Two savvy gentlemen from IBM Canada wrote a very timely and relevant Op-Ed piece in the Financial Post giving their predictions on the future of mobile payments in Canada.  Click here to check out the article on the FP website, written by James Wallis, Vice-President of global payments for IBM and Mike Cook who is a Partner in IBM’s financial services sector.  We decided to include the full text of the article on our blog because the viewpoints of these industry heavy weights are so well communicated and happen to be directly in line with our thoughts on the key drivers to mobile payments adoption in Canada.

The areas of growth addressed in the article are part of reason why we are so excited to be on the  leading  edge of this ecosystem.  Conversations with clients and prospective players in the space indicate an understanding that Value Added Services represent both a massive opportunity but also a threat to mobile payments because, for many of the players trying to be in this space, mobile experience, content and distribution partnerships are definitely not part of their core competency.  That’s where we come in. Clip is also having a number of exciting discussions with players about the need to build and manage the value added services components of their mobile payments offering that will give consumers more reason to try this new medium, and by layering up the value and engagement offerings, keep them coming back to your solution vs. another.

If you have any questions about the Clip platform or how we can help your mobile strategy, please do not hesitate to drop us a line.

Learn More about Mobile Tagging at Microsoft Tag.

If you’d like a bit of primer on NFC, mobile payments and why this is such an exciting opportunity, Mark Healy recently did a very solid post on the Globe and Mail detailing how this tech could change the game for a variety of players.

A few weeks back, I attended a conference put on by KPMG on their 2011 Mobile Payments Outlook.  The folks over at KPMG presented their research where they consulted with over 1000 stakeholders in this broad industry.  You can download the report here to get caught up on your reading.   This was a global survey but it was interesting to sit in Toronto with a panel and hear how the Canadian market is looking at the mobile payments opportunity.  For the purposes of this blog post, my analysis will mainly focus on the Canadian industry.

So what of it?  Is 2012 going to be the year of mobile payments, NFC and a new era of mobile commerce in Canada?  Or is this just another round of industry Kool Aid considering that there still aren’t any NFC enabled Smartphones actually in peoples hands and our financial institutions continue to print money by sticking with the status quo.   Not to mention consumers are quite comfortable paying with those trusty plastic cards and merchants are asking themselves, “Didn’t I just purchase a chip & pin terminal…Now you want me to invest in a Tap and Go machine?!?”

The recent unveiling of the new iPhone 4S, a phone which many tech analysts were expecting to have NFC built into it could have really poured gas on the fire in terms of thrusting NFC and tap and go transactions into the glare of mainstream consumerism.  Alas, Apple disappointed the mobile commerce nerds this time but there are a host of other device manufacturers now rolling out North American devices with NFC chipsets built-in; including the new Blackberry devices and the Nexus S phones.

These are just a few of the issues at play in what is a very complex business and technology process.  Perhaps the biggest challenge in the mobile payments space, and one that hasn’t necessarily been overcome yet, is that the companies who have a vested interest in the future of mobile payment, haven’t yet figured out how to make money in this strange new world.

Mobile Payments = Big Upfront Cost and Lower Revenues for Existing Players?

Too many mouths to feed in a complex value chain.  Attempts to cut players out have been successful in other markets.  Ie. NTT Docomo, M-PESA, Isis, Enstream are examples where carriers ‘became the bank’.

New Kids on the Block

So which players are well positioned to upset the barrel of monkeys with a strong mobile payments play?  Recently, Rogers filed an application with the federal government to become a bank.  This is a separate development from the fact that Rogers, Telus and Bell have been collaborating together for several years on their mobile payments venture called Enstream.  I have heard reports of some major personnel changes over at Enstream which could mean these players are refocusing their efforts to launch a carrier agnostic mobile payments platform without the help of  banking partners.   Similarly, US carrier backed Isis is beginning to make more noise regarding its technology being supported by a variety of handset manufacturers.

Google has made a big splash by being first to market with the launch of their Google Wallet.  High-quality retail partnerships, arriving pre-loaded on (currently only the Sprint Nexus S but presumably coming soon to) a variety of Android powered devices, as well as a beautifully simple approach to branding and marketing are just a few of the things Google has going for their mobile wallet.  Google is aiming to be the first to unlock the full benefits of a mobile wallet meaning that phones supporting their technology will be able to pay for stuff, as well being the ‘one stop shop’ for loyalty cards, local offers and even transit transactions all powered through NFC.  Sexy stuff – say goodbye to your Costanza! I recently heard that Google Wallet could make its debut in Canada in early 2012.

Paypal seems to be moving towards rolling out their solution with recent reports saying we could see something in market as early as Q4 2011. Interestingly, PayPal has been quite vocal in their criticism of NFC stating that they are not building their transaction method around Tap and Go technology and even going so far as to label NFC as being, “not for commerce.”  Don’t underestimate the Ebay – PayPal – Where connection as a serious contender to change the game of mobile, social and local.

