type,” states the report.

“Thus far, the mobile payment industry has yet to find a similar ‘in’ with consumers. Finding such a silver bullet which gives Americans a reason to change how they pay will depend not only on bringing new ideas to the table simply because technology enables them – but paying attention to how Americans pay now and looking for a need that, once again, they may not even know is there.”