Canada is a world leader in mobile payments. The country’s early commitment to EMV card security opened the door for a high penetration of contactless terminals. Canadian mobile network operators are also creating fertile ground for mobile payments, with Canada’s major mobile operators (Bell, Rogers and TELUS; as well as regional operators MTS and SaskTel), offering secure element-based NFC payment capability. Five of Canada’s “big six” financial institutions offer secure element-based NFC payment capability and an incredible 84 per cent of major Canadian retailers have adopted NFC terminals. Combined with 74 per cent smart phone penetration across the country, consumers are well placed to adopt mobile payments.
Almis Ledas, COO of EnStream, spoke with the GSMA’s Digital Commerce programme to discuss how its end-to-end mobile payment solution is helping to evolve the Canadian mobile payment system.
GSMA: In simple terms, what is EnStream’s end-to-end mobile payment solution?
Almis: EnStream, with software from Bell ID and secure hosting from BlackBerry, is the secure element trusted service management (TSM) hub for Canada. EnStream is also a service provider (SP) TSM for an increasing number of issuing banks and wallet providers. Where EnStream does the technical work for both sides of a connection, the process is quick and efficient. However, EnStream has connected with other TSM providers including Gemalto and G&D, as needed.
Because EnStream can resell access to MNO secure elements, we operate as a commercial hub for operators and issuing banks. As the single point of contact, EnStream eliminates the need for bilateral negotiations, bilateral contracts and associated complexities between operators and financial institutions.
“As the single point of contact, EnStream eliminates the need for bilateral negotiations, bilateral contracts and associated complexities between operators and financial institutions.”
GSMA: Why does the EnStream solution appeal to financial institutions in Canada?
Almis: I believe that the EnStream solution has three aspects that appeal to our customers. First, we enable access to the entire mobile customer base through one point of contact. This removes the need for financial institutions to deploy multiple technical connections or engage in separate contractual negotiations with each MNO. In this, our appeal is similar to that of Apple Pay. Second, we are a utility operating on a cost recovery basis. We are not seeking to derive margin from serving the issuers. Our goal to serve as much of the market as we can on shared infrastructure and pass the efficiencies on to our customers. Finally, we are totally flexible in adapting to the needs of the FIs, rather than seeking to impose a predefined solution. We support banks using their own stand-alone payment applications, shared wallets, or enabled banking applications. We will work with banks deploying their own credentials or tokens from card associations.
In this, we are different from Apple Pay. We manage more complexity, and if the banks want to evolve their service to leverage the capabilities of the mobile device to authenticate customers, we will evolve with them. We have also found that it can be time consuming and expensive for banks to make internal changes to accommodate mobile payments. It is faster and less expensive for us to undertake modifications on our side, adapting to the needs of each bank.
Our proposition is to operate as a utility – so, we do not own the user interface and we have a business model that is open access for all, which in itself will help the market scale. From our point of view, the end game for Canada is to use the mobile handset for secure payments and other services. Multiple bank applications can coexist on the EnStream infrastructure, run by the banks themselves.
We expect continued evolution in mobile payment applications. Some banks may favour services tightly integrated with their mobile banking applications. Others might prefer the simplicity of shared wallets. We aim to accommodate their needs regardless of which path they take.
GSMA: That’s really impressive. With the successful operators so far, what is next for EnStream?
Almis: We have plans to expand the capability of EnStream support, and with each implementation this becomes easier, quicker and more cost effective. We are also moving into non-financial issuers and examining the level of security required to make this possible. Currently, we are in the process of developing a TSM to accommodate transit. This platform will be less complex and less expensive than our Visa/MC certified TSM because there is less functionality and less security overhead required. This means that we will soon have a TSM available for non-financial transactions, such as access control, ticketing and transport. Having demonstrated the value of EnStream on the basis of being an impartial hub, we will use this as a unique selling point to move into new markets.
GSMA: What will the mobile payments landscape look like going forward?
Almis: We are still in the very early stages of mobile payments. So far, both issuers and handset manufacturers that have had the option of using a secure element have chosen to use a secure element. But the best technology doesn’t always win. Where mobile operators don’t back the SIM-based solution, issuers may have no option but HCE. In Canada, however, we are fortunate to have broad market support among mobile operators for the SIM based solution. Nevertheless, we realise that we are in a very competitive field and the issuers have options. Fortunately, I believe that the SIM-based secure element is the best solution for any handset that can use it. It has significant advantages and we have already worked through many of the technical deployment challenges.
A technology with its challenges known from commercial operation, like the SIM-based solution, will never look as easy or effortless as an alternative still in the lab or on the drawing board. But HCE will also face challenges due to the number of manufacturers and operating systems. The mobile industry has demonstrated that the SIM is an asset in making different handsets work harmoniously on a single network, and I believe the same will be true for payments.
“In the long term, I believe that the mobile phone in itself will replace the wallet for many applications.”
In the long term, I believe that the mobile phone in itself will replace the wallet for many applications. Currently, it is the app rather than the phone that effectively acts as a wallet, but there is a limit to how many apps a person will actually use for mobile payments in everyday life. Too many apps will slow down the user experience, resulting in the inevitable demand for a more streamlined solution. The user interface will have to change, but there are still many different elements of a phone that can be used to greatly improve the user experience.
Interview by Luella Charles/GSMA. Published on August 10, 2015 |