Digital Technology Makes Virtual Wallets A New Reality
Technology For decades, Canadians have been hauling around wallets bursting at the seams with everything from credit cards to library cards, coupons, and even pictures of their family pets.
But, those days are numbered thanks to a major digital innovation in the financial sector, namely the mobile wallet.
This virtual billfold can store much of the information found in a physical wallet, ranging from loyalty cards to concert tickets and retailer coupons. It can also store credit card, debit card and banking information, which means it can be used to make purchases.
A golf enthusiast, for example, can pick up the perfect 5-iron at a sporting goods store and pay for it with their credit card by swiping their smartphone over a payment terminal or by having the merchant scan a bar code on the smartphone, depending on the kind of mobile wallet they’re using.
For this transaction to happen, the phone and the payment terminal have to be specially outfitted, which many are.
Security fears unfounded
In making a purchase with a digital wallet, sensitive information passes through the smartphone’s hardware and operating system, a special payment app and finally the source of funds, which is often a bank.
Understandably, this process could lead to consumer concern over privacy and security around financial transactions.
But, experts say those fears are unfounded. “The truth is that mobile wallets leverage a variety of secure technologies and the devices themselves are equipped with built-in security features such as the secure element and biometric sensors,” says Rob Cameron, Chief Product Officer of Moneris Solutions, a processor and acquirer of debit and credit card payments. “Due to identity verification tools, even theft of your device means you are protected from fraudsters making purchases with your phone since they cannot forge or counterfeit a fingerprint.”
Mindful of security concerns, banks have developed a system in which clients, when they activate a mobile wallet, connect to a cloud. There, the bank verifies the client’s credentials and issues an electronic token that effectively authorizes small purchases. The client’s private information is stored on the bank’s secure data servers but not on the mobile device.
The more Canadians know about all these safeguards, the more likely they will be to adopt mobile wallets; in a recent study conducted by Moneris, of those respondents who had never used a mobile wallet, 62 percent said they would be more likely to do so if they knew it was secure.
Consumer apprehension notwithstanding, mobile wallets have been gaining traction as banks and trust companies, credit card companies, wireless providers, retailers, and others look at building their own mobile wallets.
Apple Pay, one of the mobile wallets that contains cards from a variety of issuers, launched in Canada in October 2014 and has partnered with several financial institutions including major Canadian banks.
Cameron reports that one-fourth of all transactions Moneris processes today are via contactless cards or devices.
The more Canadians use mobile wallets the less they will use cash. Even now, many of them rarely buy anything with cash. And, although we don’t need cash for most of what we do these days, experts feel cash will never be taken out of the mix completely.
“I often challenge myself not to carry cash and use the RBC wallet and mobile app for payments and e-transfers,” says Linda Mantia, Royal Bank’s Executive Vice President of Digital, Payments and Cards. “It’s amazing how far you can get going cashless but there are still instances that really do require cash, like giving your kids a few dollars here or there or giving someone a tip. I don’t see how cash could be eliminated entirely.”
Still, like so many others in the finance sector, Mantia expects the future to look much different when it comes to financial transactions. Look no further than Uber, the on-demand car service, she says.
Its users provide their payment information when they register for the service, they order a car using a smartphone app and, when the ride is over, fare payment is completed automatically through the billing information on file.
“Imagine if paying for everything was as easy as that,” says Mantia. “When you look at the Uber model, you begin to see what is possible.”