To this point, we have heard surprisingly little out of Visa.  Visa has been interested in the mobile payments game probably longer than anybody else and for years they have been piloting new technologies and working with partners to facilitate a future where mobile payments are possible.  Just because we haven’t seen anything yet, I wouldn’t count these guys out and have been hearing whispers that they are getting ready make some major announcements around mobile in the coming months.  Stay tuned…

In my opinion, new entrants are beginning to show real potential to disrupt the space quickly given the pent up consumer demand for everything mobile, which is forcing the big guys to take stock and get a strategy together.

Canadian Banks Don’t Compete, They Pillow Fight

Just like CIBC was the first to do mobile banking, one bank will get to market first with a mobile payment strategy and the rest will all follow suit with very similar products.  I don’t think we can expect any significant innovations from Canadian banks until the ecosystem develops and they get to see what works and what doesn’t based on the bumps in the road experienced by the disruptors.  And honestly, who can really blame them?!  Life is pretty good as a Canadian bank and I think most Canadians appreciate the steady hand approach as well as the regulatory oversight that defines life as a financial institution in Canada.

However, Canadian banks do have a lot going for them when it comes to mobile payments potential.  Primarily, they already have your trust and your credit card.  If you own a Smartphone, you probably have their mobile banking app and use it at least a couple of times a month.  It is not too far of a stretch to believe that if that app could do more for you (like buy stuff!) you would be most comfortable entrusting your bank with your most personal details vs. handing over your info to some new 3rd party.  Lets face it, consumers are creatures of habit and a bit lazy.  The KPMG 2011 Mobile Payments Outlook identified security and convenience as the two key factors that will determine how quickly mobile payments will be adopted in North American.  In terms of getting people to try new forms of payment, banks have a lot going for them and will probably do just fine when the dust settles and it is safe for them to enter this strange new world.

So there it is.  That was a brief overview of who we think they are going to be players in the future of mobile payments in Canada and a snapshot of how they are positioned to enter the market.  To be sure, it is a rapidly evolving market with a large number of potential winners and losers that are going to try and claim their stake on what has become some very precious real estate; your smartphone.  Tell us here in the comments, who you think could be a mobile payments winner in Canada and why?  How long do you think till we actually see mass adoption of mobile payments?

This post is the first of a series we will be doing on mobile payments in Canada and how Smartphone technology is impacting our lifestyles as consumers.  Stay tuned!

Here is a link to the full press release and below we have highlighted some of the key stats they included in the first report.  Most notably, Canada is 4th in the world for Smartphone penetration and in March 2011, 40% of Canadians used an app!

Mobile Behaviors in Canada

Mobile subscribers in Canada exhibited strong usage of mobile media on their devices. In March 2011, 40.6 percent of mobile users in Canada used an application on their mobile device, while 32.7 percent used a mobile browser. Accessing of news/information was conducted by 35.2 percent of the mobile audience, while social networking sites or blogs were used by 25.4 percent. Sending text messages and taking photos with their phone were the top two activities, used by 64.5 percent and 48.9 percent, respectively. Accessing work or personal email represented 29.7 percent of the total mobile audience.

Smartphone Penetration Across Global Markets

Smartphone adoption continues to spread across the globe at various rates. Canada’s smartphone penetration reached 32.8 percent in March 2011, marginally higher than that of the U.S. The U.K. led all reportable markets in smartphone penetration at 40.8 percent, followed by Spain (40.2) percent and Italy (38.3 percent).

Smartphone Platform Market Share in Canada

In March 2011, 6.6 million people in Canada owned smartphones, representing one-third of the total mobile audience. RIM was the leading mobile smartphone operating system with 42.0 percent share of Canadian smartphone subscribers. Apple ranked second with 31.0 percent share, followed by Google with 12.2 percent, Symbian with 6.4 percent share and Microsoft with 5.1 percent share.

With the goal of creating added value and convenience for consumers and local advertisers, Clip Mobile is going to be Rev’s exclusive mobile coupon provider for their consumer savings properties including their Save-a-Buck and Niagara Dining Guide publications.

Rev’s Save-A-Buck publication has a controlled circulation of 1.5 Million Coupon Booklets which are delivered to 80+ Major Hotels in the Niagara Region and the only company with 25 street boxes located in the tourism industry along with Niagara Parks Distribution. Coupon distribution through Niagara Parks includes Maid of the Mist, Butterfly Conservatory, Incline Railway, Spanish Areo Cart, 250,000 via Welcome Centers and our own LCD racks at the brink of the falls at Table Rock.

“Clip is very excited about this partnership.  Rev has a suite of niche publications as well as strategic distribution and strong relationships with local business owners.  The Niagara area gets approximately 14 to 22 million visitors a year from around the world, our location-based coupon app will allow them to save money, discover new attractions and even get directions with our mapping feature on the app,” says, David Offierski, Founder of Clip Mobile.

