RBC banking on the cloud for mobile payments

For Linda Mantia, the early days of mobile payments in Canada feel a little bit like the early days of the fax machine.

“Until you were certain that everybody else had a fax machine, no one was faxing,” says Mantia, the executive vice-president of cards and payments solutions at RBC Financial Group. On Thursday, the bank launched what it called RBC Secure Cloud, a service whereby Canadians will be able to buy things through their smartphones, but with none of the data staying on the device. Instead, all the payment information is encrypted and resides on computer servers at RBC’s data centres.

When Mantia talks about the fax era, she is describing the network effect -- once something reaches a certain critical mass, people are more likely to jump on the bandwagon. In this case, the idea of mobile payments has been intriguing to consumers for years, but there is uncertainty about how it works and whether it’s safe. Late last year, for example, CIBC and Rogers announced a partnership whereby CIBC offers an app to make payments of up to $50, but the data stays on the smartphone chip.

RBC is counting on its reputation as a trusted financial institution to convince potential customers its mobile payment option is the most secure, but in some respects this will be a test of how well everyday Canadians understand the cloud. For some, it’s still a nebulous concept where their personal information is floating around somewhere on the Internet. It’s kind of like saying you’re going to transport someone’s money in an armored truck back and forth to a bank vault, but across a highway that no one has been able to see for themselves.

Mantia says the bank is well aware that there may be some education process around RBC Secure Cloud, but the urge to make payments as they go may prove irresistible to consumers.

“We can see how they check their balances just before they make a payment and how they move funds around,” she points out. “I think the adoption curve has a lot to do with the value you offer.” RBC is not only offering credit card payments through RBC Secure Cloud, for example, but debit transactions as well.

The other ingredient for mobile payment success is uptake by merchants. RBC has been doing some pilot testing with companies like McDonalds, but this is a country of small and medium-sized businesses who will need to embrace the idea of payments via smartphone. Canada already has several startups trying to help companies replace cash registers with iPads to support mobile payments, like Payfirma in Vancouver, but as its CEO Michael Gokturk says, “The market is riddled with failed payment products.”

And while RBC is offering an “open wallet” architecture that will allow non-RBC payments and inter-bank transactions, Gokturk noted that Google has been conducting experiments with similar technology in the U.S.

“It is only a matter of time before they enter into Canada,” he says. “It will be interesting to see how RBC responds when Google enters.”

My guess is almost every Canadian-based player will be late to the game. CIBC’s mobile payment app still isn’t available on an iPhone. The RBC Secure Cloud won’t really be available until later this year, and will begin with only a single service provider partner, Bell Canada. With fierce competition both locally and internationally, consumers and merchants will be bombarded by confusing choices. There’s still a lot everyone will need to check out before we all rely on our smartphones at the checkout.