MONTREAL - A kind of digital wallet that will allow consumers to purchase such small items as coffee or lunch with a wave of their cellphones will be tested in Canada for the first time next year.
Rogers Wireless, Royal Bank of Canada and Visa said Friday they will launch a pilot project next spring in downtown Toronto using about 500 consumers and select retailers.
As part of the test, consumers will use Visa credit cards that have antennas and chips built into them and carry Motorola cellphones, which also will be outfitted with special chips.
"It's got a chip inside the device that allows you literally to point the phone at a (wireless) reader in a store and make a purchase," said Mike Bradley, head of products at Visa Canada.
It's called a "contactless" payment because there is no card being swiped.
Visa is rolling out the same technology for its credit cards, Bradley added.
"Coffee in the morning, fast-food at lunch or renting a video, you could just wave the card in front of the device. It's contactless payment," he said.
Rogers believes that, as consumers get better acquainted with the technology, its use will become more widespread as other cellphone manufacturers build mobile payment features into their phones.
"You're hard-pressed not to find a phone without a camera today," said David Robinson, vice-president of New Business Planning at Rogers.
"That's where this will go. It won't happen by mid-'09, but you will be at the beginning of what will be a massive wave."
The pilot project is the first step in making "our customers' mobile phones as indispensable as their wallets," he said.
PC Magazine analyst Sascha Segan said mobile payment technology is already being used in Japan where all three major Japanese cellphone networks sell "wallet phones" that essentially work like credit cards at many of that country's stores.
After tapping or waving the phone in front of a wireless reader, consumers then enter a password or PIN number on their phone, said Segan, lead analyst for mobile devices at the U.S.-based technology publication.
Mobile payments put yet another function on a cellphone, already loaded with features like being able to listening to music, watch video, takes pictures and send email.
"The way the phone has absorbed the digital camera, the way the phone has absorbed the MP3 player, well now it's trying to absorb your credit card, too," Segan said from New York.
The technology has also been tested in the United States since 2006.
While Segan said the mobile payments should become commonplace in about five years it has some hurdles to get over, especially in North America.
"Can Visa get multiple cellphone carriers and multiple cellphone manufacturers on board? That's where things typically fall apart."
RBC's Anne Koski said consumers taking part in the pilot project will be bank customers who work or live in downtown Toronto who are also Rogers' customers. She said they will be supplied with Motorola phones for the test.
"We want to understand if our consumers truly do value the convenience of using the form factor rather than reaching into their pocket or into to their purse to pull out their wallet and them pull out their credit card...," said Koski, head of RBC's Payments Innovation, referring to the shape of the device.
Robinson said Rogers is looking at developing a world standard for this technology on phones that run on GSM networks, the globally dominant network for cellphones and a network that Rogers also has.
"We're putting this Visa card on a GSM phone that has the early software versions of what will be the standard for all GSM phones on the planet."
However, Segan said the technology can be used on other networks.
"There's no reason why Bell and Telus couldn't do this."
Bell and Telus recently announced they will team up to jointly develop a faster national wireless network.
