In May 2016 Apple struck a deal with seven of Canada’s major banks, including every member of the big five (RBC, CIBC, BMO, TD and Scotiabank) to expand the compatibility of its Apple Pay mobile payment system to all credit cards and debit cards issued by those banks.
When it launched in Canada in November 2015, Apple Pay was only compatible with cards issued by American Express, which limited the technology’s usefulness, since many stores in Canada don’t accept American Express on account of high merchant fees. Now however, Apple Pay is already compatible with cards from RBC and CIBC and the new deal with the big five banks virtually assures that the majority of Canadian bank account holders will be able to pay with their iPhone the same way they can now tap and pay with their physical credit and debit cards.
“Our mission in this world is for merchants to give consumers the ability to pay however they want to pay and more … that’s with electronic means,” says Rob Cameron, chief product and marketing officer at Moneris, a company that provides the contactless terminals that enable mobile payment. “Over time people, especially Millennials, will tap a phone more than they will tap a card, but today tapping cards is about 20 per cent of Canadian transactions. It’s meaningful because it’s faster for the merchant and super convenient for the consumer.”
That convenience will not be limited to Canadian iPhone users for very much longer, as Samsung Pay will be having its Canadian launch sometime later in 2016, opening the ability to pay with your phone to Android users with higher-end Samsung Galaxy phones like the S6 and S7. But that convenience may also come at a cost for those who have difficulty controlling their spending.
Easing the pain of paying
“My armchair psychologist brain suspects that the easier the mechanics of the transaction, the less it feels like you’re giving away,” says Keith Emery, operations director for Credit Canada Debt Solutions, a non-profit credit counselling service based in Toronto.
“Compare it with using your debit card: sticking the card in the machine and entering your code is symbolic of the fact money is leaving your account and there is something serious going on here. When you tap, it just feels so innocuous – nothing even happened – so from a psychological point-of-view maybe you think, ‘That can’t be a big deal. How could it be a lot of money leaving my account for something that just takes a tap?'” he says.
Emery might be on to something there. A 2012 study from MasterCard revealed that within the first 12 months of a consumer’s first MasterCard PayPass transaction (one of the first contactless payment options available in Canada) consumers spend 30 per cent more using PayPass than they do using any other form of payment.
Behavioural economists often toss around the phrase “the pain of paying” to describe the different levels of inhibition consumers feel when they pay for things in various ways. Many economists quoted in a recent article from The Atlantic believe paying with your phone will offer the lowest threshold of pain or anxiety ever seen – particularly because while taking money or a credit card from a wallet is always associated with paying for something, activating your phone is associated with a variety of different things that have nothing to do with paying.
Apple Pay’s own technology assists in dampening those inhibitions and numbing the pain. Unlike with bank-branded mobile wallets, users do not need to open the Apple Wallet and select the digital credit card they want to use. Instead the NFC chip inside the phone will sense a contactless payment terminal nearby and open the wallet and select a card automatically, effectively removing any barrier from paying immediately.
“Every time it becomes that little bit easier to pay, it also becomes that little bit easier to spend,” says Christine Williston, a certified money coach with Money Coaches Canada who regularly helps clients in Vancouver sort out their spending habits.
For her, the ease of spending didn’t just start with a phone. She remembers a time when you had to go to the bank on a Friday to get all the money you needed for the weekend and with each improvement of technology from credit cards to debit cards and tap and pay, the opportunity to spend money has gotten easier and easier.
“The opportunity is part of it and obviously the access to credit has created the habit. The longer it goes on and the easier it is to get, the more people will take advantage of it and the more people will get in trouble with it,” she says.
The technology that sinks you can also save you
But if you’re Rob Cameron, the ease with which Apple Pay allows you to spend money is only part of the story.
“The advantage of tapping with Apple Pay, beyond not needing your wallet at all and the security element of having your thumb print authenticate a payment, is getting a message immediately after the transaction notifying you of the amount you just spent,” says Cameron.
You can also switch into the bank app for the cards in your mobile wallet and see all the transactions you’ve made, giving you a real-time back and forth between spending the money and having a record of it. Williston acknowledges the importance of this and knows first hand the power some mobile applications can have to track your spending extremely effectively.
“In reality we’re not going to change any of this. Apple Pay is not going away and Samsung Pay is not going away. It’s here, so really people have to embrace it and use the fact that yes, you can pay on your phone, but you can also access your bank account and look at your balance with your phone as many times as you want and lots of people do,” she says.
Many of her clients have taken advantage of budgeting apps such as Quicken and Mint to track their spending and stay within their budget directly on their phone, but Emery says the people that do readily track their spending are not the clients he is most concerned about.
“In theory it should help you because you’re getting that higher level of tracking, but the people who have discretionary spending problems don’t use the tracking options available anyway,” says Emery.
Williston agrees, saying that often all tracking software does is show a client by how much they’ve over-spent that month.
“It’s a good thing if you want to instantly see where your money is going and where you’ve gone wrong, but if you don’t do anything about it, simply tracking your spending is pretty useless,” says Williston.
Real strategies to curb overspending
So if technology won’t erect those barriers to make it harder to spend money and to think about where the money is going, both Emery and Williston recommend erecting them yourself. While Williston acknowledges that we often have to pay our bills directly from our bank accounts, she says Money Coaches Canada often recommends their clients put their discretionary income (the kind reserved for small purchases, such as a cup of coffee or eating out) in envelopes, so that once the money is gone – it’s gone for the month.
“Sometimes we actually get our clients to freeze their credit cards,” says Emery. He means actually freeze them – as in, a block of ice – so it’s physically time consuming to get out the card if you want to use it. Goal-setting is also important when it comes to keeping yourself motivated and following a budget. It doesn’t matter what that goal is, as long as it’s something you really want.
“Maybe if you’re really good at sticking to your budget one moth, you can use Apple Pay transactions as a kind of reward,” suggests Emery. “Maybe you stay away from them all month, but then you get to do a few small ones as a reward for a job well done.”
Ultimately, whether you look at tapping your phone and making mobile payments as a convenience or a hindrance for your life comes down to your mindset.
“Honestly, it depends on the psychology of the person using the technology,” says Emery. “If you have someone who has self-control, can monitor what they’re spending and stay within a budget, then paying with your phone can be a great thing. But if you have somebody who doesn’t have a good handle on what their spending is and needs to put up obstacles to prevent them from spending too much, then ultimately it can be a very bad thing for that type of person.”