Tracking Major Developments Among Canadian Mobile Wallets

Navigator Edition: November / December 2016
By: Peter Lischick and David Woynerowski

In our last review of the Canadian mobile wallet landscape in 2014, we were in the midst of watching Canada’s grand mobile payments experiment unfold. At the time, a handful of banks led by CIBC followed the Canadian government’s blueprint (the NFC Mobile Payments Reference Model) relying on MNOs to act as Trusted Service Managers and requiring MNO-supplied secure elements (SE) to store payment credentials (“SIM-based solutions”). Royal Bank of Canada (“RBC”) had recently launched the first mostly Host Card Emulation (HCE)-based solution in Canada, which seemed superior in its potential to be device agnostic by eliminating the need for MNO participation and associated handset hardware. We also reviewed two emerging merchant wallets in Tim Horton’s HCE-based solution and Loblaw’s UGO wallet which was launched jointly with TD. What intrigued us about UGO were the plans to make it more open to multiple payment forms and stakeholders (including multiple banks’ credit and debit cards, as well as multiple loyalty cards) than other solutions contemplated at the time. We wondered whether Canada’s mobile payments ecosystem, given its many advantages (government coordination, head start on EMV/contactless, more consolidated banking industry), might serve as a roadmap for the development of mobile payments in the U.S.

Since 2014 the Canadian mobile wallet landscape has continued to evolve, but there has been little direct evidence of the aforementioned mobile wallets having established meaningful traction. Instead, the recent launch of Apple Pay and the moves by several MNO-based wallets towards HCE suggest that banks are favoring more frictionless, customer-friendly solutions with an emphasis on growing adoption of mobile payments even at the expense of fully owning the customer interface. However, the banks aren’t nearly ready to concede the market to Apple Pay (or other “Pays”) and continue to invest in their own solutions to expand consumer utility. Likewise, two additional retailers have introduced proprietary mobile wallets to better control the shopping and payment experience in their locations.

The most significant change to the Canadian mobile payments market has been the adoption of Apple Pay by the “big five” Canadian financial institutions (Bank of Montreal, CIBC, RBC, Scotiabank, and TD). Apple Pay represents the first truly open wallet in Canada, allowing iPhone users to include their credit and debit cards, across the largest banks and the four leading card networks (Interac, Visa, Mastercard, and American Express). The big five banks were preceded by American Express (the initial issuer), and joined by ATB Financial and the retailer-owned issuers, President’s Choice Financial and Canadian Tire, in offering Apple Pay to their cardholders. More recently, CIBC began supporting Samsung Pay, making it the first large issuer to do so in Canada.

Not to be outdone by the “Pays,” Canadian financial institutions, in conjunction with the payment networks, have continued to upgrade their wallet offerings. In late 2015, RBC announced that it had transitioned to a fully HCE-based mobile wallet available exclusively on Android 4.4+ smartphones, and reported a tripling of users within six weeks of its launch. In March 2016, TD also introduced support of HCE to TD Mobile Payment and shortly thereafter to UGO Wallet, enabled by Visa tokenization services. UGO Wallet also introduced P2P transfers via text message using money loaded to the user’s UGO Pay account from an eligible Visa debit or credit card.

In spite of first enabling mobile payments via Apple Pay, American Express recently announced the launch of its own proprietary mobile wallet, Amex Pay, which is available to its Canadian cardholders via its mobile banking application.

Mobile wallets are also spreading to smaller Canadian financial institutions. In February, four credit unions launched the HCE-based Mobile Pay wallet of the Canadian Credit Union Association (CCUA), enabled by Interac’s new debit tokenization service. The credit unions’ customers can now pay with their debit cards using Android 4.4+ phones.

In an attempt to retain control of the shopping experience, two new retailer-branded wallets have recently launched in Canada: Canadian Tire’s mPAY & Play and Esso’s Speedpass+. The mPAY & Play application allows Canadian Tire Options Mastercard holders to manage their credit and rewards accounts, access exclusive cardholder offers, and when used to pay, provides e-Canadian Tire Money rewards in excess of those received by Options cardholders paying with cards. Through the application, Canadian Tire Options cardholders can redeem rewards and make purchases using their iOS or Android smartphone across Canadian Tire stores by simply scanning a barcode at POS terminals. Other credit cards (including Canadian Tire Cash Advantage and Gas Advantage Mastercards) are not supported by mPAY & Play.

Esso’s Speedpass+ wallet is accessible to all Esso patrons holding a major credit card (users can load any Visa, Mastercard, or American Express credit card into the wallet) or Esso Gift Card. After linking the card to the application on an iOS or Android smartphone, the wallet uses a combination of geolocation or a QR code on the pump at participating locations to process the transaction. Similar to Speedpass, users can link their Esso Extra or Aeroplan cards to the Speedpass+ app and earn points or miles with each purchase. In addition, Esso is offering an incentive to activate and use Speedpass+.

With the launch of Apple Pay in Canada, Starbucks has made both cooperative and competitive moves in support of its leading loyalty program and mobile app/wallet. On the cooperative side, Starbucks made it possible to reload its prepaid / reward cards via Apple Pay. However, it also launched Mobile Order & Pay in Canada, a capability only accessible through the Starbucks mobile app that allows customers to order and pay for Starbucks products within its wallet in advance of heading to the store.

As mobile wallet providers seek to encourage adoption and usage by Canadians, it remains to be seen which types of solutions will prevail: the convenience of the “Pays”; the integrated financial features and perceived security of bank wallets; or the seamless shopping experience and incentives of the proprietary merchant applications. In this sense, the Canadian and U.S. payments markets are at similar junctures.

Figure 1: Canadian Mobile Wallet Functionality

1 Selected bank-issued credit cards only (cards issued by other banks are not supported). 2 The company’s banking application allows P2P money transfers, but the wallet application does not. 3 Select CIBC cards work with Samsung Pay. 4 TD cards compatible with UGO use NFC/HCE technology while PCF cards in the wallet require a SIM card and therefore utilize SE technology. 5 The four Canadian Credit Unions that offer Mobile Pay are Affinity Credit Union, Conexus Credit Union, First West Credit Union, and Meridian.
Source: First Annapolis research as of November 2016.

For more information, please contact David Woynerowski, Partner or Peter Lischick, Consultant,

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