Will your smart phone replace your credit card?

Who said anything about phone calls? Today’s smart phones do everything from taking pictures to tracking your fitness regime — and soon you’ll be able to use it as your credit card too.

This month, CIBC and Rogers Communications were the first to launch a mobile payment app in Canada. Olympic champion Simon Whitfield was the first Canadian to try the new technology with something millions of Canadians do every day: buy a cup of coffee at Tim Horton’s.

Named suretap, the app uses Near Field Technology (NFC) to let your smart phone communicate with a point-of-sale (POS) terminal — no wires or buttons required. You hold up your smart phone to the terminal, the two “exchange” your payment details wirelessly and your credit card is billed. (If you’ve ever “tapped” your credit card instead of swiping it, you get the idea.) No fishing in your purse or pocket for your wallet, and no need to let your credit card out of your hands. You don’t even have to sign a slip unless your purchase is over $50.

“We’re pleased to make history in mobile commerce in Canada by completing the country’s first mobile credit card transaction,” said David Williamson, Senior Executive Vice-President and Group Head, Retail and Business Banking at CIBC in a recent press release. “Getting a coffee while you are on the go is just one example of the kind of transaction that’s going to be made easier when you can pay in just seconds with a CIBC credit card on your smart phone, and we’re excited about the possibilities this offers our clients.”

Sound convenient? Don’t get too excited yet. Currently, suretap is only available to CIBC and Rogers customers, and only if you have one of two Blackberry smart phones: the Bold 9900 or the Curve 8360. If you have an Android or Windows 8 smart phone, you’ll have to wait until the program expands in 2013.

What if you’re an iPhone user? Sorry, but not even the latest iPhone has NFC. You’ll have to wait and see whether Passbook, Apple’s proprietary digital wallet app, will someday play nice with mobile payment technology. Some tech experts worry that Apple’s refusal to embrace NFC may hamper mobile payment technology as a whole.

If you happen to have one of the aforementioned Blackberry devices through Rogers and a CIBC credit card, you can download the CIBC Mobile Payment app as of November 16. You’ll also need to purchase a new special new NFC SIM card from Rogers for about $12.99. Then, you’ll be able to use the app at any merchant with a POS terminal equipped to handle VISA payWave® or MasterCard PayPass™.

If you can’t buy your double-double using your smart phone yet, don’t despair: competition will likely heat up as the “digital wallet” trend catches on. According to a Harris/Decima poll, 44 per cent of Canadians now use a smart phone. Among that group, nearly half say they are interested in using mobile payments. Developing these applications is a win-win situation for banks and communications companies alike.

Potential pitfalls?

Let’s say you can make your purchases with your smart phone — do you really want to? For some users, there are a lot of unanswered questions about the technology, including:

Is it safe? Wallets are lost or stolen all the time — but so are smart phones. Rogers and CIBC note that suretap offers the same fraud protections as a contactless credit card. In fact, the companies claim suretap even offers an “extra layer of security” with its encryption technology. In addition to using a password on your mobile device, there’s an extra password for the app. The app isn’t “active” all the time — only when you need it.

What about hackers? Experts have already proven that hackers can commandeer smart phone cameras, so it isn’t a stretch to ask if mobile payment apps are at risk. There could be security issues on the providers end as well — for instance, both Square and Google Wallet have already had their systems compromised twice in the past year. While experts say mobile payment systems are safe overall, consumers do need to be cautious and keep tabs on their credit card statements.

Will your privacy be protected? You expect your bank to keep a record of your purchases, but will other entities such as your smart phone provider be able to track where and how much you spend? Rogers notes that it does not collect such data on purchases made using suretap, but you should look into the terms of use and privacy policy of any mobile payment service you use.

What will it cost? Besides having an NFC-enabled smart phone and a data plan, there’s no additional cost to smart phone users for using this service. However, if more people use credit cards for purchases instead of cash or debit, businesses will be paying more and those costs could eventually be passed along to consumers. Banks don’t just make money when people carry a balance on their cards, they also take a cut of up to 6 per cent on every purchase people charge.

Will it really be that convenient? If you think you can tap and go, think again — remember those passwords you should be using, and having to sign for purchases over $50? Also, once the app is activated, you have 30 seconds to use it before it times out. You can fish change out of your pocket while waiting in line, but you may not be able to get your smart phone prepped.

Do we really need another way to access credit? With so many Canadians struggling with credit card debt, many financial experts have long advocated a return to cash to help tame spending and stick to a budget. Still, companies can only offer payment tools — it’s up to consumers to use them responsibly.

As with any new technology, some people will find mobile payment options useful and while others won’t. No one really knows how quickly these apps will catch on, what problems may occur or if it will be around to stay. With more Canadians of all ages using smart phones, chances are we can expect to see more of these apps popping up in the future.

In the meantime, you aren’t missing much if you can’t pay with your smart phone — or if you don’t have a smart phone at all. Rest assured that retailers and restaurants will be happy to accept your cash, debit cards and credit cards for a long time to come.

Photo: Simon Whitfield uses the CIBC Mobile Payment App to make the first SIM-based mobile payment in Canada, with David Robinson from Rogers, right and David Williamson from CIBC, centre. (CNW Group/CIBC)

Could you go cashless?
Top travel apps you’ll actually use
Spend smarter and save more
Confused about your cell phone bill? You’re not alone
Should you worry about cell phone safety?