Last week Rogers and CIBC announced a new mobile wallet service that would be the first of its kind in Canada. It would allow you to use your smartphone to make everyday purchases. While some are naturally skeptical of advancing technology's vulnerability to hacking, mobile payments will undoubtedly become a way of life.
First of all, it should be noted that mobile payments are not entirely new in Canada, and have long been in practice around the world. Countries in Asia and Europe have been using cellphones to process payments for almost a decade.
Even in Canada, smartphones are already in limited use for making payments at certain merchants. Starbucks has an app that allows you to integrate your Starbucks card onto your phone so that you can make payments at the counter even if you don't have your card. You simply pull up the app, tap a button to generate a barcode that gets scanned, and your account is charged accordingly. Many merchants also use tap-to-pay terminals, which simply require you to touch your payment card to a scanner. If you are using a credit card, often no signature is required.
So, the introduction of mobile wallets is not earth-shattering. It's just consolidating existing technology to your mobile phone.
While neither my phone nor my bank are part of this first initiative, it's only a matter of time before they are. I'll be the first to admit that I would sign up for the technology because I'm a gadget guy. I'm only slightly more worried about security than I am for traditional magnetic-strip card technology. I've had my debit card compromised three times in the past 10 years. Each time, all the money that was electronically stolen was recouped. There will always be an arms race between banking technology and white-collar crime.
Then again, after the cellphone hacking scandal in Britain, one does wonder if storing all your credit-card information on your phone is smart. I would suggest limiting access to a single, low-limit credit card once the technology rolls out. Better safe than sorry.
The marriage of phone and wallet has other pros and cons. Software should make it much easier to track your spending. Not only could you pull up your balance on the spot, you could set up alerts and warnings that get triggered when you breach certain thresholds.
One of the disadvantages of technology is that while you use it to increase convenience, retailers use it to increase sales. Imagine you are simply dropping off a letter at the post office and you get an instant notification: Your favourite store next door has a 10-per-cent discount if you buy something in the next hour. The geo-location services on your phone knew you were nearby.
It will be a long time before there is widespread adoption. I still know a guy who only carries cash and leaves his debit and credit cards at home. He doesn't have a cellphone either. But the next time he asks to borrow my phone to make a call, I'll have to tell him I never lend my wallet out to anyone.
Preet Banerjee, B.Sc, FMA, DMS, FCSI, is a W Network Money Expert, and blogs at wheredoesallmymoneygo.com. You can also follow him on twitter at @PreetBanerjee