Canadians - and their banking institutions - have proved precocious in the embrace of new technologies. Early adopters of debit cards, Canadians have looked to their financial services providers for alternatives to the brick and mortar branch approach to banking and found ATMs and Interac, as well as telephone, online and mobile options to simplify management of personal and business affairs. This summer, the RBC pushed the innovation agenda once step further with a new first - RBC Secure Cloud, Canada’s first cloud-based mobile payments service, which will come to market by the end of the year with debit and credit on a number of smartphone platforms.
According to payment and mobile industry analyst, Christie Christelis, mobile payment represents an evolution of mobile banking strategy: "Mobile banking has been introduced in stages, and the banks have been very deliberate in what they’ve been doing. First off, they wanted to familiarize the consumer with online banking and they see mobile banking as an extension of this. Once the primary relationship link with a client is through a mobile phone, the next step is to extend this to payments. Ultimately, they expect that the mobile user will be paying with their phone and banking with their phone, but first they will use mobile banking to build trust in the system."
Ready Canadian adoption of smartphones has allowed the RBC to put this plan into action, if in accelerated fashion. The bank’s list of ‘Mobile Commerce Fast Facts’ includes:
- RBC currently has the largest digital channel engagement with several million online users and mobile downloads.
- RBC has received the Forrester Award for Best in Class Services in Online for six consecutive years and Mobile Banking in its inaugural year.
- Specifically in mobile, RBC clients will transact over 350 million times this year alone.
- In March 2013, RBC participated in the country’s first mobile debit transaction with Interac.
- In May 2013, RBC announced the launch of its mobile solution [available] on Bell later this year.
But with its Secure Cloud launch in July, the RBC is riding a horse of a different colour. A cloud-based solution that takes advantage of Near Field Communications (NFC) technology for contactless connection between the phone and other wireless networks, for the ultimate transfer of payment data via the Internet to the RBC payment cloud respository, Secure Cloud demands consumer trust not only online technologies, but also cloud and NFC. NFC payments solutions have proved popular in Asia; however, RBC’s foray into this arena is trial on a mass scale in North America.
In a note taken from Christelis, Linda Mantia, executive vice-president, Cards and Payment Solutions at RBC, has argued that RBC’s cloud approach does not represent a departure, but rather extension of a foundational shift that has been underway for some time: "the reality is that transactions occur today through communications protocols that have very tight security as one location dips into the servers of another server. Concerns around cloud aren’t really directed at banks or at how they have been conducting commerce for a long time." "We know our clients trust us," she added. "We have really been watching people who do mobile banking. This is not payments, but they are very comfortable doing mobile banking, as they are comfortable with online banking today."
RBC research into potential customer issues with mobile payments did uncover some concern over security. But since data resides in RBC’s cloud rather than on the user’s device as is the case with other solutions - it is transmitted encrypted and decoded locally on the phone at point of sale - and since the bank will assume all risk by extending it existing Zero Liability Policy for Interac, Visa and MasterCard for customers and merchants to Secure Cloud transactions, the RBC believes client trust will follow. Mantia described security as "table stakes" which the bank has ensured through a diverse range of security technologies. One of the design criteria for the Secure Cloud solution was that it be as safe, if not safer, than chip and PIN - security mechanisms that have found broad acceptance in the marketplace. A key factor, Mantia explained, is that information transmitted into point of sale is through an encrypted, one-time-use token that carries approval for a single transaction, which is then decoded locally on the device. In addition, she added "we have put in multiple security encryption keys that will never be exposed to the public." And since information that is transferred is payment data, there is no risk around personal identity loss.
According to Mantia, the team responsible for the payments project was interested in developing technology that would "truly work over the long term as a sustainable solution in mobile." As a result, Secure Cloud was designed to offer a better client experience through speedy transaction times, but also to serve as a platform for payments as opposed to a point solution for the bank: it will support non-RBC payment methods and inter-bank access to payment information, as well as a variety of mobile device and point of sale systems. In May, the bank announced partnership with Bell, but believes in "an open model" where the solution is available on all networks. The goal is to create simplicity for the user so that new cards can be added and so that no one has to switch carrier or phone OS. Credit, debit and prepaid cards will all be included in the wallet according to customer preference: "we really want to take every payment related instrument that’s in a wallet and put it in our mobile solution - so coupons, loyalty cards, credit cards will be included. The only thing I can’t put there is cash," Mantia explained. For merchants, the solution has been built around NFC on the last inch connectivity with point of sale devices, but will also accept bar code data from the minority of merchants who have not yet implemented NFC terminals.
Beyond solution ubiquity, Secure Cloud will operate as a ‘platform’ in another sense. While payment processing is the primary solution capability, Mantia believes the truly interesting piece is the innovation that will evolve out of the platform, such as merchant ability to use the platform to communicate loyalty programs, coupons, or other benefits to clients. "If I was just interested in payments," Mantia observed, "I could have just taped a credit card onto the back of my phone and called it a day. There’s no killer app in payments." The RBC is counting on ecosystem value adds to drive adoption of the solution, exploring partnerships with specialized third party developers who can will be able to take advantage of the security and scale that resides in RBC’s cloud. Will platform ubiquity drive developer interest in app innovation, or will app value adds help Secure Cloud go viral? It’s a chicken and egg that the software industry as a whole has wrestled with for some time now. Mantia expects to have some preliminary feedback on traction in six months or so - stay tuned….