Digital wallets are about to take off, for real this time

New payment apps will turn smartphones into credit cards.


(Photo: iStock)

The telcos and banks are ready. The rules are in place. The requisite technology is in consumers’ and retailers’ hands. Finally, you’ll be able to buy your morning coffee by reaching for your phone instead of your wallet.

Yes, yes, we’ve heard promises of “digital wallets” and “virtual payments” repeatedly over the past decade, but this time it’s for real. In recent years, contactless “touch and go” systems like PayPass and Paywave have made us more comfortable with buying without cash or a PIN. This infrastructure, widely available at Canadian retailers, can now serve the coming wave of mobile payment technologies, either via specialty apps or near-field communications (NFC) that allows you to pay by holding your phone next to a cash register. Already, “Canada has more contactless-enabled cards in the market than almost anywhere in the world,” says Derek Colfer, Visa Canada’s head of mobile strategy. (If you recently got a credit or debit card, you’ll see a radar logo: it means contactless tech is inside.) All of which creates the perfect conditions for mobile payments to go mainstream.

Before your smartphone can act like the chip in your credit card, telecom providers and banks must put in place security agreements—which they’re doing. Rogers and CIBC announced a joint program in May, and MasterCard vice-president Richard McLaughlin says similar deals are at varying degrees of completion. A flurry of other ventures have been announced over the past six months. In August alone, Starbucks agreed to adopt a smartphone-based payment system from California’s Square; PayPal paired with Discover to enable purchases with only a mobile number and a PIN; McDonald’s started testing a new mobile payment app in France; and major retailers teamed up to form the Merchant Customer Exchange to develop a payment app of their own.

Mobile payments are expected to find particularly eager adoption in hurry-up-and-pay sectors like grocery, gas and fast food. As apps and NFC-enabled phones multiply in the coming months, get ready to leave your wallet at home.