This article was previously published in e-finance & payments, law & policy.
Surveys conducted in Canada have revealed that although consumers are increasingly adopting mobile channels to make payments, security and privacy are still major concerns. Dan Petirs, Senior Consultant at KPMG, examines how Canadian consumers relate to the mobile platform.
In the past five years, there has been a dramatic shift in how consumers integrate the internet and mobile technology into their daily lives. Within this timeframe, consumers in Canada and around the globe have increased their willingness to use their mobile phones for financial transactions and have become more open to receiving ads in return for something of value to them. Research has shown that consumers are increasingly willing to accept targeted personally identifiable information (PII)- based advertising in exchange for lower cost or free services and content. There is also a growing willingness across all age groups to use cloud-based services to store information. In Canada, consumers are increasingly using cloud computing services. However, few are ready to put their medical or financial information on the cloud. Canadian consumers, like their global counterparts, remain anxious about data privacy.
To gain a better understanding of consumer trends related to mobile technology, KPMG International recently conducted its fourth annual Consumers and Convergence Survey. The objective of the survey is to identify and obtain a better understanding of consumer trends and gain insights related to mobile technology, mobile banking and payments, security and privacy, and consumer cloud services. Conducted in the spring of 2010, the study involved over 5,500 consumers in 22 countries worldwide, including Canada.
Over the four years KPMG conducted the survey, there have been no significant improvements in consumer concerns about security and privacy - in fact, those concerns have actually increased. Consumers today are more anxious than ever about the privacy of their PII when using their mobile phones. In Canada, over 60% of those surveyed are very concerned about the security and privacy of their personal data, which represents a 7% increase over the 2008 findings and is also consistent across all age groups. When it comes to sharing their PII, consumers around the globe exhibit two seemingly conflicting behaviors: on the one hand, they express greater concern than ever over the privacy of their personal information and, on the other, they appear increasingly willing to allow their personal information to be tracked.
This year, 58% said they would be willing to allow their online usage and personal profile information to be tracked if it resulted in lower costs, an increase of 8 percentage points from 2008. Despite continued apprehension about information security and privacy, consumers demonstrated a growing readiness to share PII with trusted service providers in exchange for free or cheaper services or premium content. However, as the user community gains in sophistication, it is demanding greater transparency around the purpose for which its data will be used. Clearly, consumers remain wary about sharing information.
Complex website privacy policies and news reports about privacy violations and intrusive advertising and data mining serve to fuel this anxiety, but if providers are willing to provide something of value in return for greater access - whether it be discounts, personalized offers and content, or new services - consumers may be willing to take a greater risk with their information. While the survey found that security and privacy dominate consumer concerns regarding online and mobile transactions, today's consumer is more willing to set those concerns aside to gain the benefits and convenience of conducting personal business through his or her mobile handset. Today, more than twice as many consumers indicate that they are comfortable using a mobile phone to handle their online financial tasks than two years ago. Canada appears to lag in this area. However, while only 15% of Canadians have conducted their banking through a mobile device, nearly half of all consumers surveyed by KPMG International globally say they have used their mobile device for banking.
It would appear that Canadian banks have more work to do in convincing their customers of the benefits of mobile banking. Age as well as geography plays a role in mobile banking activity: more than twice the number of consumers 54 and under used their mobile phones to conduct a banking transaction in 2010 than in 2008. As in previous years' surveys, older consumers appear to be more reluctant to use their mobile phones for online banking, but they are beginning to get on board. The adoption rate for those 55 and older has increased from 12% in 2008 to 18% in 2010.
In addition to conducting financial and banking transactions through their mobile phones, consumers have made a notable shift to using devices for retail purposes - 'm-commerce'. In Canada, the number of consumers who have made purchases using a mobile phone doubled in the last year.
Potential explanations for the jump in mobile banking and retail include increased capabilities of the mobile devices themselves, but also the advancement of the policies and technological infrastructure that support them. In Canada, for example, the Canadian Payments Association (CPA), which develops and updates the rules and standards that govern the clearing and settlement of payments between its members, fully recognizes the evolution of mobile banking and m-commerce. According to the CPA, 'while the payments landscape in Canada has evolved rapidly over the past ten years, due to expansive growth in electronic payments and the increase of payment service providers and new market entrants, research indicates that the next ten years will yield a period of even faster changes'1. To further support that evolution, the CPA has made the number one objective of their payment strategy, Vision 2020, to 'support the growth of electronic payments and to develop, as required, the standards and rules framework to support the clearing and settlement of emerging and innovative payment solutions, e.g. mobile payments and EMV Chip card applications'2.
Companies like Visa and Interac are at the forefront of the mcommerce evolution with new innovations in payments. With the recent announcement of Flash, Interac's new contactless enhancement of the Interac debit card, Interac is providing a new level of convenience for the consumer.
At the recent Mobile Money Forum in Canada, Visa discussed taking its payWave contactless payment system, which currently allows consumers to simply wave their Visa card instead of inserting or swiping it, one step further with the Visa Mobile Payment Platform. The new platform will extend the functionality of Visa payWave by offering Visa cardholders the ability to make contactless payment transactions with their cell phones.
Visa Canada has already piloted this technology in 2010 through a joint effort with the Royal Bank of Canada and Rogers Communications, with the objective of better understanding consumer and merchant behavior and transactional trends3. There appears to be little doubt that as the ease of use of making mobile payments increases, adoption rates will rise dramatically in Canada across all age groups.
A few other findings from the Consumers and Convergence Survey bear mentioning. With the advent of m-commerce, it has almost become an assumption that consumers around the world - particularly younger ones - are disconnecting their hard-wired links to voice and data services in favor of their mobile devices. Based on the survey, however, that does not appear to be the case. In Canada and around the world, more than 75% of those surveyed continue to have landline connections. These results are fairly consistent across all age groups, with slightly greater landline use by older consumers. The findings challenge the broadly accepted assumption that younger consumers were overwhelmingly eschewing telephone landlines altogether. While the results may be surprising, a closer look at the data reveals evidence suggesting why telephone landline installations remain at such high levels for a majority of consumers: internet access. Voice usage takes a secondary role, which is understandable in light of mobile proliferation. It will therefore be paramount for landline services to focus investments in areas that will retain their data-oriented users.
KPMG's fourth Consumers and Convergence study confirms that consumers are continuing to embrace a broad range of mobile and cloud computing applications. It demonstrates that across Canada and the globe, consumers are increasingly ready to use their mobile phones for important financial transactions and to purchase goods and services. And, in exchange for cheaper basic services, consumers have become increasingly willing to accept advertising. Convergence is becoming a reality.
So, what's next? Before business executives celebrate the opportunities these changing attitudes may bring, they would do well to keep in mind that the tripwire of security and privacy remains an important issue that must be addressed in order to be effectively neutralized. Consumers rightly perceive that they have a choice among service providers. If they lose trust in a provider, they will take their business to a competitor. While the market opportunities are expanding quickly, the mobile business landscape remains fiercely competitive.
Footnotes
1. Canadian Payments Association, 'CPA Payments Strategy, Vision 2020',
February 2010, available at www.cdnpay.ca/imis15/eng/res/Vision_2020.aspx
2. Canadian Payments Association.
3. Mike Bradley, 'Visa Innovations in Payment', Visa Inc. Canada, as presented at the 2010 Mobile Money Forum (Toronto).
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
Mr Dan Petirs
KPMG
Suite 4600
Bay Adelaide Centre
333 Bay Street
Toronto
Ontario
M5H 2S5
CANADA
Fax: 4167778818
E-mail: sblair@kpmg.ca
URL: www.kpmg.ca
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