Canadian Merchant Accounts and Contactless Mobile Payment

by David Dierking

2 min read

More than 90% of transactions made in Canada are cashless, which is way ahead of the United States. Canadians have always been quick to adopt new payment technologies. Having already fully adopted the EMV chip card technology, which was first introduced in the United States in late 2015, Canadians are now leading the way towards a new generation of digital payment solutions using contactless payment technology.

How do Contactless Payments Work?

Utilizing a new mobile payment technology called near field communication, consumers can simply tap or wave their smartphone over an NFC-enabled terminal. In doing so, a one-time code is issued authorizing the transaction. No credit card information is exchanged, and the merchant doesn’t store any data, protecting the transaction from hacks or fraud. Some smartphone wallets, such as Apple Pay and Google Wallet, require additional authorization through a PIN code as an added layer of security.

Contactless Payments Usage in the U.S. vs. Canada

In the United States, the main focus of contactless payments has been through smartphone wallets. To be able to use the technology, the smartphone must be NFC-enabled. Apple, Google, and Samsung are including an NFC card on all of their new smartphones. However, merchants have been slow to adopt the technology, which would require them to upgrade their point-of-sale terminals.

More than [one-third of terminals] https://www.thestar.com/business/2015/10/19/why-paying-with-your-smartphone-hasnt-caught-on.html) in Canada are already NFC-enabled. However, most smartphones in Canada are not NFC-enabled. Apple is not expected to release an NFC-enabled phone to the Canadian market until next year. That hasn’t stopped many Canadians from experiencing contactless payments – most of the large banks in Canada now issue NFC-enabled tap cards, which look like a credit card but perform the same function as a smart wallet. MasterCard’s PayPass tap card is accepted by 19 of the top 25 Canadian retailers.

Contactless Mobile Payments Moving Forward in Canada

While waiting for Apple and others to introduce their NFC-enabled phones, Interac, a Canadian payments company, has introduced Flash, an application that can be loaded on any smartphone to mimic the tap card. TD Canada Trust has launched a similar mobile payment application for Android phones. Between newly distributed NFC-enabled smartphones and the availability of payment apps, it is estimated that more than 80% of Canadians will be equipped to transact contactless payments in a few years.

Advantages and Disadvantages of Contactless Payments

Canadians seem more willing and ready to try the latest payment technology. However, the introduction of new technology always comes with advantages and disadvantages.

The primary advantage of contactless payments for consumers will be improved checkout times. That will also prove to be an advantage for merchants who are looking to increase customer loyalty. In addition, contactless payments add a layer of security, because each transaction is imprinted with a unique digital signature. For now, the only disadvantage is that it will take some time before the banks, merchants, and telecom providers can create the universal infrastructure needed to accommodate all consumers.

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