Smartphones promise to be the next big thing in consumer banking, holding the promise of everything from fewer trips to the local bank branch or ATM to the convenience of tap-and-go payments at retail outlets. But first, a number of hurdles still need to be overcome.
Jim Miller, J.D. Power's senior director of the banking practice for North America, says Canadian banks have been slightly slower than their U.S. counterparts in adopting popular features in their smartphone apps, such as depositing cheques with their phones, but they are gaining ground.
"I have to believe that Canada's going to catch up fairly soon. I think the U.S. got out ahead of the curve a little bit earlier," Miller said from Boston.
Tangerine, the former ING Direct Canada operations, and B.C. credit union Vancity, recently added the ability to deposit cheques by taking a picture of them using a smartphone's camera.
Miller, and others, expect there will be an even bigger jump in usage if the banks, merchants and telecom companies can figure out a better way for customers to make purchases with their smartphones by tapping a retail terminal at the counter.
However, the banks have been cautious because they don't want to see smartphones to get between them and their customers.
"I think that's the way it has to go a some point, but it's a little bit of chicken-and-egg because you need enough merchants to accept it so that you can stop carrying your regular credit card, your physical credit card, and just have your mobile phone take care of it all," Miller said.
Speculation banks want 'cloud' computing
Windsor Holden of Juniper Research says the most common form to tap-and-pay mobile technology puts security on a card on the device, which is under the carrier's control.
But he thinks several of the Canadian banks are working on a different method — host card emulation or HCE — that would put transaction security into a "cloud" computing service that they would control.
'You've got people using mobile — if not necessarily as a primary transactional channel at the moment, certainly a channel for regular communication with the banks.' - Windsor Holden, Juniper Research
"I think that if the banks do get to the point where they can integrate contactless payments into their banking applications, which I think they will go for using HCE, that's when you'll see transactional levels really ramping up."
Juniper Research, a London-based company that monitors mobile commerce developments, estimates about 800 million people around the world used a smartphone to do banking this year and that is expected to jump to 1.75 billion by 2019.
Juniper also forecasts that within that time, mobile banking will overtake online banking, the preferred method for most consumers.
Holden says that four years ago when Juniper started looking at the mobile banking apps, they were still uncommon in Canada.
"Now virtually every major bank has a fairly wide portfolio of ways of reaching the consumer via mobile channel — be that apps, be that basic texts," Holden said in an interview from London, where Juniper has its headquarters.
"You've got a huge proportion of the traffic migrating from desktop to tablet. You've got people using mobile — if not necessarily as a primary transactional channel at the moment, certainly a channel for regular communication with the banks."
Juniper's findings are supported by other recent data, including a survey done in May and June for the Canadian Bankers Association.
Preliminary figures from a 2014 survey supplied to The Canadian Press found that web-enabled mobile devices were the primary method of banking for nine per cent of those surveyed — compared with five per cent in its 2012 biannual survey.
That put mobile banking close to branch visits (13 per cent), and ahead of telephone banking (four per cent). Online banking was by far the most common form, at 55 per cent, followed by automatic teller machines at 18 per cent.