Prediction: You'll tap-to-pay with your phone in 2013

Death of the wallet.

Simon Whitfield (l.) making one small NFC payment for man (Photo: Groupe CNW/Banque CIBC))

Although Canadian Olympic triathlete Simon Whitfield crashed out of the London Games in 2012, he still inspired us to greatness in the field of commerce. In November, the star athlete demonstrated new smartphone payment technology co-developed by CIBC and Rogers to complete Canada’s first point-of-sale mobile credit-card transaction at a Tim Hortons in downtown Toronto. Wielding only his phone, Whitfield bought a coffee. Soon, all of Canada will walk in his footsteps. This is our time. Believe in the power…of your smartphone.

“This has been hovering on the horizon for a long time,” says Jim Maynard, president of Wavefront, a Vancouver-based not-for-profit that works with the wireless industry. Finally, the conditions are right for mobile payments to take off. In other countries, particularly Japan and South Korea, a great deal of business is already conducted by smartphone—groceries, taxi rides, subway fares. Canadians just haven’t had access to the right kind of phone.

Mobile payments require handsets with near-field communications (NFC) technology, which can send data over very short distances (about 10 centimetres). NFC chips can store and transmit credit card data, for example. Wave a smartphone at a merchant’s digital reader and complete a purchase, just as with a tap-and-go credit card.

Mobile-wallet applications will take digital commerce further, by digitizing your debit card as well. You’ll start to see gift cards and loyalty programs managed on your phone too.

The retail infrastructure required to make mobile payments common in Canada is within reach, says Juanita Gonsalves, founder of Emerging Payments Consulting. “There are more and more retailers that are NFC-enabled, from drugstores to gas stations to grocery stores. The rails are being installed.” At the consumer end, most smartphones in Canada are expected to be NFC-enabled by the end of 2013.

Research In Motion has included the capability in all of its new smartphones. And RIM has also been chosen to provide the security technology for EnStream, a joint venture of Bell, Rogers and Telus to manage mobile payments. “We think we have a real opportunity to take a leadership position,” says Andrew MacLeod, RIM’s Canadian managing director. As yet, no iPhone model is equipped with NFC, MacLeod points out.

Mobile payments are but one application of the looming transformation interchangeably called machine-to-machine (M2M) technology, hyperconnectivity, or the Internet of things. It involves wireless connections between two devices, without necessarily requiring the intervention of people. Your smartphone will soon become central control for an array of connected devices, like your car, television, fridge, coffee maker, home lighting and electrical systems. According to a recent Scotiabank report, the 140 million M2M connections today, is expected to rise astronomically to 50 billion by 2020. Among the industries likely to see the earliest uptake is auto.

Within three to five years, all new cars are expected to be equipped with wireless connections. Currently, RIM’s in-car infotainment system is dominant. In the emergence of M2M, some analysts perceive the chance for RIM to redeem itself. It’s hard to overstate the commercial opportunity. “Connected devices are going to start to disrupt every segment of what we consider our normal industrial society,” Maynard says. “Payments are just the tip of the iceberg.”