UPDATE 1-CIBC, Rogers announce Canada's first mobile wallet

TORONTO Tue May 15, 2012 11:07am EDT

TORONTO May 15 (Reuters) - Mobile payments in Canada moved a step closer to reality on Tuesday as a major bank and the country's largest wireless carrier teamed up to launch a "mobile wallet" that puts credit card credentials onto smartphones.

Rogers Communications and Canadian Imperial Bank of Commerce said at a joint news conference the mobile wallets will be available later this year and will be the first in Canada.

"It will no doubt change the way Canadians pay for purchases," said David Williamson, CIBC's head of retail banking.

Rogers had 9.3 million wireless customers at the end of March, and CIBC is Canada's fifth-largest bank. Rogers is paying the bank a flat fee per credential added to its SIM cards.

Canada's banking industry on Monday published a blueprint to support open standards for secure transactions using near field communications (NFC) chips that are available in a growing number of the latest smartphones.

That guidelines, a joint effort by Canada's banks and credit unions, followed a government-sanctioned report late last year that warned Canada was falling behind in the global push for secure mobile payments.

"Today we've taken a giant leap forward," said Rob Bruce, president of communications for Rogers.

He said 60 percent of Rogers' postpaid customers use a smartphone and that some 300,000 of those are already NFC-enabled. "In a few years, a digital wallet will be just as common on a smartphone as a camera is today," Bruce said.

The NFC chips can hold secure data and exchange it wirelessly across very short distances, meaning they can communicate with the sophisticated electronic readers already broadly adopted by Canadian retailers.  The readers, most of them in fast food outlets, gasoline stations, grocery and convenience stores and coffee shops, work with existing credit and debit cards that emit similar signals. NFC chips are considered a safer alternative to traditional magnetic strips, which are more easily hacked.

The global value of mobile payment transactions is difficult to quantify, given that research firms have defined the market in different ways, but they all agree that the sector is set to boom.

Globally, NFC-based mobile payments are expected to exceed $13 billion by 2013, according to research firm Gartner, rising from just over $7 billion in 2011. But NFC is still dwarfed by mobile payments made via SMS or online, which together accounted for transactions worth more than $90 billion in 2011, Gartner said.

The Rogers-CIBC announcement is likely to be the first of several as Canada's banks and telecom companies jostle for advantage in the nascent mobile payments market.

The country's third-largest wireless operator, Telus Corp , said it is working with a number of banks to offer a mobile wallet to its customers in the near future.

"Due to the sensitive nature of the credentials being stored on devices, Telus is spending time to ensure that we offer a superior security and service experience when we launch," spokesman Jim Johannsson said.

The carriers, and to a lesser extent the banks, are threatened by a rival mobile payment system from Google Inc , which plans to bring its Google Wallet to Canada.

Currently offered via Nexus S phones on Sprint Nextel Corp's U.S. network, Google Wallet cuts the carrier out of the equation and does not charge merchants or the credit providers either a fee or a cut on purchases. Instead Google uses the system to collect transaction data for targeting ads to the individual consumer, a red flag for the banks.

In the United States, three big carriers have struck deals with three banks for the Isis payments venture and launched pilots in two small markets. But the partners still must persuade millions of merchants to upgrade their payment readers to enable them to work with smartphones, something the Canadian banks and carriers don't need to worry about.

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