'Digital wallet' will transform smartphone, and how we spend

Digital wallets are on their way to replacing their leather counterparts for many Canadians within the next two years, according to retail and communications specialists.

One thing it could change, for example, is your morning coffee ritual.

David Robinson, vice-president of emerging communications at Rogers, envisions a Tim Hortons application that would know you always order a large double-double, track your location via GPS and charge your bank account before you’ve even set eyes on the restaurant.

"Then," says Robinson, "you just pick it up in an express window."

The smartphone-enabled wallet also allows consumers to purchase items simply by tapping their phone on a pad at the cash, much like a tap-and-pay credit card.

Those cards only deal in transactions, but the possibilities for digital wallets could be endless.

Big players such as Rogers, Visa and PayPal are backing the new technology, signaling its rise in the near future.

The list of digital wallet capabilities is long.

'Every carrier and bank on the planet wants to be able to do this.'

—David Robinson, vice-president of emerging communications at Rogers

New to the city and need a transit pass? You could simply purchase a pass on your phone and go. Access cards for your office building could be there, too.

Receipts would be stored in the phone, and so alleviate many of the headaches of the return line.

The way consumers buy alcohol or cigarettes would also change, as patrons could simply tap their phone on a pad at the cash to indicate their age to a clerk.

It could even bring sweeping change to the way health-care identification works, as provincial health cards could reside on a phone in the same wallet.

Test results could be emailed or explained to patients over the phone, eliminating many types of follow-up visits.

Stolen, copied or forged plastic health cards would be a thing of the past.

The digital wallet is a virtual representation of the real thing – except it resides in a digital device.

A wireless signal known as near field communication (NFC) is at the heart of the innovation, where a chip in the device sends a signal from the phone to a payment terminal.

Robinson says Canada is uniquely ready for digital wallets because the infrastructure is more developed here than in most countries.

As well, Canadians are in the top four in the world for smartphone usage and often have the latest and greatest devices.

Mobile payments and digital wallets are top of the development heap, says Visa Canada's Derek Colfer.

"There's lots of conversations occurring between mobile network operators, device manufacturers and banks," Colfer says. "There will be a plethora of digital wallets for consumers to choose from within the next 24 months."

Visa believes that once the retail backbone is established the rest will follow.

Rogers' Robinson says that in a few years digital wallets will be as common as a camera is on a cellphone today. "Every carrier and bank on the planet wants to be able to do this," he says.

Still, according to a report in December 2011 by the Task Force for the Payment Systems Review, Canada is still not yet where it needs to be for digital payments.

The review, commissioned by Finance Minister Jim Flaherty, says that Canada has not yet implemented a digital authentication process that is both safe and easy to use — something that industry players are pushing to rectify.

The review also states that Canadians rely too heavily on cheques, and that financial institutions could save $600 million a year in cost savings by 2020 under a digital payments system.

The seeds of digital wallets have been sown already — Google and PayPal have versions set up for payment. Visa’s digital wallet works on some LG, Samsung and BlackBerry phones for direct payment, including the BlackBerry Bold 9900 and 9790 models, as well as the Curve 9360 and 9380.

Robinson says RIM is the most aggressive but many handset manufacturers are developing the technology.

Other phones that are already NFC-capable include the LG Optimus LTE, the HTC Ruby, and Samsung's Galaxy S II.

Apple is curiously absent from the list – but many expect the company to include the feature on its next phones.

"Apple is very aggressive in patents in the category," Robinson says. "They've filed all sorts of patents around NFC. So looking at that would indicate that they're going to do something."

Every developer says security is a huge issue for consumers.

Research conducted for PayPal Canada found that 43 per cent of people don't trust their smartphone to keep their personal information secure, and more than 80 per cent worry about financial privacy while making mobile transactions.

But the developers of digital wallets believe they will be even more secure than traditional ones.

"If there is a transaction that occurs on an e-commerce site that you didn't make, you will not pay for it," says Colfer.

And no need to panic and call a dozen card issuers if your digital wallet is lost.

"One of the services we'll provide as carriers is we'll inform all issuers simultaneously that the cards have been compromised, and then issuers will be able to lock those accounts," Robinson says.