The team at Rev is just getting going with the mobile coupon initiative but keep checking on Clip for more great offers in the Niagara Region from Rev and Save-A-Buck  being added to the Clip database daily.

The first is a report by Kantar Media detailing U.S. Advertising Economy and breaking it down by sector.  The full article can be found here but the gist is that in 2010, the total U.S. ad spend grew modestly as whole but traditional sectors such as locally  focused print media are seeing a rapid decline in both volume and spend. Here are a few more details.

…locally focused print media like newspapers, which have seen an ongoing exodus of advertising budgets following the migration of consumer usage to digital alternatives. The recession only seems to have exacerbated that trend, and print is the only major medium that is not benefiting directly from the recovery.

In fact, Swallen noted that local newspaper ad spending has declined for “21 consecutive quarters.” And the downward demand isn’t just affecting the volume of local newspaper advertising, but its value as well. Swallen noted that while there was actually a “small uptick” if the volume of local newspaper space sold last year, total ad dollars fell 4.6%, meaning advertisers paid a lower price on average to place ads in local newspapers.

The flipside of the coin is that a new report by BIA/Kelsey,  a local markets research group says that the local digital advertising market is set to explode, growing to $42.5 billion market by 2015.

BIA/Kelsey says that means a 14.4% compounded growth rate every year until 2015. At the end of 2010, the media research company said local media was at $21.7 billion.

Also, consumer marketing “deal-of-the-day” deals through social sites — Facebook and Twitter — will contribute to a rapid digital advertising rise, climbing to some $3.9 billion by 2015.

Tom Buono, chief executive officer, BIA/Kelsey, said: “Our analysis indicates that as advertisers move to online, mobile and particularly, the variants of social media, we are fast approaching a tipping point where digital media will soon become a dominant segment of the local advertising marketplace.”

Certainly this information is indicative that the media landscape is a state of flux.  At Clip we see this as being an extremely exciting period and we find ourselves and our technology platform directly in the center of this sea-change.   As we grow our network and meet with new partners and players, it is apparent that some people and organizations “Get It” and  others just don’t.  We’re excited to work with the those who are committed to evolving their business and are accepting that no one has all the answers in this new world order.  There is a whole lot of learning still to be done.  Those who just don’t get it, remaining cloistered in their ivory towers reflecting on the good ol’ days of big media, I guess we’ll just have to check back to see how things are going for them in 2015…

Comscore says,“Smartphone adoption, 3G penetration and unlimited data plans drove a surge of mobile media consumption across geographies and deepened the integration of mobile devices into everyday life. And, the coming year has the potential to be even more exciting. As the mobile ecosystem continues to develop, including progress in mobile advertising and commerce, it’s clear that mobile is destined to become an increasingly important platform for digital marketers across all industries.”

Here are a few other juicy tidbits for you, or you can download the full report.

• Smartphone adoption accelerated in both the U.S. and Europe. U.S. smartphone adoption reached 27 percent of mobile subscribers in December 2010, an increase of 10 percentage points from the previous year, while European adoption reached 31 percent, also up nearly 10 points versus year ago.
• Network quality and cost of monthly plan were the top 2 purchase consideration factors for mobile subscribers in the U.S. and UK.
• Nokia was the top OEM in the UK, Germany, Italy and Spain. Samsung took the top spot in the U.S. and France, and also ranked in the top three in the UK, Germany, Italy and Spain.
• 36 percent of mobile Americans and 29 percent of Europeans browsed the mobile web in December 2010, with access through an application reaching 34 percent of Americans and 28 percent of Europeans. Across regions, mobile browsing and application usage is growing in the range of 7-9 percentage points per year.
• More than 75 percent of mobile subscribers in Japan are connected media users (used their browser, accessed applications or downloaded content) far surpassing the U.S. and European countries in this regard. Japan also saw nearly 10 percent of its mobile audience make a purchase with their mobile wallet in December 2010.
• Over the past year the number of mobile users that accessed a social networking site at least once a month via their mobile device increased by 56 percent to nearly 58 million users in the U.S. Even stronger growth occurred in Europe, with a 75-percent increase in the number of users over the last year to 42 million in December 2010.

On the note of getting bigger, faster, Clip is now offering its location services platform to partners.  The thinking behind this is that there are a large number of existing players who have either a) sales and marketing relationships with small and medium sized businesses, or b) media companies seeking to unlock further value from their mobile properties.   We have deep domain expertise in this space, a robust and flexible platform for publishing local mobile mobile offers across multiple Smartphone platforms.

That’s right Groupon.  Get ready, cause we’re coming for you.

Thanks to Brodie Beta for her love of mobile technology and keen editorial skills.