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The True North Goes Digital

Chris Metinko

NEW YORK (MainStreet)—One of the world's largest credit card companies is trying to make paying easier — starting in the Great White North. "Canadians are early adopters when it comes to digital payments and embracing new technologies; that's why Canada is the first market in North America where we're launching MasterPass," said Jason Davies, MasterCard Canada's vice president of e-commerce.

Also see: MasterPass, Digital Wallet Solutions at Your Fingertips

Though MasterPass has expanded to the U.S. (with Living Social here a major player in the MasterPass roster) the Canadian launch may elucidate many of the obstacles the digital wallet faces stateside.

MasterPass is the latest entry into the battle for digital wallet supremacy, and another effort by one of the titans of the credit industry to elbow their way into what is getting to be a crowded marketplace dominated by more traditional tech companies.

A recent study by marketing and analytics company comScore showed while 72% of people were aware of PayPal's wallet and 41% had heard of the Google Wallet, only 13% and 8% had heard of MasterCard's and Visa's digital offerings, respectively. MasterCard said earlier this year it plans a new fee for digital wallet operators — such as PayPal — that allow customers to use MasterCard cards starting in June.

Last October, Visa introduced its digital wallet product in both the U.S. and Canada — called V.me. The application currently is set up to work with about 40 U.S. retailers.

Also see: The True Secret to the Digital Wallet May Be In Your Other Pocket

Ann-Marie McIntosh, with Visa, said the company's entry into the digital wallet market is important for both giving customers another way to pay and supporting merchants who are trying to adapt for those customers. She added Visa continues to see double digit growth in its e-commerce transactions.

"We want to be there," McIntosh said. "We need to be there."

A desire to gain a foothold in the market is not surprising, considering the research firm Forrester recently forecasted mobile payments in the U.S. will go from $12.8 billion last year to $90 billion in 2017, with in-store mobile payments making up $41 billion.

"There are a number of companies anxious to make a claim in this space," said Mark Horwedel, chief executive of the nonprofit Merchant Advisory Group.

Both MasterCard and Visa also have unique advantages owing from their historic relationships with large numbers of card issuers.

"In my view, the likely winner will need to first succeed in building a financial model that works for both the issuers of the devices as well as the merchants who accept it for payment," Horwedel added. "They will also need to recognize that the payment feature is but one of many key ingredients. Once the financial foundation is developed, a compelling consumer case will likely follow."

Also see: Fear and Loathing with the Digital Wallet

MasterPass is the evolution of MasterCard's PayPass service, which was introduced in the spring of last year, according to MasterCard spokesperson Brian Gendron. MasterPass allows users to register up to 25 different credit cards — even MasterCard's competitors — along with their shipping address. The service eliminates having to enter a user's address multiple times or pull out a credit card as purchases can be completed with a password.

MasterCard says it plans to have 800 merchants signed on by the end of this year and 2,800 by the end of 2014.

MasterCard said the decision to launch in Canada made sense since e-commerce sales in retail is growing at a much faster pace than retail sales as a whole. MasterCard's data shows total Canadian year-over-year e-commerce sales grew nearly 27% in the past 6 months ending in February, compared to just 3% growth in overall Canadian retail sales during the same period.

Also see: Google Wallet, RIP?

"With e-commerce growing by double digits, more and more Canadians want a secure, seamless and simple payment experience," Davies said.

That desired experience could mean digital wallets are here to stay.

"While much needs to be done to convince the public to use digital wallets, most industry pros believe they are a certainty," Horwedel said.

--Written by Chris Metinko

Also see: Why The Glacial Adoption of the Mobile Wallet?

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