Then, new phone in hand, a person could piece their wallet back together just tapping on a screen and making some phone calls from an NFC-capable device – a much quicker ordeal.

Smartphone providers won't have detailed credit card information. Instead, they'll have a record that an account exists on a particular device.

"When we put a card in secure memory, no one has access to that information other than the issuers," Robinson says.

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Canadian firms planned to spend more on R&D in 2011

Businesses in Canada planned to spend $15.6 billion on industrial research and development in 2011. That is five per cent higher than the $14.9 billion they planned to spend in 2010. iStock

Research and development spending by industry is expected to increase in 2011 — the first time in four years that has happened in Canada.

"The 2011 industrial R&D spending intentions suggest that recovery is underway after three consecutive years of declining R&D spending that occurred across almost all industrial sectors," said a Statistics Canada report Friday.

Businesses in Canada planned to spend $15.6 billion on industrial research and development in 2011. That is five per cent higher than the $14.9 billion they had planned to spend in 2010, but still below the $16.8 billion they spent in 2007.

The communications sector showed the biggest relative increase, at 21.4 per cent, followed by aerospace at 8.2 per cent.

Each of those industries planned to spend $1.4 billion this year. Scientific research and development services planned to spend the largest amount, at $1.7 billion, but that was an increase of 1.1 per cent compared to 2010.

In addition to planned spending in recent years, the Statistics Canada report also looked at actual spending for years where data was available.

It found that industrial R & D activities provided the equivalent of 149,900 full-time jobs across the country in 2009, down 11.8 per cent from 2008.

The companies themselves provided 79 per cent of the funding for their research and development activities. However, 13 per cent came from foreign sources, two per cent came from the federal government, and the rest came from other Canadian sources such as provincial governments and contracts with other firms.

Over the longer term, the number of companies performing research and development has increased from 9,648 in 1997 to 24,203 in 2008.

Nevertheless, Canada's R & D spending-to-GDP ratio "continues to lag the average for all OECD member countries" and has fallen from 1.3 in 2001 to 1.0 in 2009, the same level it had in 2004, the report said. Meanwhile, the U.S. ratio increased to 2.0 in 2008 from 1.7 in 1994.

The countries with the highest relative R & D spending were Israel and Finland, which had ratios of 3.4 and 2.8 respectively. In 2009, the most recent year for which provincial data was available, Ontario and Quebec accounted for more than 75 per cent of industrial R & D spending across the country.

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U.S. consumers spend more, bring home less

U.S. consumers spent slightly more last month but earned less for the first time in nearly two years. The new data on spending and incomes suggest Americans tapped their savings to cope with steep gas prices and a weaker economy.

The Commerce Department said Friday that consumer spending rose 0.2 per cent in August after a revised 0.7 per cent increase in July.

Incomes fell 0.1 per cent. That's the poorest showing since a similar 0.1 per cent drop in October 2009.

Americans saved less money. The savings rate fell to its lowest level since late 2009.

A decline in income growth could slow the economy, if it causes households to cut back on spending. Consumer spending accounts for 70 per cent of economic activity.

The economy grew at an annual rate of just 0.9 per cent in the first six months of the year, the slowest growth since the recession officially ended more than two years ago.

Economists expect only slightly better growth in the second half of this year, based on expectations that consumers will spend more.

Some are predicting growth of around 2 per cent in the second half of the year. That level of growth would ease recession fears, but it's not enough to lower the unemployment rate, which was 9.2 per cent in August.

Consumer confidence stayed weak in September after the economy experienced a number of shocks this summer. Lawmakers fought over raising the nation's borrowing limit, Standard & Poor's downgraded long-term U.S. debt, the stock market fluctuated wildly and Europe's debt crisis intensified.

Employers have pulled back on hiring. In August, they added no new jobs.

Some pressures are easing. Gasoline prices are now roughly $3.46 US per gallon. While that is higher than last year, the price is down nearly 52 cents from this year's peak price of $3.98.

The Federal Reserve last week agreed to shift $400 billion of its portfolio of Treasury securities to try to drive down long-term interest rates. It was the Fed's latest unconventional move seeking to give the economy a boost.

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