Mobile wallets in Canada: The dollars and sense behind the delay

This is the time everybody heads back to the big box stores with their credit cards ready, where major retailers prepare to cash in on one of the biggest spending blitzes of the year. It’s different for someone like Jenna Herbut. She’s got the goods, but not the big box to sell them in. That’s why she’s an early adopter of the mobile wallet approach.

Herbut is the co-founder of MakeIt, an independent shopping event gathering artisans across Canada that tries to strike a more upscale, urban pose than the traditional craft fairs featuring quilts from local grandmothers. The last MakeIt event took place in the Croatian Cultural Centre in Vancouver, and before it took place she was approached by Square, the mobile commerce startup created by Twitter co-founder Jack Dorsey. Square supplied Herbut and her artisans simple block-sized readers that can attach to an iPhone and immediately process credit card transactions.

“I thought, ‘Oh, people are going to be harassing us and asking us a million questions,’” she said, “I thought they might be skeptical or wary. But everybody I dealt with thought it was really cool and super-slick.”

Why the delay?

The concept of a mobile wallet has been discussed in tech circles for years, but not until smartphones became common has there been any sign of real traction. Square is one example of a vendor making inroads in Canada with its Register service, which processes payments at a 2.75 per cent transaction rate. Another, which seems almost ancient by technology standards, is PayPal, which launched an app earlier this year that gives people a mobile version of the same kind of secure online payment people have been using to buy things on eBay and other sites for years.

“Changing the form factor of having your credentials from a plastic card to a chip on a phone doesn’t really change the game a lot. I think it needs to be a lot smarter than that,” said Darrell MacMillan, managing director, PayPal Canada. Because PayPal’s service works “in the cloud,” it doesn’t matter if you drop or lose your phone. Your money will still be safe. The next stage will be making all the other things that might be in a real wallet, like coupons and receipts, more accessible in a mobile format.

There are some other issues on the table as well. The Canadian Federation of Independent Business has said its small business members worry about new fees being introduced as part of mobile wallet-style services. The Finance Department has set up a task force on the matter but there are no real rules in place as yet. There’s also the challenge of simply changing consumer behavior.

Almost 10 years ago I was writing about a Canadian startup called Dexit, which offered a small tag you could put on your keychain and swipe to make small purchases. You could reload your tag at any time online. It was as good a mobile wallet as anything else I’ve seen. But merchants struggled to learn how to use the readers, and Dexit struggled to turn swiping the tag into a habit. At the time, one of the founders told me once someone had used it six times, they were hooked, but getting to that sixth swipe was incredibly difficult.

The technology industry tends to assume everyone wants mobile commerce. The reality might be different, both for consumers who need to learn a new process and for merchants, who may decide they have enough work getting people to pull out their old wallets as it is.